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GA Southern BUSA 4131 Chapters 1-5

Blue Motors Inc., an automobile company, is the market leader due to its superior engine technology and service orientation. These unique
qualities have helped the company generate revenues that are consistently higher than other firms in the same industry. Which of the following
can be concluded about Blue Motors Inc. from this scenario?
It has a competitive advantage over the other firms.
A firm is likely to have a competitive advantage when it:
provides services that consumers will value more than those of its rivals.
Which of the following statements best explains why JetBlue airlines is now struggling to maintain a competitive advantage, despite enjoying
some years of early competitive advantage?
It has tried to combine a cost leadership position with a differentiation strategy
Which of the following statements related to a firm’s stakeholders is NOT true?
While external stakeholders are those who make contributions toward the firm, internal stakeholders are those who reap all the benefits.
Motors Inc. is a vendor who supplies auto parts to an automobile manufacturing company. In return, Motors Inc. relies on the company for its
revenue and is affected by any decisions taken by the company. In this scenario, Motors Inc. is a(n) _____ for the automobile manufacturing
external stakeholder
Which of the following events is NOT a black swan event?
Passing of the Sarbanes-Oxley Act
Which of the following statements will effectively guide a strategist?
The principles of strategic management can be applied universally to all organizations.
Which of the following groups will NOT be considered a company’s internal stakeholder?
When a firm integrates the competitive strategies of cost-leadership and differentiation, it will most likely result in:
trade-offs that work against each other.
Which of the following statements is true of strategy?
Actions that allow a firm to address a competitive challenge are strategy.
Which of the following would be most likely to directly put an organization like BP at a major competitive disadvantage?
The Environmental Protection Agency (EPA) banning BP from any new contracts with the U.S. government
Daily Dose Inc. is a supermarket chain that has decided to adopt cost-leadership as its strategy for competitive advantage. Which of the
following statements is most likely true about Daily Dose Inc.?
Daily Dose Inc. will aim to attract its customers through lower prices.
Which of the following statements about competitive advantage is NOT true?
A firm’s competitive advantage is always absolute, not relative.
Which of the following forces is most closely related to firm effects within a pharmaceutical industry?
The strategic actions taken by managers of a firm in the industry
Which of the following statements with regard to determining firm performance is true?
External analysis will help understand the industry effects that determine a firm’s performance.
A diagnosis of the competitive challenge, an element of a good strategy, is primarily accomplished through _____.
strategy analysis
Which of the following does a firm possess when it can outperform other firms in the same industry or the industry average over a prolonged
period of time?
Sustainable competitive advantage
The greater the difference between value creation and cost, the:
greater a firm’s economic contribution.
Which of the following groups is most likely to be considered a firm’s internal stakeholder?
Board members
Which of the following is a stakeholder attribute that managers should consider at every step in a stakeholder impact analysis?
Which of the following statements accurately brings out the difference between an organization’s vision and mission?
Vision defines what the organization wants to accomplish ultimately, whereas the mission defines the means by which vision is accomplished.
According to the Level-5 leadership pyramid, the Level 2 manager is a(n):
contributing team member.
An organization’s _____ describes what the organization actually does—the products and services it plans to provide, and the markets in
which it will compete.
A company’s vision primarily states:
what the company wants to accomplish ultimately.
In the 1980s, Japanese competitors brought better-quality chips to the market at lower cost, threatening Intel Corp.’s position and strategic
plan regarding the production of DRAM (dynamic random-access memory) chips. When the functional managers at Intel came up with the
simple rule of producing whichever product delivered the higher margin, the front-line managers shifted Intel’s production capacity away from
the lower-margin DRAM business to the higher margin semiconductor business. This _____ emerged as a consequence of the firm’s resource
allocation process.
bottom-up strategy
Which of the following statements does the upper-echelons theory support?
Executives interpret situations through the lens of their unique perspectives, shaped by personal circumstances, values, and experiences.
Which of the following actions of an automobile firm will be considered as a strategic commitment?
The firm investing eight years and $4 billion to develop a range of hybrid cars with which it will compete in the future
Which of the following statements is true of the Level-5 leadership pyramid?
Each level of leadership builds upon the previous one in the pyramid.
If a company chooses to keep its vision customer-oriented rather than product-oriented, what will be its implication?
The company will tend to be more flexible when adapting to changing environments.
