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This Document Contains Chapters 1 to 2 Chapter 01 Business Driven Technology Multiple Choice Questions 1. Which of the following is not included as one of Friedman's 10 forces that flattened the world? A. Systems Thinking. B. Outsourcing. C. Informing. D. Supply Chaining. Answer: A. Systems Thinking. Rationale: The 10 forces are Fall of the Berlin Wall, Netscape IPO, Work flow software, Open sourcing, Outsourcing, Offshoring, Supply chaining, In-sourcing, Informing, and Wireless technologies. 2. Why do students need to study information technology? A. Information technology is everywhere in business. B. Information technology is rarely discussed in business. C. Information technology is rarely used in organizations. D. Information technology is found in only a few businesses. Answer: A. Information technology is everywhere in business. Rationale: Information technology is everywhere in business. 3. Which of the following is considered information? A. Quantity sold B. Date sold C. Best-selling item by month D. All of these Answer: C. Best-selling item by month Rationale: Best-selling item by month is information. 4. Which of the following is considered data? A. Quantity sold B. Best customer by month C. Best-selling item by month D. Worst-selling item by month Answer: A. Quantity sold Rationale: Quantity sold is data. 5. Cheryl Steffan is the operations manager for Nature's Bread Company, which specializes in providing natural products for health-conscious individuals. Cheryl is responsible for compiling, analyzing, and evaluating daily sales numbers to determine the company's profitability and forecast production for the next day. Which of the following is an example of a piece of data Cheryl would be using to successfully perform her job? A. Craig Newmark is customer number 15467. B. Compare the costs of supplies, including energy, over the last five years to determine the best-selling product by month. C. Best-selling product by day. D. Best-selling product changes when Tony, the best baker, is working. Answer: A. Craig Newmark is customer number 15467. Rationale: Data is raw facts that describe the characteristics of an event or object. Data for Cheryl would include Craig Newmark is customer number 15467. 6. Cheryl Steffan is the operations manager for Nature's Bread Company, which specializes in providing natural products for health-conscious individuals. Cheryl is responsible for compiling, analyzing, and evaluating daily sales numbers to determine the company's profitability and forecast production for the next day. Which of the following is an example of the type of information Cheryl would be using to successfully perform her job? A. Craig Newmark is customer number 15467. B. Compare the costs of supplies, including energy, over the last five years to determine the best-selling product by month. C. Best-selling product by day. D. Best-selling product changes when Tony, the best baker is working. Answer: C. Best-selling product by day. Rationale: Best-selling product by day is an example of information. 7. Data is useful for understanding individual sales, but to gain deeper insight into a business, data needs to be turned into information. Which of the following offers an example of turning data into information? A. Who are my best customers? B. What is my best-selling product? C. What is my worst-selling product? D. All of these Answer: D. All of these Rationale: Questions outlined in the book include: Who are my best customers? Who are my least-profitable customers? What is my best-selling product? What is my slowest-selling product? Who is my strongest sales representative? Who is my weakest sales representative? 8. Which of the following provides an example of information? A. Who is customer number 12345XX? B. What is product number 12345XX? C. What customer number is Bob Smith? D. What is my worst-selling product? Answer: D. What is my worst-selling product? Rationale: What is my worst-selling product is an example of taking data and turning it into information. 9. Which of the following provides an example of data? A. Who are my best customers? B. What is my best-selling product? C. What is my worst-selling product? D. Who is customer number 12345XX? Answer: D. Who is customer number 12345XX? Rationale: Who is customer number 12345XX is an example of data. 10. Business intelligence is information collected from multiple sources. Which of the following provides an example of a source that would be included in business intelligence? A. Suppliers. B. Customers. C. Competitors. D. All of these. Answer: D. All of these. Rationale: Business Intelligence is information collected from multiple sources-such as suppliers, customers, competitors, partners, and industries-that analyzes patterns, trends, and relationships for strategic decision making. 11. Which of the following is not a topic associated with the information age? A. Collection of data. B. Storage of data. C. College statistics for data. D. Use of data. Answer: C. College statistics for data. Rationale: We live in the information age, where the collection, storage, and the use of data are hot topics. 12. What is information collected from multiple sources-such as suppliers, customers, competitors, partners, and industries-that analyzes patterns, trends, and relationships for strategic decision making? A. Supplier's intelligence. B. Social intelligence. C. Employee intelligence. D. Business intelligence. Answer: D. Business intelligence. Rationale: Business intelligence is information collected from multiple sources-such as suppliers, customers, competitors, partners, and industries-that analyzes patterns, trends, and relationships for strategic decision making. 13. When Friedman describes Globalization 3.0, he discuss 10 forces that ________ the world. A. Increased B. Shrunk C. Prioritized D. Flattened Answer: D. Flattened Rationale: Friedman's 10 forces that flattened the world are outlined in his discussion of Globalization 3.0. 14. Which of the below is the key term that defines the confirmation or validation of an event or object? A. Buyer power. B. Data. C. Fact. D. Entry barrier. Answer: C. Fact. Rationale: A fact is the confirmation or validation of an event or object. 15. Which of the following is included as one of Friedman's 10 forces that flattened the world? A. Wireless technologies. B. Global-warming effects. C. Social environmental technologies. D. Hazardous waste environmental impacts. Answer: A. Wireless technologies. Rationale: The 10 forces are Fall of the Berlin Wall, Netscape IPO, Work flow software, Open sourcing, Outsourcing, Offshoring, Supply chaining, In-sourcing, Informing, and Wireless technologies. 16. What is data converted into a meaningful and useful context? A. Competitive intelligence. B. Information. C. Buyer power. D. First-mover advantage. Answer: B. Information. Rationale: Information is data converted into a meaningful and useful context. 17. As companies move from data to knowledge, they start to include more and more variables for analysis, resulting in better, more precise support for _____________. A. Decision making. B. Problem solving. C. Both decision making and problem solving. D. None of these. Answer: C. Both decision making and problem solving. Rationale: As companies move from data to knowledge, they start to include more and more variables for analysis, resulting in better, more precise support for (1) decision making and (2) problem solving. 18. How are the majority of companies today typically organized? A. By departments or functional areas. B. By departments or financial areas. C. By degree or financial areas. D. All of these. Answer: A. By departments or functional areas. Rationale: Companies today are typically organized by departments or functional areas. 19. How does the text recommend that a company operate if it wants to be successful in the information age? A. Functionally independent between departments. B. Interdependently between departments. C. Together as one department with little or no independence. D. Each department acting as its own individual business unit. Answer: B. Interdependently between departments. Rationale: For companies to operate as a whole and be successful in our current business environment, they must operate interdependently between departments. 20. Most companies are organized by departments or functional areas. Which of the following is not a common department found in a company? A. Accounting. B. Payroll. C. Marketing. D. Human Resources. Answer: B. Payroll. Rationale: Payroll is part of the accounting department. 