Business Strategy & Policy

I) Please select the most plausible alternatives from the choices given below (20 x 2 = 40 points):

Which of the following is an example of the resource-based view of the firm?
Philip Morris diversified by purchasing Kraft foods, because they did not want to put money back in the high-risk cigarette business.
Google hires employees by asking them to fill out a 200-item questionnaire; many of the questions have nothing to do with computers.
Halliburton takes advantage of the US war budget to bill the government at over $5 per gallon of gasoline.
Canon manufactures scanners, printers, copiers and cameras, all using its capability in imaging.

Apple has a unique ability to design products that are better looking than competition. IMacs often sell because of their looks as much as for their power and ease of use. This quality of Apple is a:

3. Ford is considering moving its Taurus plant from Edison, NJ to Buenos Aires in Argentina, but is intimidated by the fact that the inflation rate in the nation is too high, and their dollar investments may be compromised. Which segment of the general environment does this statement refer to?
a. Corporate-financial
b. Business-exchange
c. Political-legal
d. Economic

Which of the following is an example of economies of scale?
Johnson & Johnson makes fourteen different varieties of Band-Aid for various product segments.
Intel has a big plant making Centrino chips, reducing the per-unit cost of each chip.
Mutual funds invest their stocks in several different companies, to offset the risk of one company failing suddenly.
Wal-Mart sells certain products very economically, in order to attract customers, while other products may be at par with, or even more expensive than competition.

The term strategy can be defined as:
A company’s market share, which allows it to outperform competition.
A coordinated deployment of a firm’s resources to achieve competitive advantage.
The sum total of a company’s financial, organizational, physical and human resources.
All of the above.

EB Company sells a large pack of “Cutie” diapers for $20. One pack of diapers requires two pounds of raw material and one hour of direct labor for manufacture. Raw material costs $3 per pound and direct production labor is paid $4 per hour. Fixed supervisory costs are $2,000 per month and EB rents its factory for $4,000 per month. How many packs of diapers should EB sell every month to break even?

Cynthia Buchelli, the Vice President (Sales) of MGT 460 Inc. manages a portfolio of three products in the computer division. The new Intel M ULV 773 processor-based Sleekline model has a low market share of around 5%, but has just been introduced, and since the market is booming, Cynthia is hopeful that it will grow into maturity. Stallion, the Xenon-based system, has a market share of 88% in the industry segment it operates in, but the market is stable and not growing too fast. Finally, there is the Pentium4-based Thunderbird, which only sells in discount markets in rural areas.

Which of the following describes the product portfolio under Cynthia?
a. Sleekline-question mark, Stallion-star, Thunderbird-cash cow
b. Sleekline-question mark, Stallion-cash cow, Thunderbird-dog
c. Sleekline-Star, Stallion-cash cow, Thunderbird-dog
d. Sleekline-question mark, Stallion-dog, Thunderbird-cash cow

8. Ned Micic, Microsoft’s CFO finds that the company has a current ratio of 3.7. He would conclude that the firm is
a. Over-leveraged
b. Too-liquid
c. Undercapitalized
d. Profitable

9. Which ones of the four examples below is an example of value-migration?
a. No one buys typewriters anymore, but they buy PCs even to type.
b. HP now produces laser printers that can accept emailed inputs as well.
c. Honda used its expertise in small engines to enter the lawn-mower market
d. Sony lost share in the video recorder market, but gained the camcorder market.

Benetton is a brand name that is supplied by a variety of firms that operate in a network. These firms not only compete with each other, but also collaborate and share resources at times. This phenomenon represents:
a. a white-space opportunity
b. a business ecosystem
c. lowered transaction costs
d. asset specificity

An industry is defined as:
A collection of firms that compete with one another in a single product market.
A collection of firms that exist in a particular geographical area (e.g. Spain).
A collection of firms that use similar distribution channels.
All of the above.

Which of the following is a stock market?
Dow Jones.
Standard and Poors.
All of the above.

Which of the following is not a good core competence?
Logistics management.
Large cash resources.
Skill in acoustic technology.
The ability to produce hybrid automobiles.

Michael Porter’s five-forces model does not include
Bargaining power of suppliers.
Competitive Rivalry.
Stock Market Fluctuations.
Threat of Substitutes.

Which of the following is not an example of the sociocultural segment of the general environment?
People are getting health conscious
Minimum wages are rising
More people are telecommuting
More women work, so more families eat out

An organizational resource would include
The brand names an organization has trademarked.
A firm’s formal reporting structure.
Patents and copyrights.
All of the above.
A defining attribute of a core competence is that it is
Ethical and sustainable
In-house and can be outsourced
A source of globalization
Rare and valuable

Who are the primary stakeholders of a corporation?
There is no such thing as a primary stakeholder.
Bankers who lend money to a corporation.
Customers, who are the source of all revenue.
An employee, without whom value addition is impossible.

What is a good example of inbound logistics in a value chain?
Coordinating the receipt of raw materials
Material handling and warehousing
Inventory control
All of the above

Which of these business leaders is still the CEO of their company?
Bill Gates/Microsoft.
Jack Welch/GE.
Warren Buffet/Berkshire Hathaway.
Bernie Ebbers/Worldcom

Answer any five of the following in about a sentence each (5 x 5 = 25 points).

1) What is a strategic group?

2) Define “economies of scale”.

3) Starbucks had a Total Assets Turnover (TAT) ratio of 1.2 in 2007, which was an improvement over a TAT of 0.96 in 2006. If Starbucks had the exact same level of sales, debt, and profit in 2007 as they did in 2006, how did their TAT improve?

4) What does “outsourcing” mean?

5) Give me an original example of a disruptive technology in a current business scenario.

6) Give me an original example of a barrier to entry.

III) Answer the following question with a short essay (suggested length 200 words). 35 points.

Consider the following quote based on the firm Rubbermaid.

Rubbermaid has experienced major increases in the cost of resin (an important raw material… ) and attempted to pass on these costs with large price increases to its customers. Wal-Mart was particularly angered by the large price increases… Wal-Mart refused to stock a number of Rubbermaid products and deleted Rubbermaid’s products from its promotional materials… Instead, Wal-Mart featured Sterilite, one of Rubbermaid’s prominent new competitors… When Rubbermaid passed on the huge price increases to its customers, the competitors had only small price increases, deciding instead to reduce their profits rather than pass on the full cost of the raw materials.

The quote illustrates three of Porter’s five forces. Which three? How does it illustrate each of them?

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