As the Chief Executive Officer (CEO) of PepsiCo, Indra Nooyi declared PepsiCo’s vision to be “Performance with a Purpose.” She wants to
reposition PepsiCo toward a more sustainable future by focusing not only on economic, but also social and environmental contributions. Which
of the following approaches to the development of strategy does PepsiCo best illustrate?
Top-down strategic planning
The board of directors of True Goods Inc., a company that has a large product mix, has decided to get actively involved in research and
development for the next three financial years. Budget for each business unit under the company will be allocated from the headquarters in
proportion to its previous performances. The board has also decided to liquidate those units that have failed to perform so far. Which of the
following strategies does this scenario best illustrate?
Corporate strategy
Evaluating the data collected from environmental analysis, the corporate executives of F&S Pharma Inc. realized that it was the right time to
expand the business. The company’s vision was accordingly adjusted from “To Be the Best in the Pharmaceutical Industry” to “To Make
Good Health Accessible to Everyone around the Globe.” To support the new vision, the executives decided that the company would first enter
the Asian market where its growth potential would be huge. To further support these decisions, the general managers of different SBUs and
the functional managers formulated their own strategies. Which of the following approaches to the development of strategy does this best
Top-down strategic planning
Strategic commitments are actions that are:
difficult to reverse.
Which of the following questions would a firm’s business strategy ideally answer?
How to compete?
_____ is best described as the behaviors and styles of executives that influence others to achieve an organization’s vision and mission.
Strategic leadership
According to the upper-echelons theory, _____.
organizational outcomes reflect the values of the top management team.
Which of the following questions does the values espoused by a company primarily answer?
How do we accomplish our goals?
Donna has been recently promoted to the position of a team lead at an auditing company. This promotion was based on her boss’s
assessment that Donna is capable of organizing resources such as time, workforce, and budget efficiently based on the projects, as well as
guiding her team to achieve the organization’s goals. From this scenario, we can say that Donna is currently at _____ of the Level-5 leadership
Level 3
_____ is best described as the combination of intended and emergent strategy.
Realized strategy
Which of the following statements is true of customer-oriented visions?
They define a business in terms of providing solutions to people’s needs.
The relative bargaining power of suppliers is most likely low when:
incumbent firms face low switching costs when changing suppliers.
Which of the following firms most likely has the lowest bargaining power as a buyer?
A cell phone company that requires highly customized software for its phones
Which of the following statements is true of an oligopoly?
An oligopoly is often analyzed using game theory.
Neon Electronics Inc., One Electra Inc., and Ovyxo Products Corp. are all companies that manufacture and sell consumer electronics. They
procure their component parts from the same set of suppliers in China and sell the final product to customers with similar needs. Thus, the
three companies together are a part of a(n) _____.
_____ is best described as the amount that savers are paid for use of their money and the amount that borrowers pay for that use.
Interest rate
A consolidated industry turns into a fragmented industry when:
restrictive government policies are introduced in the industry.
_____ describe the positive externality that one user of a product or service has on the value of that product or service for other users.
Network effects
Red Think Inc. is a company that supplies microprocessors to Osion Inc., a computer hardware company. When Osion Inc. demands lower
prices for the microprocessors, Red Think Inc. makes it clear that it would profit more from launching its own brand of laptops and desktops in
the market. Fearing the competition it would then face from Red Think Inc., Osion Inc. decides to buy the microprocessors at the quoted price
itself. In this scenario, Red Think Inc., as a supplier, has exercised its bargaining power by threatening to _____.
forward integrate
Which of the following real-world examples best supports the statement that strategic commitments to a specific industry may be the result of
more political than economic considerations?
Airbus was created by a number of European governments through direct subsidies in order to provide a countervailing power to
In the restaurant industry, a large number of restaurants cater to the similar food-related needs of customers. However, each restaurant makes
its product unique by offering a different cuisine, a different ambience, or different services like home delivery and organic ingredients. This
differentiation allows each restaurant to set its own prices. Thus, the restaurant industry best illustrates a(n) _____.
monopolistically competitive structure
Which of the following statements about the five forces in the U.S. airline industry is true?
The combination of the competitive forces leads to intense rivalry among existing airlines.
Which of the following statements best supports the fact that even during a period of low demand in the U.S. automotive industry, excess
capacity remained?
GM and Chrysler, despite their bankruptcy, restructured instead of exiting the industry.
Incumbent firms can benefit from several important sources of entry barriers. Economies of scale are one such source. Which of the following
is an implication of economies of scale for incumbent firms?
They can demand better terms from their suppliers.