21. Which of the following is typically performed by the sales or marketing department? A. Manage enterprise-wide processes. B. Maintain employment policies. C. Manage cross-enterprise processes. D. Maintain transactional data. Answer: D. Maintain transactional data. Rationale: Sales and marketing departments focus on moving goods or services into the hands of the consumers and maintain transactional data. 22. The sales department needs to rely on information from operations to understand _________. A. Inventory. B. Customer orders. C. Demand forecasts. D. All of these. Answer: D. All of these. Rationale: Sales needs to rely on information from operations to understand inventory, place orders, and forecast consumer demand. 23. Which of the following represents the department that maintains policies, plans, and procedures for the effective management of employees? A. Human Resources. B. Sales. C. Employee Resources. D. Employee Relations. Answer: A. Human Resources. Rationale: Human resources maintains policies, plans, and procedures for the effective management of employees. 24. Greg works for Geneva Steel Corporation. Greg's duties include managing the overall processes for the company and transforming the steel resources into goods. Which department would Greg most likely work in? A. Accounting Manager. B. Operations Manager. C. Marketing Manager. D. CIO. Answer: B. Operations Manager. Rationale: Operations management manages the process of converting or transforming resources into goods or services. 25. Information technology can enable departments to more efficiently and effectively perform their core _____________. A. Facts. B. Feedback mechanisms. C. Business operations. D. Media issues. Answer: C. Business operations. Rationale: Information technology can enable departments to more efficiently and effectively perform their business operations. 26. The department within a company that records, measures, and reports monetary transactions is called _______________. A. Accounting. B. Marketing. C. Finance. D. Operations Management. Answer: A. Accounting. Rationale: The department within a company that records, measures, and reports monetary transactions is accounting. 27. The department within a company that performs the function of selling goods or services is called _______________: A. Marketing. B. Sales. C. Finance. D. Operations Management. Answer: B. Sales. Rationale: The department with a company that performs the function of selling goods or services is sales. 28. The department within a company that supports sales by planning, pricing, and promoting goods or services is called ___________. A. Sales. B. Operations Management. C. Accounting. D. Marketing. Answer: D. Marketing. Rationale: The department within a company that supports sales by planning, pricing, and promoting goods or services is marketing. 29. Which of the following represents the relationship between functional areas in a business? A. Independent B. Autonomous C. Interdependent D. Self-sufficient Answer: C. Interdependent Rationale: Functional areas are interdependent. 30. Which of the following statements is true? A. IT equals business success. B. IT equals business innovation. C. IT represents business success and innovation. D. IT enables business success and innovation. Answer: D. IT enables business success and innovation. Rationale: IT is an important enabler of business success and innovation. 31. What is the name of a company's internal MIS department? A. Management information systems (MIS) B. Information systems (IS) C. Information technology (IT) D. All of these Answer: D. All of these Rationale: Typical organizations have an internal MIS department, often called Information Technology (IT), Information Systems (IS), or Management Information Systems (MIS). 32. A system is a collection of parts that link together to ___________. A. Monitor the company. B. Gather experience. C. Achieve a common purpose. D. Implement solutions. Answer: C. Achieve a common purpose. Rationale: A system is a collection of parts that link to achieve a common purpose. 33. Which of the following does not offer a good example of a system? A. A car. B. A laptop. C. The light-rail tram. D. A pencil. Answer: D. A pencil. Rationale: A system is a collection of parts that link to achieve a common purpose. A pencil does not link together to achieve a common purpose. 34. Which four elements are included in systems thinking? A. Output, Process, Feedback, and Accounting. B. Process, Output, Operations, and Accounting. C. Input, Process, Output, and Feedback. D. Input, Output, Sales, and Feedback. Answer: C. Input, Process, Output, and Feedback. Rationale: The systems-thinking process includes input, process, output, and feedback. 35. MIS is a business function, like accounting or sales, which moves information about people, products, and processes across the company to facilitate decision making and problem solving. What does MIS stands for? A. Management Information Strategy. B. Management Intelligence System. C. Management Information Systems. D. Management Information Strategist. Answer: C. Management Information Systems. Rationale: Management Information Systems. 36. Shelby Black runs a successful hair salon in downtown Los Angeles. One of Shelby's tasks is to input positive and negative customer reviews into her computer system. What type of information is Shelby gathering? A. Feedback. B. Processing. C. Output management. D. Sales processing. Answer: A. Feedback. Rationale: Feedback is information that returns to its original transmitter (input, transform, or output) and modifies the transmitter's actions. 37. One challenge that companies today sometimes have is that they are departmentalized and the departments act independently of each other. One solution that can help a company work interdepartmentally includes ___________. A. System processes. B. Human resources. C. Management information systems. D. Resource information systems. Answer: C. Management information systems. Rationale: Management information systems is a business function, like accounting and human resources, which moves information about people, products, and processes across the company to facilitate decision making and problem solving. 38. What is a way of monitoring the entire system in a company, by viewing the multiple inputs being processed to produce outputs? A. Feedback thinking. B. Systems thinking. C. Output management. D. Operational thinking. Answer: B. Systems thinking. Rationale: Systems thinking is a way of monitoring the entire system by viewing multiple inputs being processed or transformed to produce outputs, while continuously gathering feedback on each part. 39. Feedback is information that returns to its original transmitter and modifies the transmitter's actions. What would the original transmitter include? A. Input, Transform, Output. B. Input, Transform, Outnumber. C. Output, Input, Performer. D. Input, Process, Transform. Answer: A. Input, Transform, Output. Rationale: Feedback is information that returns to its original transmitter and modifies the transmitter's actions. The original transmitter includes input-transform-output. 40. MIS is a business function. Which of the following does MIS perform to help aid the company in decision making and problem solving? A. Moves information about people. B. Moves information about processes across the company to improve systems. C. Moves information about products. D. All of these. Answer: D. All of these. Rationale: MIS is a business function, which moves information about people, products, and processes across the company to facilitate decision making and problem solving. 41. A system is a collection of parts that link to achieve a common purpose. Systems thinking is a way of monitoring ________________. A. The entire system. B. A division within the sales role. C. The executive team. D. The company's competitors. Answer: A. The entire system. Rationale: A system is a collection of parts that link to achieve a common purpose. Systems thinking is a way of monitoring the entire system by viewing multiple inputs being processed or transformed to produce outputs, while continuously gathering feedback on each part. 42. MIS can be an important enabler of business success and innovation. Which of the below statements is accurate when referring to MIS? A. MIS equals business success and innovation. B. MIS represents business success and innovation. C. MIS is not a valuable tool that leverages talent. D. MIS is a valuable tool that can leverage the talents of people who know how to use and manage it effectively. Answer: D. MIS is a valuable tool that can leverage the talents of people who know how to use and manage it effectively. Rationale: MIS does not equal or represent business success and innovation. It is a valuable tool that can leverage the talents of people who know how to use and manage it effectively. 