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BIS Chp 3

1) The competitive strategy followed by an organization is derived from its ________.
A) function
B) structure
C) profits
D) goals
B) structure
2) The competitive strategy of an organization determines its ________.
A) industry rivals
B) short-term goals
C) value chains
D) structure
C) value chains
3) In which of the following situations would the suppliers have the strongest bargaining power?
A) coffee planters during a season of frost that decreases production
B) companies negotiating compensation during a booming economy
C) providers of logistic support during an economic slowdown
D) a wholesaler declaring a stock-clearance sale
A) coffee planters during a season of frost that decreases production
4) Porter originally developed the five forces model to determine ________.
A) the potential profitability of an industry
B) the nature of competitive industrial environments
C) the reason why certain industries collapse
D) the means by which to improve industrial viability
A) the potential profitability of an industry
5) Simpson’s Lawn Services decides to offer two free mowing services for all customers who booked garden landscaping in the fall. By doing this, which of the following forces is Simpson’s addressing?
A) the control exercised by Acme Corp. who supplies Simpson with lawn mowers
B) the power held by the landlord of the Simpson office space
C) the threat posed by Roger’s Landscapes, a new competitor
D) the bargaining power of the City Football Club who are their customers
C) the threat posed by Roger’s Landscapes, a new competitor
6) Porter’s five competitive forces can be grouped into two types: forces related to ________ and forces related to supply chain bargaining power.
A) pricing
B) labor
C) competition
D) consumers
C) competition
7) Porter’s model includes the bargaining power of which of the following groups as one of the five factors?
A) investors
B) competitors
C) employees
D) customers
D) customers
8) In Porter’s five factor model, each of the three competitive forces concerns the danger of ________.
A) suppliers favoring rival companies
B) customers taking their business elsewhere
C) investors refusing to back up new projects
D) employees not working towards organizational goals
B) customers taking their business elsewhere
9) Two strength factors that relate to all three competitive forces are ________ and customer loyalty.
A) market forces
B) nature of products
C) customer satisfaction
D) switching costs
D) switching costs
10) In which of the following cases is the strength of competitive forces low?
A) when switching costs are high
B) when rival products are priced low
C) when customer loyalty is low
D) when the product is unique
A) when switching costs are high
11) If customers perceive the benefits of a substitute to be similar to that of a product then ________.
A) the threat of the substitute is weak
B) the price should be increased to retain market
C) the threat from the substitute is strong
D) there is no threat from the substitute
C) the threat from the substitute is strong
12) The strength of bargaining power forces depends on the availability of substitutes and ________ compared to the size of suppliers or customers.
A) the amount of profit made annually
B) the relative size of the firm
C) the presence of competitors in the market
D) the threat of new competitors
B) the relative size of the firm
13) An organization responds to the structure of its industry by choosing a ________ strategy
A) competitive
B) growth
C) leadership
D) operational
A) competitive
14) If a company produces a uniquely formulated anti-ageing face cream targeted at women above the age of forty, which of the following competitive strategies is it following?
A) industry-wide low cost
B) industry-wide differentiation
C) focused low cost
D) focused differentiation
D) focused differentiation
15) Which of the following is an example of a competitive strategy employed by a firm?
A) increasing the price of its product when raw material prices increase
B) laying off staff in order to cut down costs during a recession period
C) advertising its products nationwide like its competitor organizations
D) launching a unique product targeted at a section of consumers
D) launching a unique product targeted at a section of consumers
16) According to Porter, to be effective the organization’s goals, objectives, culture, and activities must be consistent with the ________.
A) organization’s structure
B) organization’s competitors
C) organization’s strategy
D) organization’s workforce
C) organization’s strategy
17) Porter defined ________ as the amount of money that a customer is willing to pay for a resource, product, or service.
A) margin
B) profit
C) price
D) value
D) value
18) Which of the following is true of a value-chain?
A) It is a network of value-creating activities.
B) It consists of only primary activities.
C) It is specific to manufacturing industries.
D) It nullifies the importance of support activities.
A) It is a network of value-creating activities.
19) A business that selects a differentiation strategy would ________.
A) add cost to an activity provided it has a positive margin
B) provide essential functions at lowest costs
C) imitate rival companies’ strategy and products
D) aim to please stockholders with highest dividends
A) add cost to an activity provided it has a positive margin
20) The difference between the value that an activity generates
and the cost of the activity is called the ________.
A) equity
B) liability
C) overhead
D) margin
D) margin
21) Collecting, storing, and physically distributing the product to buyers describes which of the following primary activities?
A) inbound logistics
B) sales and marketing
C) outbound logistics
D) operations/management
C) outbound logistics
22) Inducing buyers to purchase the product and providing a means for them to do so describes which of the following primary activities?