Aura Software Inc. has been operating in the country of New Fernsland for almost a decade. The nation is currently experiencing an economic
downturn. Which of the following is the most likely benefit of this economic condition for Aura Software Inc.?
Aura Software Inc. will have better access to highly skilled human capital at a lower cost.
How do complements affect a primary product or service?
They increase the demand for the primary product.
Although U.S. companies usually lay off people during periods of economic recession, the Japanese company, Toyota, prefers to use these
periods to train its workers on the latest manufacturing techniques. Which of the following is the result of this human resource management
It positions the company well when the economy picks up again.
Strategic group mapping establishes that:
competitive rivalry is strongest between firms that are within the same strategic group.
Restrictions imposed by the government, such as export quotas on certain products, are a part of the _____ of the PESTEL framework.
political environment
Which of the following is a feature of a consolidated industry?
A consolidated industry has the potential to be highly profitable.
Owners of coffee plantations in the country of Zatvia grow their own coffee beans and supply them to various stores and restaurants all over
the country. There are many plantation owners supplying to a huge number of companies, and they are typically unable to differentiate their
products from each other. They also do not have the power to fix their own prices in the industry. In addition, these suppliers can only achieve
competitive parity and not a competitive advantage. Thus, the coffee bean industry in Zatvia best illustrates a(n) _____ structure.
perfectly competitive
If a firm is not effectively organized to exploit the competitive potential of a valuable, rare, and costly to imitate (VRI) resource, the best case
scenario is _____.
a temporary competitive advantage
Which of the following will most likely be considered as an automobile company’s core competency?
The company’s ability to make its cars more fuel efficient than most of its competitors
In the context of the SWOT matrix, which of the following best exemplifies an external opportunity for a firm?
Decreasing government interference in the target market
Leather Love Inc. manufactures shoes. From procuring the leather to servicing the customer at the store, the cost incurred by the company
per pair of shoes is estimated to be approximately $100. However, with each step in the value chain, the value of the product also increases.
Thus, Leather Love can sell a pair of shoes costing $100 at $130. In this scenario, the difference between the value and the cost is best
termed as the _____.
economic contribution
In the context of the VRIO framework, a resource is said to be valuable if it:
allows a firm to take advantage of an external opportunity.
For an asset or a capability to be included in a firm’s resource stock, it should be:
built through investments over time.
While most of Couture Inc.’s competitors were moving toward developing and emerging markets, Couture Inc. decided to keep its operations
limited to its home country so that it could gain some advantage. A few years later, however, Couture Inc. lost its footing in the home market
due to a sharp fall in demand. It then decided to invest in large scale operations in the same developing nations as its competitors, within a
short period of six months. However, its costs kept increasing and it could not compete against the already established brands. In this
scenario, the failure of Couture Inc. can be best attributed to _____.
time compression diseconomies
According to the value chain analysis, which of the following is a support activity?
Research and development
Using the _____, managers can see how competitive advantage flows from a firm’s distinct set of activities.
value chain analysis
A firm decides to retain $20,000 from its annual earnings and invest it in developing an advanced manufacturing system. In this scenario, the
$20,000 would most likely be referred to as the firm’s _____.
resource flow
The balance sheet of Embark Inc. shows that its total assets are worth $1,200,000. This includes inventories worth $120,000, patents valued
$150,000, and goodwill estimated to be worth $70,000. The current liabilities of the company are estimated to be $275,000. In monetary value,
the resource stock of Embark Inc. is worth _____.
In the context of SWOT analysis, a firm can develop a defensive strategic option primarily by:
eliminating an internal weakness to mitigate an external threat.
Onivo Auto Inc. has been the leader in low-cost and fuel-efficient engine technology for many years. It has been able to sustain its competitive
advantage primarily because of its highly efficient automobile engines, which competitors have been unable to develop or buy at a reasonable
price. In the context of the VRIO framework, which of the following resource attributes most likely underpins Onivo’s competitive advantage?
The resource is costly to imitate.
The auditor of a public company is assessing the value of all the intangible assets owned by the company. Which of the following would most
likely be included in this assessment?
The company’s brand equity
In a perfectly competitive industry structure:
any competitive advantage that one firm has will be short-lived.
A firm’s _____ are best described as distinct and fine-grained business processes such as order taking, physical delivery of products, or
invoicing customers.
Which of the following statements accurately brings out the distinction between a firm’s resources and capabilities?
While resources reinforce core competencies, capabilities allow managers to orchestrate their core competencies.