43. Which of the following provides an accurate definition of systems thinking? A. A way of monitoring the entire system by viewing multiple inputs being processed or transformed to produce outputs, while continuously gathering feedback on each part. B. A way of monitoring individual components, including an input, the process, and an output, while continuously gathering feedback on the entire system. C. A way of monitoring the entire system by viewing multiple inputs being processed or transformed to produce outputs, while continuously gathering feedback on the entire system. D. A way of monitoring singular parts of a system by viewing a single input that is processed or transformed to produce an entire system that is continuously monitored to gather feedback on each individual part. Answer: A. A way of monitoring the entire system by viewing multiple inputs being processed or transformed to produce outputs, while continuously gathering feedback on each part. Rationale: Systems thinking is a way of monitoring the entire system by viewing multiple inputs being processed or transformed to produce outputs, while continuously gathering feedback on each part. 44. Consider a washing machine as a system. Which of the following represents the inputs? A. The dirty clothes, water, and detergent. B. The clean clothes. C. The wash and rinse cycle. D. The light indicating that the washer is off balance and has stopped. Answer: A. The dirty clothes, water, and detergent. Rationale: The inputs for a washing machine include the dirty clothes, water, and detergent. 45. Consider a washing machine as a system. Which of the following represents the process? A. The dirty clothes, water, and detergent. B. The clean clothes. C. The wash and rinse cycle. D. The light indicating that the washer is off balance and has stopped. Answer: C. The wash and rinse cycle. Rationale: The process for a washing machine includes the wash and rinse cycle. 46. Consider a washing machine as a system. Which of the following represents feedback? A. The dirty clothes, water, and detergent. B. The clean clothes. C. The wash and rinse cycle. D. The light indicating that the washer is off balance and has stopped. Answer: D. The light indicating that the washer is off balance and has stopped. Rationale: The feedback for a washing machine includes a light indicating that the washer is off balance and has stopped. 47. Consider a washing machine as a system. Which of the following represents the outputs? A. The dirty clothes, water, and detergent. B. The clean clothes. C. The wash and rinse cycle. D. The light indicating that the washer is off balance and has stopped. Answer: B. The clean clothes. Rationale: The output for a washing machine includes clean clothes. 48. Consider an oven as a system. Which of the following represents the input? A. The uncooked food. B. The cooked food. C. A light indicating that the oven has reached the preheated temperature. D. The oven running at 350 degrees for 20 minutes. Answer: A. The uncooked food. Rationale: The input for an oven includes the uncooked food. 49. Consider oven as a system. Which of the following represents the output? A. The uncooked food. B. The cooked food. C. A light indicating that the oven has reached the preheated temperature. D. The oven running at 350 degrees for 20 minutes. Answer: B. The cooked food. Rationale: The output for an oven includes the cooked food. 50. Consider an oven as a system. Which of the following represents the process? A. The uncooked food. B. The cooked food. C. A light indicating that the oven has reached the preheated temperature. D. The oven running at 350 degrees for 20 minutes. Answer: D. The oven running at 350 degrees for 20 minutes. Rationale: The process for an oven includes running at 350 degrees for 20 minutes. 51. Consider an oven as a system. Which of the following represents feedback? A. The uncooked food. B. The cooked food. C. A light indicating that the oven has reached the preheated temperature. D. The oven running at 350 degrees for 20 minutes. Answer: C. A light indicating that the oven has reached the preheated temperature. Rationale: The feedback for an oven includes a light indicating that the oven has reached the preheated temperature. 52. Consider a home theater system. Which of the following represents the inputs? A. The DVD player, DVD movie, speakers, TV, and electricity. B. Playing the movie, including the audio through the speakers and the video on the TV. C. A message stating that the disk is dirty and cannot be played. D. Spinning the disk to play, pause, rewind, or fast forward. Answer: A. The DVD player, DVD movie, speakers, TV, and electricity. Rationale: A home theater system requires inputs of the DVD player, DVD movie, speakers, TV, and electricity. 53. Consider a home theater system. Which of the following represents the outputs? A. The DVD player, DVD movie, speakers, TV, and electricity. B. Playing the movie, including the audio through the speakers and the video on the TV. C. A message stating that the disk is dirty and cannot be played. D. Spinning the disk to play, pause, rewind, or fast forward. Answer: B. Playing the movie, including the audio through the speakers and the video on the TV. Rationale: The output of a home theater system includes playing the movie, including the audio through the speakers and the video on the TV. 54. Consider a home theater system. Which of the following represents the process? A. The DVD player, DVD movie, speakers, TV, and electricity. B. Playing the movie, including the audio through the speakers and the video on the TV. C. A message stating that the disk is dirty and cannot be played. D. Spinning the disk to play, pause, rewind, or fast forward. Answer: D. Spinning the disk to play, pause, rewind, or fast forward. Rationale: The process of a home theater system includes spinning the disk to play, pause, rewind, or fast forward. 55. Consider a home theater system. Which of the following represents the feedback? A. The DVD player, DVD movie, speakers, TV, and electricity. B. Playing the movie, including the audio through the speakers and the video on the TV. C. A message stating that the disk is dirty and cannot be played. D. Spinning the disk to play, pause, rewind, or fast forward. Answer: C. A message stating that the disk is dirty and cannot be played. Rationale: The feedback from a home theater system includes a message stating that the disk is dirty and cannot be played. Fill in the Blank Questions 56. A ____________ is the confirmation or validation of an event or object. Answer: Fact 57. Top managers use __________ intelligence to define the future of the business, analyzing markets, industries, and economies. Answer: Business 58. Companies are organized by departments. The __________ department is responsible for maintaining records, measures, and reports of monetary transactions. Answer: Accounting 59. The __________ management department in a company manages the process of converting or transforming resources into goods or services. Answer: Operations 60. The __________ department tracks strategic financial issues, including money, banking, credit, investments, and assets. Answer: Finance 61. The __________ resources department maintains policies, plans, and procedures for a company. Answer: Human 62. ____________ is information that returns to its original transmitter and modifies the transmitter's actions. Answer: Feedback 63. A __________ is a collection of parts that link to achieve a common purpose. Answer: System 64. ____________ information systems is the academic discipline covering the application of people, technologies, and procedures-collectively called information systems-to solve business problems. Answer: Management 65. Information technology is a field concerned with the use of technology in managing and processing ________________________. Answer: Information 66. ____________ are raw facts that describe the characteristics of an event. Answer: Data 67. ____________ is data converted into a meaningful and useful context. Answer: Information True/False Questions 68. Companies today are successful when they combine the power of the information age with traditional business methods. Answer: True Rationale: Companies today are successful when they combine the power of the information age with traditional business methods. 69. The information age is the present time, during which infinite quantities of facts are widely available to anyone who can use a computer. Answer: True Rationale: The information age is the present time, during which infinite quantities of facts are widely available to anyone who can use a computer. 