Business Concepts Quiz
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Questions and Answers

What is the primary function of a matchmaking firm?

  • To supply goods directly to end consumers.
  • To provide infrastructure that reduces transaction costs. (correct)
  • To conduct market research exclusively.
  • To manufacture products for suppliers.

    • Which of the following is a major cost associated with monetizing customer value propositions (CVP)?

  • Employee training costs.
  • Coordination costs. (correct)
  • Transportation logistics costs.
  • Real estate acquisition costs.

    • What is the relationship between infrastructure maintenance and transaction costs?

  • Lower transaction costs enhance the need for infrastructure maintenance.
  • Building infrastructure has no impact on transaction costs.
  • Maintaining infrastructure helps to reduce transaction costs. (correct)
  • Increased maintenance leads to higher transaction costs.

    • When does payment typically occur in a usage-based model?

    <p>After the first usage.</p> Signup and view all the answers

    Which statement best describes the outcome of reducing transaction costs?

    <p>Transaction volume is likely to increase.</p> Signup and view all the answers

    What distinguishes a mass market from a niche market?

    <p>Mass market caters to a broad audience, while niche market targets specific segments.</p> Signup and view all the answers

    What should companies assess to understand customer needs relative to their customer value proposition (CVP)?

    <p>Price drivers and the alignment of products with customer needs.</p> Signup and view all the answers

    Which factor is NOT typically considered in a revenue model?

    <p>The cost of raw materials used.</p> Signup and view all the answers

    What is one key question that defines 'who pays' in a firm's revenue model?

    <p>Is the buyer the end user or a wholesaler?</p> Signup and view all the answers

    In the context of a revenue model, what does 'for what' refer to?

    <p>The pricing structure of the product and its additional services.</p> Signup and view all the answers

    What determines whether a price is fixed or variable in a revenue model?

    <p>The market demand and supply dynamics.</p> Signup and view all the answers

    Which of the following defines 'complement' in a revenue model?

    <p>Products that enhance or support the primary offering.</p> Signup and view all the answers

    What role do price drivers play in developing a revenue model?

    <p>They help in understanding the factors influencing pricing decisions.</p> Signup and view all the answers

    What is the primary goal of a business strategy in the long run?

    <p>Maximize economic profit</p> Signup and view all the answers

    Which level of strategy addresses the question of which business a company should be involved in?

    <p>Corporate Strategy</p> Signup and view all the answers

    What does the acronym PEST stand for in strategic analysis?

    <p>Political, Environmental, Socio-cultural, Technological</p> Signup and view all the answers

    Which force in Porter's Five Forces model involves the competition among existing firms?

    <p>Rivalry among existing competitors</p> Signup and view all the answers

    What factor does NOT directly influence the bargaining power of suppliers?

    <p>Market demand for products</p> Signup and view all the answers

    What is an opportunity cost?

    <p>The net benefit of the best alternative option</p> Signup and view all the answers

    Which of the following is NOT a common classification system used for industries?

    <p>International Financial Reporting System (IFRS)</p> Signup and view all the answers

    Which factor does NOT affect the intensity of rivalry among existing competitors?

    <p>Technological advancements</p> Signup and view all the answers

    What is a characteristic of homogeneous products in a competitive market?

    <p>Low switching costs for buyers</p> Signup and view all the answers

    The threat of new entrants is influenced by all of the following EXCEPT?

    <p>Buyer preference changes</p> Signup and view all the answers

    Which of the following is a factor that can improve the bargaining power of buyers?

    <p>Low switching costs</p> Signup and view all the answers

    In the context of strategic management, what does the term 'complements' refer to?

    <p>Products that enhance the value of other goods</p> Signup and view all the answers

    What are the factors that affect the attractiveness of an industry?

    <p>Structure that derives profitability and opportunities for structural changes</p> Signup and view all the answers

    Which of the following best characterizes the supply side of an industry?

    <p>Similar production processes used by firms</p> Signup and view all the answers

    What is the relationship between buyer's willingness to pay and value creation?

    <p>Increasing buyer's willingness to pay enhances value capture.</p> Signup and view all the answers

    Which factor does not influence competitive dynamics in an industry?

