Podcast
Questions and Answers
SA Pharmaceuticals achieves an 18% return on invested capital. What benchmark is most appropriate to determine if this indicates a competitive advantage?
SA Pharmaceuticals achieves an 18% return on invested capital. What benchmark is most appropriate to determine if this indicates a competitive advantage?
- Assessing the value based on the shareholders' expectations of return on their capital
- Comparing the value to the history of the firm's return on investment over a number of years
- Comparing the return to the return on invested capital obtained by other firms in the industry (correct)
- Evaluating the liquidity ratios for other pharmaceutical companies
In a highly competitive industry, which strategy is most likely to lead to inferior performance?
In a highly competitive industry, which strategy is most likely to lead to inferior performance?
- Trying to be everything to everybody by combining different competitive strategies (correct)
- Choosing a distinct strategic position in the industry
- Focusing on creating value for customers rather than destroying rivals
- Working toward increasing the difference between value creation and cost
Pink Couture Inc. focuses on unique product features and superior customer service, while Pink Blush Inc. focuses on low prices and minimal customer service. Both companies have a competitive advantage because they have:
Pink Couture Inc. focuses on unique product features and superior customer service, while Pink Blush Inc. focuses on low prices and minimal customer service. Both companies have a competitive advantage because they have:
- engaged in direct imitation and substitution.
- executed integrated strategies.
- entered into a cartel arrangement.
- pursued distinct strategic positions. (correct)
Javier, a retired CEO, invests in a start-up and mentors its employees because he wants the company to succeed. Javier is best described as a:
Javier, a retired CEO, invests in a start-up and mentors its employees because he wants the company to succeed. Javier is best described as a:
Organic Food Inc. relies on Radio Plus to advertise, and Radio Plus generates most of its revenue from Organic Food's products. In this scenario, Radio Plus is Organic Food Inc.'s:
Organic Food Inc. relies on Radio Plus to advertise, and Radio Plus generates most of its revenue from Organic Food's products. In this scenario, Radio Plus is Organic Food Inc.'s:
Which of the following describes how managing relationships with various types of stakeholders helps a firm?
Which of the following describes how managing relationships with various types of stakeholders helps a firm?
Which of the following best describes the function of the AFI strategy framework?
Which of the following best describes the function of the AFI strategy framework?
Why are customer-oriented vision statements generally more effective than product-oriented vision statements?
Why are customer-oriented vision statements generally more effective than product-oriented vision statements?
Corporate executives at LikeReal, Inc. decide to compete in the airplane industry by making the largest model planes available among all competitors; by doing this, they completed part of their:
Corporate executives at LikeReal, Inc. decide to compete in the airplane industry by making the largest model planes available among all competitors; by doing this, they completed part of their:
In a large company, which individual is typically most responsible for defining the corporate strategy?
In a large company, which individual is typically most responsible for defining the corporate strategy?
Flashcards
Competitive Advantage
Competitive Advantage
Superior performance relative to other firms in the same industry or the industry average.
Firm Effects
Firm Effects
Attributes firm performance to the actions managers take within a chosen industry.
Stakeholder
Stakeholder
Someone who invests capital in exchange for a stake in the company.
AFI Strategy Framework
AFI Strategy Framework
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Strategic commitments
Strategic commitments
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Vision vs. Mission
Vision vs. Mission
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Organizational values
Organizational values
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Corporate strategy
Corporate strategy
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PESTEL framework
PESTEL framework
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Porter's Five Forces
Porter's Five Forces
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Study Notes
- A firm that achieves superior performance relative to other firms in the same industry or the industry average has a competitive advantage.
- Comparing SA Pharmaceuticals' 18% return on invested capital to that of other pharmaceutical companies will help determine if it has a competitive advantage.
- For a firm in a highly competitive industry, trying to be everything to everybody by combining different competitive strategies will result in inferior performance.
- Pink Couture Inc.(focuses on unique product features and superior customer service) and Pink Blush Inc.(focuses on low prices and minimal customer service) both have gained a competitive advantage by pursuing distinct strategic positions.
- Firm effects attribute firm performance to actions managers take within a chosen industry.