70. Technology provides countless business opportunities, but can also lead to pitfalls and traps for a business. Answer: True Rationale: Technology provides countless business opportunities, but can also lead to pitfalls and traps for a business. 71. For an organization to succeed, every department or functional area must work independently to be most effective. Answer: False Rationale: For an organization to succeed, every department or functional area must work together, or interdependently, sharing common information and not be a "silo." 72. Successful companies today operate cross-functionally, integrating the operations of all departments. Answer: True Rationale: Successful companies today operate cross-functionally, integrating the operations of all departments. 73. An overview of systems thinking includes input, process, output, and finances. Answer: False Rationale: An overview of systems thinking includes input, process, output, and feedback. 74. MIS is a tool that is most valuable when it leverages the talents of people who know how to use and manage it effectively. Answer: True Rationale: MIS is a tool that is most valuable when it leverages the talents of people who know how to use and manage it effectively. 75. Information technology equals business success and innovation. Answer: False Rationale: Information technology is an important enabler of business success and innovation. It does not equal business success and innovation. 76. Common departments found in an organization include accounting, management information systems, operations management, and delivery. Answer: False Rationale: Delivery is not a department found in organizations. 77. Three key resources-people, information, and information technology (in that order of priority)-are inextricably linked. If one fails, they all fail. Answer: True Rationale: Three key resources-people, information, and information technology (in that order of priority)-are inextricably linked. If one fails, they all fail. Essay Questions 78. Describe the information age and the differences between data, information, business intelligence, and knowledge. Answer: We live in the information age, when infinite quantities of facts are widely available to anyone who can use a computer. The core drivers of the information age include data, information, business intelligence, and knowledge. Data are raw facts that describe the characteristics of an event or object. Information is data converted into a meaningful and useful context. Business intelligence (BI) is information collected from multiple sources, such as suppliers, customers, competitors, partners, and industries, that analyzes patterns, trends, and relationships for strategic decision making. Knowledge includes the skills, experience, and expertise, coupled with information and intelligence, that creates a person's intellectual resources. As you move from data to knowledge, you include more and more variables for analysis, resulting in better, more precise support for decision making and problem solving. 79. Identify the different departments in a company and why they must work together to achieve success. Answer: Companies are typically organized by department or functional area, such as accounting, finance, human resources, marketing, operations management, and sales. Although each department has its own focus and own data, none can work independently if the company is to operate as a whole. It is easy to see how a business decision made by one department can affect other departments. Functional areas are anything but independent in a business. In fact, functional areas are interdependent. Sales must rely on information from operations to understand inventory, place orders, calculate transportation costs, and gain insight into product availability based on production schedules. For an organization to succeed, every department or functional area must work together, sharing common information and not be a "silo." Information technology can enable departments to more efficiently and effectively perform their business operations. 80. Explain systems thinking and how management information systems enable business communications. Answer: A system is a collection of parts that link to achieve a common purpose. Systems thinking is a way of monitoring the entire system by viewing multiple inputs being processed or transformed to produce outputs while continuously gathering feedback on each part. Feedback is information that returns to its original transmitter (input, transform, or output) and modifies the transmitter's actions. Feedback helps the system maintain stability. Management information systems (MIS) is a business function, like accounting and human resources, which moves information about people, products, and processes across the company to facilitate decision making and problem solving. MIS incorporates systems thinking to help companies operate cross-functionally. For example, to fulfill product orders, an MIS for sales moves a single customer order across all functional areas, including sales, order fulfillment, shipping, billing, and finally customer service. Although different functional areas handle different parts of the sale, thanks to MIS, to the customer the sale is one continuous process. Chapter 02 Identifying Competitive Advantages Multiple Choice Questions 1. Which of the following is not a typical way that a company would duplicate a competitive advantage? A. Acquiring the new technology. B. Copying the business operations. C. Hiring away key employees. D. Carrying large product inventories. Answer: D. Carrying large product inventories. Rationale: Ways that companies duplicate competitive advantages include acquiring new technology, copying the business operations, and hiring away key employees. 2. When a company is the first to market with a competitive advantage, this is called a first-mover advantage. All of the following companies were first-movers except ____________. A. FedEx-the online self-service software. B. Apple-iPad. C. Apple-iPod. D. Microsoft-Bing search engine. Answer: D. Microsoft-Bing search engine. Rationale: First-mover advantage is an advantage that occurs when a company can significantly increase its market share by being first with a competitive advantage. Google was first to market with search-engine technology. 3. A business strategy achieves a specific set of goals, which include __________. A. Developing new products or services and attracting new competition. B. Increasing costs and attracting new competition. C. Attracting new customers and developing new products or services. D. All of these. Answer: C. Attracting new customers and developing new products or services. Rationale: A business strategy is a leadership plan that achieves a specific set of goals or objectives such as developing new products or services, entering new markets, increasing customer loyalty, attracting new customers, increasing sales, and decreasing costs. 4. Competitive intelligence is the process of gathering information about the competitive environment, including _________. A. Competitors' employees. B. Competitors' differentiated processes. C. Competitors' plans. D. All of these. Answer: C. Competitors' plans. Rationale: Competitive intelligence is the process of gathering information about the competitive environment, including competitors' plans, activities, and products, to improve a company's ability to succeed. 5. Which of the following is a tool a manager can use to analyze competitive intelligence and identify competitive advantages? A. The three generic strategies. B. The threat of substitute buyer power. C. Differentiated costs. D. Supplier loyalty. Answer: A. The three generic strategies. Rationale: Managers utilize three common tools to analyze competitive intelligence and develop competitive advantages including: (1) the five-forces model, (2) the three generic strategies, and (3) value chain analysis. 6. Identifying competitive advantages can be difficult and explains why they are typically _______. A. Temporary. B. Satisfactory. C. Terminated. D. Unsuccessful. Answer: A. Temporary. Rationale: Competitive advantages are typically temporary. 7. Updating business strategies is a continuous undertaking, as internal and external environments ________. A. Become less competitive. B. Remain stagnant. C. Rapidly change. D. Become more consistent. Answer: C. Rapidly change. Rationale: Updating business strategies is a continuous undertaking, as internal and external environments rapidly change. 