    <p>Firm size</p> Signup and view all the answers

    In terms of competitive advantage, which aspect is critical for sustaining it?

    <p>Availability of resources</p> Signup and view all the answers

    Which element is a component of the VRIO framework that contributes to value creation?

    <p>Valuable resources</p> Signup and view all the answers

    What does strategic interdependence refer to in competitive dynamics?

    <p>The reliance on competitors' actions for firm outcomes.</p> Signup and view all the answers

    What is the primary focus of game theory in the context of competitive dynamics?

    <p>Understanding the interaction between competitors.</p> Signup and view all the answers

    Which of the following is considered a barrier to imitation?

    <p>Tacit knowledge</p> Signup and view all the answers

    What are the outcomes of product innovation?

    <p>Increased buyer's willingness to pay</p> Signup and view all the answers

    How does process innovation typically impact a firm?

    <p>Decreases costs while maintaining value capture</p> Signup and view all the answers

    What is a defining characteristic of comparative advantage?

    <p>Explains efficiency differences between industries.</p> Signup and view all the answers

    Which two aspects are fundamental to understanding the value chain?

    <p>Input transformations and profitability assessments</p> Signup and view all the answers

    What essential factor must be organized throughout the value chain according to the VRIO framework?

    <p>Organized resources and capabilities</p> Signup and view all the answers

    Which of the following reflects the micro perspective in competitive analysis?

    <p>Value chain analysis</p> Signup and view all the answers

    What does the term 'payoff' refer to in competitive dynamics?

    <p>Impact of actions on firm profitability</p> Signup and view all the answers

    What is one of the potential benefits of vertical integration?

    <p>Lower costs</p> Signup and view all the answers

    Which of the following represents a disadvantage of vertical integration?

    <p>Increasing costs</p> Signup and view all the answers

    Which type of diversification focuses on expanding into a variety of geographical markets?

    <p>Geographic diversification</p> Signup and view all the answers

    What are the potential costs associated with related diversification?

    <p>Cognitive conflicts</p> Signup and view all the answers

    Which of the following can be a benefit of diversification strategies?

    <p>Cost and revenue synergies</p> Signup and view all the answers

    What is a major factor to consider when evaluating the scope decisions of a firm?

    <p>Internal organizational capabilities</p> Signup and view all the answers

    What does 'economies of scope' refer to in a diversification strategy?

    <p>Reduced overall costs from shared resources</p> Signup and view all the answers

    Which option represents a risk involved in vertical integration?

    <p>Increasing potential for legal repercussions</p> Signup and view all the answers

    What is the main focus of business strategy within firm scope?

    <p>Deciding how to compete effectively</p> Signup and view all the answers

    Which of the following is NOT a potential benefit associated with diversification?

    <p>Cognitive conflicts</p> Signup and view all the answers

    What is a key barrier to sustaining value in a platform environment?

    <p>Switching costs</p> Signup and view all the answers

    What factor distinguishes a traditional firm from a platform-based firm?

    <p>Ecosystem value</p> Signup and view all the answers

    Which of the following is NOT considered a key participant in a platform?

    <p>Traditional retailers</p> Signup and view all the answers

    What is a major challenge faced by platform-based businesses?

    <p>Competitor imitation</p> Signup and view all the answers

    What enhances a buyer's willingness to pay (WTP) in the context of platforms?

    <p>Direct and indirect network effects</p> Signup and view all the answers

    Which characteristic is indicative of both supply side economies of scale and demand side network effects?

    <p>Increased user engagement</p> Signup and view all the answers

    What ultimately drives business model innovation in platform-based firms?

    <p>Technological advancements</p> Signup and view all the answers

    In platform environments, what does resource orchestration primarily focus on?

    <p>Coordinating resources with external participants</p> Signup and view all the answers

    Which of the following strategies is critical for corporate strategy in platform firms?

    <p>Decide on market entry and expansion</p> Signup and view all the answers

    What can cause disintermediation in a platform context?