Even though Talk Gen Inc. and TJ Com Inc. operate in the same industry—telecommunications—each firm has a different and loyal customer
base. While Talk Gen Inc. attracts young students and professionals through its efficient network coverage and pricing, TJ Com Inc. attracts
elderly customers solely due to its excellent customer service. Thus, both firms draw their strengths from distinct resource bundles. Which of
the following assumptions of the resource-based model of competitive advantage does this scenario best illustrate?
Resource heterogeneity
FL Systems Inc. and Oryxo Systems Inc. are two competing firms. FL Systems Inc. has $300,000 in tangible assets and $200,000 in
intangible assets. Oryxo Systems Inc. has $150,000 in tangible assets and $347, 000 in intangible assets. In the context of the
resource-based view, which of the following is the most likely implication of the asset values of the two companies?
FL Systems Inc. will find it harder than Oryxo Systems Inc. to attain competitive advantage.
Which of the following is an example of a firm’s capabilities?
Skills involved in training and managing a workforce
Which of the following financial ratios typically indicates a company’s efficiency in extending credit, as well as collecting debts?
Receivables turnover
The sum of consumer surplus and producer surplus for a good or service equals the:
economic value created.
By selling a television at $1,200 for which consumers are willing to pay up to $1,300, a consumer electronics firm makes a profit of $500 per
unit. What is the economic value created in this scenario?
Though the microwaves manufactured by Sun Electra Inc. and FS Electronics Inc. sell at the same price of $600 per unit, the economic value
created by Sun Electra Inc. is more than that of FS Electronics Inc. In the context of this scenario, which of the following statements is true?
Sun Electra has a relative cost advantage over FS Electronics.
Which of the following is an advantage of accounting data?
Accounting data can be easily transformed into financial ratios to help assess and evaluate the competitive performance of firms.
Blue Ace Autos Inc. and Ferdova Autos Inc. are two competing automobile companies. While Blue Ace Autos’s Cost of goods sold / Revenue
is 63.4%, the Cost of goods sold / Revenue of Ferdova Autos is 54.2%. What do you infer from this financial data?
Blue Ace Autos is less efficient than Ferdova Autos in producing goods.
_____ is best described as the difference between the value a consumer attaches to a good or service and what he or she paid for it.
Consumer surplus
The payables turnover of Tesva Automobiles Inc. is 8.2 and that of its competitor, Mova Automobiles Inc., is 18.4. What does this financial
data indicate?
Tesva Automobiles will be more efficient than Mova Automobiles in generating interest-free loans from suppliers.
Paul estimated that a pair of Blue Cult jeans would be worth $50 for its brand and durability. However, at the Blue Cult store, the pair of jeans
he wanted was available for $40. The difference of $10 in this scenario is referred to as the _____.
consumer surplus
The idea that all available information about a firm’s past, current state, and expected future performance is embedded in the market price of
the firm’s stock is called the _____.
efficient-market hypothesis
Which of the following is NOT a disadvantage of the balanced scorecard approach?
It fails to allow managers to prepare the company for future growth.
The tenet behind the triple bottom line is that:
a firm should achieve positive results along the economic, social, and ecological dimensions to gain a sustainable strategy.
The inventory turnover of G&L Apparels Inc. is 102.6 and that of White Couture Inc. a competitor, is 15.6. What do you infer from this financial
G&L Apparels has lesser capital tied up in its inventory than White Couture.
ChatRoom is an instant messaging mobile application. Initially, users were not charged. However, after a period of six months, the users had to pay for a fee to use the upgraded version of the application with advanced features.
Which of the following business models does this best illustrate?
For an apparel manufacturing unit, the cost incurred on fabrics, buttons, and zippers is considered as variable cost primarily because it:
is dependent on the level of consumer demand.
Higher ratios of receivables turnover indicate:
shorter durations of interest-free loans to customers.
In the financial year 2012, Apple’s return on revenue was 26.70% and BlackBerry’s return on revenue was 6.30%. This implies that:
Apple’s return on revenue was higher than that of BlackBerry.
Which of the following is a disadvantage of the balanced scorecard approach to measure firm performance?
It provides only limited guidance about which performance metrics to choose.
If a company has 25 million shares outstanding, and each share is traded at $400, the _____ is $10 billion.
market capitalization
Univo Corp. is a public company whose shares are currently trading in the market at $150 each. The company manufactures smartphones at
the cost of $300 per unit and sells them in the market for $500 each. What is the company’s producer surplus?

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