8. Which of the following represents a reason why competitive advantages are typically temporary? A. The competitor will hire away your key employees. B. The competitor quickly seeks ways to duplicate your business operations. C. The competitor will purchase new technology. D. All of these. Answer: D. All of these. Rationale: Competitive advantages are typically temporary, because competitors often quickly seek ways to duplicate them by acquiring new technology, copying the business operations, and hiring away key employees. 9. What is a competitive advantage? A. A product that an organization's customers place a lesser value on than similar offerings from a competitor. B. A feature of a product or service on which customers place a lesser value than they do on similar offerings from a supplier. C. A service that an organization's customers place a lesser value on than similar offerings from a supplier. D. A feature of a product or service on which customers place a greater value than they do on similar offerings from competitors. Answer: D. A feature of a product or service on which customers place a greater value than they do on similar offerings from competitors. Rationale: This is the definition of competitive advantage. 10. All of the following are common tools used in industry to analyze and develop competitive advantages, except: A. Five-Forces Model B. Three Generic Strategies C. Competitive analysis model D. Value chain analysis Answer: C. Competitive analysis model Rationale: A competitive analysis model is not discussed in this text. 11. Greg Provenzo owns and runs a Blockbuster video store. Greg is implementing a drive-thru rental process that is the same as you would find at a fast-food restaurant. Customers can pick up and drop off their videos without leaving their cars. Greg's new system has become so popular that Videos Plus, a competitor down the street, is attempting to re-create Greg's video drive-thru rental process. Greg's system is an example of a _________. A. Supply chain power. B. First-mover advantage. C. Business processing strategy. D. Business Intelligence. Answer: B. First-mover advantage. Rationale: The first-mover advantage is an advantage that occurs when a company can significantly increase its market share by being first with a competitive advantage. 12. The process of gathering information about the competitive environment, including competitors' plans, activities, and products, to improve a company's ability to succeed is the definition of ___________. A. Feedback. B. Information. C. Competitive intelligence. D. Data. Answer: C. Competitive intelligence. Rationale: Competitive intelligence is the process of gathering information about the competitive environment, including competitors' plans, activities, and products, to improve a company's ability to succeed. 13. Steve Jobs and Apple created a big advantage in the technology industry with the introduction of the iPod, iPhone, and iPad. What are these all examples of? A. Competitive advantage B. Competitive intelligence C. First-mover advantage D. All of these Answer: D. All of these Rationale: Steve Jobs and Apple created a big advantage in the technology industry with their products the iPod, iPhone, and iPad. These are examples of competitive advantage, competitive intelligence, and first-mover advantage. 14. Paula Logston is the owner and operator of a high-end online custom clothing company. Paula has never heard of Porter's Five-Forces Model, and she wants to understand why she would perform an analysis using it. If you were tasked with explaining Porter's Five-Forces Model to Paula, what would be the primary reason she would want to use this type of analysis? A. To help Paula choose a clothing business focus. B. To help Paula evaluate the attractiveness of the clothing industry. C. To help Paula evaluate and execute business goals. D. All of these. Answer: B. To help Paula evaluate the attractiveness of the clothing industry. Rationale: One of the three tools company executives often use when analyzing competitive intelligence is the five-forces model. This is used to evaluate industry attractiveness. 15. A __________ advantage features a product or service on which customers place a greater value than they do on similar offerings from competitors. A. Competitive B. Competitor C. Power D. First-mover Answer: A. Competitive Rationale: A competitive advantage features a product or service on which customers place a greater value than they do on similar offerings from competitors. 16. The Victory Wireless store in Denver is currently offering a fabulous marketing strategy for potential new iPhone customers. Victory Wireless offers customers who purchase an iPhone with a two-year subscription a free Otter phone case, car charger, ear phones, and speakers. In terms of Porter's Five Forces, what is Victory Wireless attempting to achieve with this marketing strategy? A. Increase buyer power. B. Increase substitute products. C. Decrease supplier power. D. Decrease buyer power. Answer: D. Decrease buyer power. Rationale: Victory Wireless is attempting to decrease buyer power by offering products at a lower price or competing on price. 17. Gina Brooks works for Aquarium Retail Services selling high-end saltwater fish and tank supplies. Aquarium Retail Services is the current market leader in Gina's city. Gina has recently been approached by Deep Blue Incorporated with an opportunity to run its corporate nationwide marketing and sales division. Gina decides to jump at the opportunity! Deep Blue is attempting to gain a competitive ________ by stealing its competitor's key employees. A. Power B. Entry Barrier C. Advantage D. Loyalty Answer: C. Advantage Rationale: Ways that companies duplicate competitive advantages include acquiring the new technology, copying business processes, and hiring away employees. 18. The banking industry has implemented several competitive advantages, including ATMs, online bill-pay services, and electronic statements. Of course, these competitive advantages were quickly duplicated by any competitor that wanted to remain in the banking industry. These were all examples of ___________ competitive advantages. A. acquiring new technology products and services B. hiring new employees C. reducing expenses D. gaining invaluable feedback from customers Answer: A. acquiring new technology products and services Rationale: The banking industry has utilized competitive advantage by offering ATMs, online bill-pay services, and e-statements. All of these are examples of ways they duplicated each other by acquiring new technology products and services. 19. Michael Porter defined the Five-Forces Model and the potential pressures that can hurt sales. Which of the following is not one of the potential pressures that can hurt sales? A. Suppliers can drive down profits by charging more for supplies. B. New market entrants can steal potential investment capital. C. Substitute products can steal customers. D. All of these. Answer: D. All of these. Rationale: Michael Porter defined the Five-Forces Model. Before formally presenting his model, he identified pressures that can hurt potential sales, which include: (1) knowledgeable customers can force down prices by pitting rivals against each other, (2) influential suppliers can drive down profits by charging higher prices for supplies, (3) competition can steal customers, (4) new market entrants can steal potential investment capital, and (5) substitute products can steal customers. 20. Which of the following is included in Porter's Five-Forces Model? A. Loyalty expenses. B. Supply chain management. C. The power of competitors. D. Systems thinking. Answer: C. The power of competitors. Rationale: In figure 1.8, Porter's five-forces model outlines rivalry among existing competitors, the power of competitors. 21. Kevin Campbell is an incoming freshman at your college. Kevin is frustrated by the cost of books, tuition, and expenses, and he also needs to purchase a rather expensive laptop. In an effort to save money, Kevin begins a Facebook group finding other college students who need to purchase laptops. Soon, Kevin's Facebook group has close to 100,000 students. Kevin decides to collectively approach different computer companies to see if his group qualifies for a special discount. What business strategy is Kevin using to purchase laptops? A. Collecting business intelligence. B. Decreasing entry barriers. C. Purchasing a substitute product. D. Increasing buyer power. Answer: D. Increasing buyer power. Rationale: Buyer power is one of Porter's Five Forces, which measures the ability of buyers to affect the price they must pay for an item. Kevin's group is attempting to increase its buyer power. 22. What are costs that make customers reluctant to switch to another product or service? A. Support activities. B. Switching costs. C. Loyalty rewards. D. Value chain activities. Answer: B. Switching costs. Rationale: Switching costs are costs that make customers reluctant to switch to another product or service. 