    <p>Direct buyer-seller connections</p> Signup and view all the answers

    Study Notes

    Strategy

    • Strategy involves creating, capturing, and sustaining value to generate long-term financial returns.
    • Three levels of strategy exist: corporate, business, and functional.
    • Corporate strategy determines which businesses to operate in.
    • Business strategy outlines how to compete effectively within a business.
    • Functional strategy focuses on how individual business units operate.
    • Factors influencing strategy include PEST (Political, Economic, Social, Technological) factors, potential entrants, substitutes, industry analysis (Firm resources and capabilities, competitors), and external and internal factors.

    Profitability

    • Accounting profit equals revenue minus total costs.
    • Economic profit considers accounting profit minus opportunity cost (the cost of the next best alternative).
    • Opportunity cost is the net benefit of the best forgone alternative.

    Value Creation

    • Value is created by the difference between buyer's willingness to pay and the firm's cost.
    • Economic profit (value captured) is the difference between the value created and the opportunity cost.

    Industry Analysis

    • Analyzing industry structures helps firms understand profitability potential and identify opportunities.
    • Porter's Five Forces model assesses: threat of new entrants, bargaining power of suppliers, bargaining power of buyers, threat of substitutes, and rivalry among existing competitors.
    • Key factors considered: Price, quantity, new products/services, and location.

    Competitive Advantage

    • Comparative advantage explains patterns of trade between countries.
    • Two ways to increase firm value:
      • Increasing buyer willingness to pay: leads to increased value creation
      • Decrease costs: leads to increased value capture.
    • VRIO Framework (Valuable, Rare, Inimitable, Organized) is used to analyze firm resources to determine sustainability of competitive advantage.
    • Inimitable resources are hard to copy or substitute.
    • Organized resources are integrated efficiently throughout the value chain.
    • Competitive advantage requires valuable, rare, inimitable, and organized resources and capabilities.

    Sustaining Competitive Advantage

    • Maintaining competitive advantage requires barriers to imitation to prevent competitors from copying successful strategies.
    • Isolating mechanisms such as path dependence, tacit knowledge, casual ambiguity, complexity, time compression diseconomies, legal systems, and virtuous/vicious circles can prevent competitors from copying successful strategies.

    Value Chain Analysis

    • Value chain analysis involves examining the activities that add value to a product or service throughout the entire process.
    • Firms can utilize and develop resources and capabilities around this value chain.
    • Companies should organize their resources and activities around a cohesive value chain.
    • Analyze value chains to identify activities where the firm has a relative advantage.

    Platform Analysis

    • Platforms enable firms to facilitate exchanges (e.g., hardware, software).
    • Key participants include complementors and users.
    • Challenges: competition, disintermediation (creating direct connections), and bargaining power.
    • Analyze industry value chain and firm value chain.
    • Assess firm's relative advantage in price/ cost.

    Strategy Implementation

    • Vertical integration involves controlling upstream and downstream activities.
    • Diversification strategies can involve geographic expansion or new product lines.
    • Related diversification involves expanding into products/industries related to existing core businesses (potential benefits are economies of scope and synergies).
    • Unrelated diversification involves expanding to unrelated products/ industries (potential benefits of economies of scale).
    • Evaluating Diversification Strategies using a better-off and ownership test to determine if acquiring the business is financially beneficial or not.

    M&A and Strategic Partnerships

    • M&A and partnerships aim to improve competitive advantage.
    • Build, Borrow, Buy model is utilized to determine how best to integrate new businesses.
    • Ownerships test decides whether to acquire or not.
    • Internal resources need to be assessed and determined if similar to the firms' needs in order to develop internally.
    • If resources are not similar, or if they are available externally and can be borrowed if the execs don't know what they lack, it is beneficial to borrow or contract the resources.

    Organizational Design

    • Implementing strategy requires a well-designed organization to coordinate and motivate employees.
    • Formal structures (like organizational charts), standard operating procedures, and informal structures (values and norms) are critical aspects of organization design.
    • Coordination and cooperation problems may arise from employee motivation.

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    Description

    Test your understanding of core business concepts including matchmaking firms, customer value propositions, and transaction costs. This quiz explores critical relationships and models that impact business operations and profitability.

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