- Javier is one of the company's stakeholders because as a retired CEO, he invests capital in a start-up company that creates budgeting software and mentors the entrepreneur and employees.
- Radio Plus, which relies on Organic Food Inc. to generate most of its revenue from advertising Organic Food's products, is an external stakeholder of Organic Food Inc.
- Managing relationships with various types of stakeholders helps the firm gain and sustain competitive advantage.
- The AFI strategy framework is a model that links strategy analysis, strategy formulation, and strategy implementation, helping managers plan and implement a strategy for competitive advantage.
- Strategic commitments are actions that are long-term oriented.
- Visionary companies outperform their competitors because they provide more aspirational visions. Being effective requires firms to back up their visions with strategic commitments that are costly and difficult to reverse.
- A vision states what a firm wants to accomplish, while a mission states how a firm plans to accomplish this vision.
- "Andrea, Ltd. wants to be the best manufacturer of picture frames in the industry" is an example of a product-oriented vision statement.
- It is better for firms to keep their vision statements customer-oriented rather than product-oriented because customer-oriented visions tend to be more flexible when adapting to changing environments.
- "To enable people throughout the globe to identify their capabilities," is a customer-oriented vision.
- A firm gains a competitive advantage when it can provide products similar to its competitors, but at lower prices.
- Organizational values are ethical standards and norms that govern the behavior of individuals within a firm.
- Corporate executives at LikeReal, Inc. decided to compete in the airplane industry by making the largest model planes available among all competitors, have completed part of their corporate strategy. Rosalind Brewer, the CEO of Sam's Club, reports to Walmart's CEO, C. Douglas McMillon; therefore, Sam's Club is a strategic business unit of Walmart.
- If the CEO of True West Products Inc. (TWP) decides to enter the markets of emerging nations like China and Brazil, this best illustrates corporate strategy.
- In a large company, the CEO of the company is most responsible for devising the corporate strategy.
- The general managers of individual business units are responsible for making business strategies in a large conglomerate.
- General managers of strategic business units rely on functional managers to implement specific business strategies.
- Strategies developed at the departmental level within a strategic business unit are referred to as functional strategies.
- The PESTEL framework allows the scanning, monitoring, and evaluating of changes and trends in a firm's macro environment.
- The stage of the business cycle that the country is in represents an economic factor in a firm's external general environment.
- The primary objective of Porter's five forces model is to understand the profit potential of different industries.
- In the telecom industry, the threat of new entrants is most likely low because this industry in the country of New Taria is characterized by the presence of strong network effects, high brand loyalty, high economies of scale, and proprietary technology among incumbent firms
- Network effects are likely to protect social network platforms from new entrants.
- In the aircraft manufacturing industry, entering requires huge capital investments, so there is not a significant threat of entry.
- Buyers have high bargaining power when they purchase from an industry where products are undifferentiated.
- Rivalry among existing competitors is likely to be more intense when the industry growth rate is negative.
- A company is best described as a complementor to an existing company if customers value the existing company's product or service offering more when combined.
- A company that manufactures its own brand of desktops and laptops will most likely not be a complementor to a firm that manufactures computers.
- The power of suppliers is high in an industry when the suppliers' industry is more concentrated than the industry it sells to.
- Companies in the same strategic group are direct competitors to each other.
- Home Savings, Good Deals, Hank's Store, and King Bargains compete for advantage against each other through everyday low-pricing and discounts on bulk purchases, which caters to the needs of highly price-sensitive customers to form a strategic group.
- Intellectual property is an example of intangible resources.
- Nokia lost its competitive advantage because it relied too long on its core competency of producing highly reliable cell phones without refining or upgrading other aspects of its products from new technologies, an example of core rigidity.
- When a firm makes choices between a cost or value position to achieve competitive advantage, it is primarily involved in strategic trade-offs.
- A firm that sells high-quality products at a premium price to a specific market segment uses a focused differentiation strategy.
- Producing more output over time with the existing production technology allows a firm to move down a given learning curve.
- Compared with a differentiator, a cost-leader is more likely to have rigid labor supervision.
- A firm that is successful with a blue ocean strategy uses value innovation.
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