23. Callie Crystal owns and operates one of the most successful local coffee shops in Denver, called The Edgewater Café. Each time a customer purchases their 100th cup of coffee at The Edgewater Café, they receive a free pound of coffee of their choice. What is Callie attempting to create with her unique "Free Pound of Coffee" marketing program? A. Reducing buyer power with a loyalty program. B. Increasing buyer power with a loyalty program. C. Decreasing supplier power with a differentiated product. D. Creating a substitute product. Answer: A. Reducing buyer power with a loyalty program. Rationale: One way to reduce buyer power is with a loyalty program, which is a program to reward customers based on their spending. 24. What includes all parties involved, directly or indirectly, in obtaining raw materials or a product? A. Support chain. B. Supply chain. C. System chain. D. Supply choice. Answer: B. Supply chain. Rationale: The supply chain includes all parties involved, directly or indirectly, in obtaining raw materials or a product. 25. Which of the below represents a company in a supply chain? A. Customer and competitor. B. Supplier and competitor. C. Knowledge worker and supplier. D. Supplier and customer. Answer: D. Supplier and customer. Rationale: In a typical supply chain, a company will be both a supplier and a customer. 26. In the center of Porter's Five-Forces Model is competition. Which of the below represents the four outer boxes? A. Buyer power, systems power, threat of false entrants, and threat of substitute products or services B. Buyer power, systems power, threat of new entrants, and threat of substitute products or services C. Buyer power, supplier power, threat of new entrants, and threat of substitute products or services D. Business power, supplier power, threat of new entrants, and threat of powerful services Answer: C. Buyer power, supplier power, threat of new entrants, and threat of substitute products or services Rationale: The four competitive forces that work among the power of competitors are buyer power, supplier power, threat of new entrants, and threat of substitute products or services. 27. Shawn McGill is on the executive board for ABC Pharmaceuticals. The company produces the number-one-selling cancer-fighting drug on the market. Due to its incredible success, ABC pharmaceuticals has decided to increase the cost of the drug from $8 a pill to $15 a pill. Which force is ABC Pharmaceuticals using to increase its drug price? A. Supplier power. B. Buyer power. C. Threat of false entrants. D. Business power. Answer: A. Supplier power. Rationale: Supplier power, one of Porter's five forces, measures the suppliers' ability to influence the prices they charge for supplies (including materials, labor, and services). 28. What is one of the most common ways a company can decrease supplier power? A. Charge lower prices. B. Charge higher prices. C. Use MIS to find and create alternative products. D. Companies cannot affect supplier power. Answer: C. Use MIS to find and create alternative products. Rationale: Using MIS to find alternative products is one way of decreasing supplier power. 29. If a supplier has high power, what can it do to influence its industry? A. Charge higher prices. B. Shift costs to industry participants. C. Limit quality or services. D. All of these. Answer: D. All of these. Rationale: If the supplier power is high, the supplier can influence the industry by (1) charging higher prices, (2) limiting quality or services, or (3) shifting costs to industry participants. 30. When buyer power is low, supplier power is typically ______. A. Identical. B. High. C. Low. D. Unstable. Answer: B. High. Rationale: When buyer power is low, supplier power is typically high. 31. How can a company reduce the threat of substitute products or services? A. Market the product to fewer than 10 customers. B. Ignore competitive forces. C. Offer additional value through wider product distribution. D. Offer less value, making the product far more generic and similar to the competition. Answer: C. Offer additional value through wider product distribution. Rationale: One way a company can reduce the threat of substitute products or services is to offer additional value through wider product distribution. 32. Which one of Porter's five forces is high when it is easy for new competitors to enter a market and low when there are significant entry barriers to joining a market? A. Threat of new entrants. B. Threat of substitute products or services. C. Threat of buyer power. D. Supply chain competition. Answer: A. Threat of new entrants. Rationale: Threat of new entrants, one of Porter's five forces, is high when it is easy for new competitors to enter a market and low when there are significant entry barriers to joining a market. 33. John Cleaver is the CEO of Tech World, which is a retail store that sells computers, monitors, cameras, televisions, and many other electronic products. John and his executive team are meeting to brainstorm new ideas on how to grow the business. One idea is to mimic the product of a competitor that is attempting to sell a new product in a different industry. After performing a Porter's Five-Forces analysis, John determines that all of the forces are high in this new industry. What should John do? A. Explode into the market with an overflow of the product. B. Contemplate other products to introduce at the same time in this new market. C. Compare the competitor's prices and offer his product lower in this new market. D. Not introduce the product. Because all five forces are strong, introducing the product would be a highly risky business strategy. Answer: D. Not introduce the product. Because all five forces are strong, introducing the product would be a highly risky business strategy. Rationale: When the five forces are all strong or high, copying a competitor's product is a poor business strategy. When the forces are low, this is a great time to execute this business strategy. 34. What is a feature of a product or service that customers have come to expect and that entering competitors must match if they want to survive? A. Significant barrier. B. Entry barrier. C. Product differentiation. D. Entry chain. Answer: B. Entry barrier. Rationale: An entry barrier is a feature of a product or service that customers have come to expect and that entering competitors must match to survive. 35. Which of the following represents a typical supply chain? A. Company-Customers-Suppliers. B. Company-Suppliers-Customers. C. Suppliers-Company-Customers. D. Suppliers-Customers-Company. Answer: C. Suppliers-Company-Customers. Rationale: A traditional business supply chain operates like this: supplier-company-customers. 36. Imagine you are creating a new product to sell in an up-and-coming market. Which of the below statements indicates that it would be easy for you, as the new entrant, to compete in this market? A. The threat-of-new-entrants force is high in the up-and-coming market. B. The threat-of-new-entrants force is low in the up-and-coming market. C. The threat-of-new-entrants force is impossible to define in the up-and-coming market. D. All of these, depending on the time of year. Answer: A. The threat-of-new-entrants force is high in the up-and-coming market. Rationale: The threat of new entrants is high when it is easy for new competitors to enter a market and low when there are significant entry barriers to joining a market. 37. Imagine you are creating a new product to sell in an up-and-coming market. Which of the below statements indicates that it would be difficult for you to enter this new market? A. The threat-of-new-entrants force is high in the up-and-coming market. B. The threat-of-new-entrants force is low in the up-and-coming market. C. The threat-of-new-entrants force is high during the summer months in the up-and-coming market. D. All of these, depending on the time of year. Answer: B. The threat-of-new-entrants force is low in the up-and-coming market. Rationale: The threat of new entrants is high when it is easy for new competitors to enter a market and low when there are significant entry barriers to joining a market. 