A) inbound logistics
B) sales and marketing
C) outbound logistics
D) operations/management
B) sales and marketing
23) Each stage of the value chain not only adds value to the product but also ________.
A) attracts buyers
B) accumulates costs
C) devalues the final product
D) attracts competitors
B) accumulates costs
24) Which of the following is a primary activity in the value chain?
A) processes of finding vendors
B) setting up contractual arrangements
C) negotiating prices
D) delivering products to consumers
D) delivering products to consumers
25) ________ includes general management, finance, accounting, legal, and government affairs.
A) Human resources
B) Research and development
C) Firm infrastructure
D) Operations management
C) Firm infrastructure
26) Porter’s model of business activities includes ________, which are interactions across value activities.
A) linkages
B) evaluations
C) support
D) operations
A) linkages
27) Manufacturing systems that include linkages, use ________ to plan production.
A) prior profits and losses
B) sales forecasts
C) competitor’s information
D) software packages
B) sales forecasts
28) Manufacturing systems use ________ to reduce inventory costs.
A) linkages
B) margins
C) value chains
D) support activities
A) linkages
29) As Porter says, the processes and systems in an organization pursuing differentiation must ________.
A) create sufficient value to cover their costs
B) provide products at lowest costs to customers
C) make it easy for products to be duplicated
D) give stiff competition to other similar products
A) create sufficient value to cover their costs
30) If a value chain’s margin is positive, the company must ________.
A) try to increase the value
B) reduce the cost of the value chain
C) retain its present practices
D) change its present practices
C) retain its present practices
31) Organizations gain a competitive advantage by creating new products or services, ________ and by differentiating their products and services from those of their competitors.
A) advertising products and services
B) imitating existing products and services
C) promoting products and services
D) enhancing products and services
D) enhancing products and services
32) Which of the following is a product implementation principle of competitive advantage?
A) Raise barriers to market entry.
B) Enhance goods or services.
C) Establish alliances with firms.
D) Lock in customers and buyers.
B) Enhance goods or services.
33) Which of the following strategies is also called establishing high switching costs?
A) establishing alliances
B) locking in suppliers
C) reducing costs
D) locking in customers
D) locking in customers
34) Which of the following is a process implementation principle of competitive advantage?
A) creating a new product
B) enhancing a product
C) establishing alliances
D) differentiating a product
C) establishing alliances
35) Which of the following is least likely to be an outcome of organizations forming alliances with each other?
A) promotion of product awareness
B) development of market size
C) reduction in purchasing costs
D) increase in mutual competitiveness
D) increase in mutual competitiveness
Competitive strategy determines an organization’s value chain.
true
Porter originally developed the five forces model in order to understand organizations’ competitive environment
false
According to Porter’s five forces model, a company is profitable if all the five competitive forces are strong
false
The bargaining power of competitors is one of the competitive forces identified by Porter
false
The three competitive forces, in Porter’s model, concern the danger of customers taking their business elsewhere
true
If the costs of switching to another vendor are high, then the strength of the competitive forces is low
true
The strength of bargaining power forces does not depend on the availability of substitutes
false
Typically, as an individual, a customer has substantial bargaining power to a large manufacturing industry
false
An organization can choose to either minimize cost or maximize differentiation to gain a competitive advantage
true
Focused differentiation is a strategy in which the product is unique and is used by a wide range of consumers
false
According to Porter, to be effective the organization’s goals, objectives, culture, and activities must be consistent with the organization’s strategy
true
A business that selects a differentiation strategy would structure itself around least-cost activities
false
Organizations analyze the structure of their industry, and, using that analysis, they formulate a competitive strategy
true
Support activities are business functions that relate directly to the production of the organization’s products or services
false
A business with a cost strategy will add cost to an activity only as long as the activity has a positive margin
false
Each stage of the generic value chain accumulates costs and subtracts value from the product
false
The support activities in the generic value chain facilitate the primary activities and contribute only indirectly to production, sale, and service of the product
true
Receiving, storing, and disseminating inputs to the product falls under the operation function of primary activity
false
The company uses the outbound logistics activity to deliver the finished product to a customer
true
Porter’s definition of technology is narrow as it only includes research and development.
false
Porter’s model of business activities includes linkages, which are interactions across value activities
false
Firm infrastructure excludes general management, finance, accounting, legal, and government affairs
false
Business processes implement value chains or portions of value chains
true
Supporting activities contribute to a margin and are easier to calculate than primary activities
false
Manufacturing systems avoid linkages to reduce inventory costs
false
No matter what competitive strategy is being used, the value chain activities remain the same
true
Value chain analysis has a direct application to manufacturing businesses
true
If the value chain’s margin is negative, the company must make some change
true
An information system can be part of a product but it cannot provide support for a product or service
false
Raising barriers to market entry is a product implementation principle
false
Establishing alliances with other organizations promotes product awareness
true

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