38. Which of the following offers an example where Porter's five forces are mostly strong and competition is high? A. A dog-walking business. B. A ski resort. C. A professional hockey team. D. All of these. Answer: A. A dog-walking business. Rationale: With Porter's five-forces model, the following are all examples of situations with strong forces and, therefore, increased competition: (1) a single consumer purchasing milk, (2) a company that makes pencils, (3) coffee from McDonalds, (4) a dog-walking business, and (5) a coffee shop. 39. Which of the following offers an example where Porter's five forces are mostly weak and competition is low? A. An international hotel chain purchasing milk. B. A coffee shop. C. A single consumer purchasing milk. D. A dog-walking business. Answer: A. An international hotel chain purchasing milk. Rationale: With Porter's five-forces model, the following are all examples of situations with weak forces and, therefore, decreased competition: (1) an international hotel chain purchasing milk, (2) a company that makes airline engines, (3) cancer drugs from a pharmaceutical company, (4) a professional hockey team, and (4) the Department of Motor Vehicles. 40. Some industries' competition is much more intense than others. Retail grocery stores, such as Kroger, Safeway, and Albertson's in the United States, experience fierce competition and offer similar marketing campaigns to compete. What is this an example of in terms of Porter's Five Forces? A. Rivalry among new entrants. B. Rivalry among existing competitors. C. Threat of substitute products or services. D. Buyer power. Answer: B. Rivalry among existing competitors. Rationale: Some industries' competition is much more intense than others. Retail grocery stores, such as Kroger, Safeway, Albertson's, and Ralph's in the United States, have fierce competition and similar programs to compete with each other. 41. Amazon.com uses a customer-profiling system whenever a customer visits its website. Using this system, Amazon can offer products tailored to that particular customer's profile and buying pattern. What is Amazon using to achieve this competitive advantage? A. Rivalry. B. Buyer power. C. Product differentiation. D. Substitute product. Answer: C. Product differentiation. Rationale: Product differentiation is an advantage that occurs when a company develops unique differences in its products with the intent to influence demand. 42. Your boss, Ty Jacob, has asked you to analyze the music industry using Porter's five-forces model. Which of the following represents supplier power in the music industry? A. Established record labels like EMI, Sony, and Universal. B. Walmart, Target, iTunes. C. Game systems like Wii and social networks like Facebook. D. Taylor Swift, Beyonce, The Beatles, and The Rolling Stones. Answer: A. Established record labels like EMI, Sony, and Universal. Rationale: An example of supplier power in the music industry includes established record labels like EMI, Sony, and Universal. 43. Your boss, Ty Jacob, has asked you to analyze the music industry using Porter's five-forces model. Which of the following represents buyer power in the music industry? A. Established record labels like EMI, Sony, and Universal. B. Walmart, Target, and iTunes. C. Independent record labels. D. Game systems like Wii and social networks like Facebook. Answer: B. Walmart, Target, and iTunes. Rationale: Buyer power in the music industry includes Walmart, Target, and iTunes, which purchase music from record labels to sell online and in their stores. 44. Your boss, Ty Jacob, has asked you to analyze the music industry using Porter's five-forces model. Which of the following represents the threat of substitute products or services in the music industry? A. Established record labels like EMI, Sony, and Universal. B. Independent record labels. C. Game systems like Wii and social networks like Facebook. D. Taylor Swift, Beyonce, The Beatles, and The Rolling Stones. Answer: C. Game systems like Wii and social networks like Facebook. Rationale: Game systems like Wii and social networks offer alternatives or substitute products to purchasing music for a consumer. 45. Your boss, Kerry Miller, has asked you to analyze the soft drink industry using Porter's five-forces model. Which of the following represents supplier power in the soft drink industry? A. Pepsi requires stores that carry Pepsi products to commit to minimum orders of 1,000 cases. B. Walmart negotiates a lower cost per bottle from Coke in exchange for premium shelf space in every Walmart store. C. Zevia Natural Diet Soda begins selling directly over the Internet. D. Vitamin water, fruit juice, and coffee. Answer: A. Pepsi requires stores that carry Pepsi products to commit to minimum orders of 1,000 cases. Rationale: Supplier power in the soft drink industry is represented by Pepsi. 46. Your boss, Kerry Miller, has asked you to analyze the soft drink industry using Porter's five-forces model. Which of the following represents buyer power in the soft drink industry? A. Pepsi requires stores that carry Pepsi products to commit to minimum orders of 1,000 cases. B. Walmart negotiates a lower cost per bottle from Coke in exchange for premium shelf space in every Walmart store. C. Zevia Natural Diet Soda begins selling directly over the Internet. D. Vitamin water, fruit juice, and coffee. Answer: B. Walmart negotiates a lower cost per bottle from Coke in exchange for premium shelf space in every Walmart store. Rationale: Buyer power in the soft drink industry is represented by Walmart. 47. Your boss, Kerry Miller, has asked you to analyze the soft drink industry using Porter's five-forces model. Which of the following represents a threat of a new entrant in the soft drink industry? A. Pepsi requires stores that carry Pepsi products to commit to minimum orders of 1,000 cases. B. Walmart negotiates a lower cost per bottle from Coke in exchange for premium shelf space in every Walmart store. C. Zevia Natural Diet Soda begins selling directly over the Internet. D. Vitamin water, fruit juice, and coffee. Answer: C. Zevia Natural Diet Soda begins selling directly over the Internet. Rationale: Zevia Natural Diet Soda represents a new entrant in the soft drink industry. 48. Your boss, Kerry Miller, has asked you to analyze the soft drink industry using Porter's five-forces model. Which of the following represents a substitute product in the soft drink industry? A. Pepsi requires stores that carry Pepsi products to commit to minimum orders of 1,000 cases. B. Walmart negotiates a lower cost per bottle from Coke in exchange for premium shelf space in every Walmart store. C. Zevia Natural Diet Soda begins selling directly over the Internet. D. Vitamin water, fruit juice, and coffee. Answer: D. Vitamin water, fruit juice, and coffee. Rationale: Vitamin water, fruit juice, or coffee are all substitute products to a soft drink. 49. Your boss, Kerry Miller, has asked you to analyze the soft drink industry using Porter's five-forces model. Which of the following represents rivalry in the soft drink industry? A. Pepsi requires stores that carry Pepsi products to commit to minimum orders of 1,000 cases. B. Walmart negotiates a lower cost per bottle from Coke in exchange for premium shelf space in every Walmart store. C. Zevia Natural Diet Soda begins selling directly over the Internet. D. Coke and Pepsi submit bids to the owner of a football stadium for the exclusive sale of their products during games. Answer: D. Coke and Pepsi submit bids to the owner of a football stadium for the exclusive sale of their products during games. Rationale: The rivalry between Coke and Pepsi is famous in the soft drink industry. 50. Porter identified three generic strategies that a business could follow after identifying a market it wanted to enter. Which of the following is not included as one of Porter's three generic strategies? A. Broad differentiation. B. Supplier cost differentiation. C. Focused strategy. D. Broad cost leadership. Answer: B. Supplier cost differentiation. Rationale: Porter has identified three generic business strategies for entering a new market: (1) broad cost leadership, (2) broad differentiation, and (3) focused strategy. 51. According to Porter's three generic strategies for entering a market, if you have a focused strategy what market should you target? A. A niche market. B. A broad market. C. Neither niche or broad markets. D. Both niche and broad markets. Answer: A. A niche market. Rationale: According to Porter's three generic strategies for entering a market, if you have a focused strategy you should target a narrow market, niche market, or a unique market. 52. Which of the following offers an example of a company operating in a narrow, focused market operating as the low-cost provider? A. Walmart. B. Tiffany & Co. C. Neiman Marcus. D. Payless Shoes. Answer: D. Payless Shoes. Rationale: Payless competes by offering a specific product (narrow market) at low prices. Their strategy is to be the low-cost provider of shoes. 53. Broad differentiation, broad cost leadership, and _________ are the three generic strategies identified by Porter. A. Narrow market leadership B. High cost versus low cost C. Focused strategy D. None of these Answer: C. Focused strategy Rationale: The three strategies proposed by Porter are (1) broad cost leadership, (2) broad differentiation, and (3) focused strategy. 54. Jennifer Bloom is writing a paper and she must determine which of Porter's three generic strategies The Museum Company has implemented. Jennifer finds out that The Museum Company offers specialty products found only in museums around the world to affluent customers. What would Jennifer determine The Museum Company is using as its generic strategy? A. Broad market, low cost. B. Narrow market, high cost. C. Broad market, high cost. D. Narrow market, low cost. Answer: B. Narrow market, high cost. Rationale: The Museum Company competes using a narrow market and high cost focus. 55. According to Porter, companies that wish to dominate broad markets should operate using a ________ strategy. A. Cost leadership with a low cost B. Differentiation with a low cost C. Cost leadership with a high cost D. All of these Answer: A. Cost leadership with a low cost Rationale: According to Porter, broad markets should use cost leadership with a low cost and differentiation with a high cost. 56. Which of the following demonstrates a company that has implemented a low-cost, broad-market strategy? A. Neiman Marcus. B. Payless Shoes. C. The Sharper Image. D. Walmart. Answer: D. Walmart. Rationale: Walmart competes by offering a broad range of products at low prices. Its business strategy is to be the low-cost provider of goods for the cost-conscious consumer. 57. If a business is following a focused strategy, then its competitive scope is ________. A. Broad market. B. Narrow market. C. Broad range of products. D. Broad range of services. Answer: B. Narrow market. Rationale: When you have a market segment, your competitive scope should be a narrow market, and the cost strategy should be a focused strategy. 58. When applying Porter's three generic strategies, Tiffany & Co. has a competitive scope and cost strategy that is a __________. A. Broad market, high cost strategy. B. Narrow market, low cost strategy. C. Narrow market, high cost strategy. D. Broad market, low cost strategy. Answer: C. Narrow market, high cost strategy. Rationale: Tiffany & Co. competes by offering a differentiated product, jewelry, at high prices. Its business strategy allows it to be a high-cost provider of premier designer jewelry to affluent consumers. 59. In the bookstore industry, some of today's businesses compete with different business strategies and cost strategies. Which of the following is using a broad market competitive scope along with a low cost strategy? A. Amazon.com. B. Any local independent bookstore that specializes in antique books. C. Barnes & Noble. D. Borders Books. Answer: A. Amazon.com. Rationale: Amazon.com competes by offering a broad range of differentiated products at low prices. 60. Which of the below is similar to focused strategy versus broad strategy? A. Large market versus leadership. B. Large market versus uniqueness. C. Niche market versus large market. D. Niche market versus generic. Answer: C. Niche market versus large market. Rationale: Focused strategies versus broad strategies is synonymous to niche market versus large market. 61. Your boss, Tom Repicci, has asked you to analyze the airline industry using Porter's three generic strategies. Which of the following companies are using a cost leadership strategy? A. Southwest, Horizon, Frontier, and JetBlue. B. British Airways, Singapore Airlines, and Virgin Atlantic. C. Sky Taxi, a rent-by-the-hour personal plane service. D. All of these. Answer: A. Southwest, Horizon, Frontier, and JetBlue. Rationale: Southwest, Horizon, Frontier, and JetBlue all use cost leadership business strategies. 62. Your boss, Tom Repicci, has asked you to analyze the airline industry using Porter's three generic strategies. Which of the following companies are using a differentiation strategy? A. Southwest, Horizon, Frontier, and JetBlue. B. British Airways, Singapore Airlines, and Virgin Atlantic. C. Sky Taxi, a rent-by-the-hour personal plane service. D. All of these. Answer: B. British Airways, Singapore Airlines, and Virgin Atlantic. Rationale: British Airways, Singapore Airlines, and Virgin Atlantic all compete using differentiation strategies. 63. Your boss, Tom Repicci, has asked you to analyze the airline industry using Porter's three generic strategies. Which of the following companies are using a focused strategy? A. Southwest, Horizon, Frontier, and JetBlue. B. British Airways, Singapore Airlines, and Virgin Atlantic. C. Sky Taxi, a rent-by-the-hour personal plane service. D. All of these. Answer: C. Sky Taxi, a rent-by-the-hour personal plane service. Rationale: Sky Taxi is using a focused strategy, targeting individuals that want to hire private planes. 64. According to Porter's value chain analysis, which of the below provides customer support after the sale of goods and services? A. Inbound logistics. B. Outbound logistics. C. Operations. D. Service. Answer: D. Service. Rationale: The service activity within the primary value activities will provide customer support after the sale of goods and services. 65. Which of the below represents procurement as part of the support value activities in a value chain analysis? A. Purchases inputs, such as raw materials, resources, equipment, and supplies. B. Applies MIS to processes to add value. C. Distributes goods and services to customers. D. Promotes, prices, and sells products to customers. Answer: A. Purchases inputs, such as raw materials, resources, equipment, and supplies. Rationale: Procurement is the part of the support value activities which purchases inputs, such as raw materials, resources, equipment, and supplies. 66. What includes support-value activities and primary-value activities and is used to determine how to create the greatest possible value for customers? A. Supplier power. B. Operations management. C. Porter's Five-Forces Model. D. Value chain analysis. Answer: D. Value chain analysis. Rationale: The support activity firm infrastructure and the primary value activity of outbound logistics, are both included in value chain analysis. 67. What is a standardized set of activities that accomplishes a specific task? A. Business strategy. B. Business outcome. C. Business process. D. Knowledge process. Answer: C. Business process. Rationale: A business process is a standardized set of activities that accomplishes a specific task. 68. Which of the following analyzes a company's business processes and is useful for determining how to create the greatest possible value for customers? A. Product analysis. B. Primary supplier power. C. Value chain analysis. D. Buyer chain analysis. Answer: C. Value chain analysis. Rationale: Value chain analysis views a firm as a series of business processes that each add value to the product or service. 69. The goal of value chain analysis is to identify processes in which the firm can add value for the customer and create a competitive advantage for itself, with a ________ or ________________. A. Focused strategy, product differentiation B. Focused strategy, cost advantage C. Cost advantage, primary value activities D. Cost advantage, product differentiation Answer: D. Cost advantage, product differentiation Rationale: The goal of value chain analysis is to identify processes in which the firm can add value for the customer and create a competitive advantage for itself, with a cost advantage or product differentiation. 70. What are the two main categories in a value chain analysis? A. Primary value activities and secondary value activities. B. Primary value activities and support value activities. C. Primary value activities and strengthening value activities. D. None of these. Answer: B. Primary value activities and support value activities. Rationale: The value chain groups a firm's activities into two categories, primary value activities and support value activities. 71. Which of the following is not considered a category within the primary value activities in a value chain analysis? A. Inbound logistics. B. Firm infrastructure. C. Operations. D. Service. Answer: B. Firm infrastructure. Rationale: Primary value activities are found at the bottom of the value chain. These include business processes that acquire raw materials and manufacture, deliver, market, sell, and provide after-sales services. 72. Which of the following is not considered a category within the support value activities in a value chain analysis? A. Technology development. B. Outbound logistics. C. Human resource management. D. Firm infrastructure. Answer: B. Outbound logistics. Rationale: Support value activities are found along the top of the value chain and include business processes, such as firm infrastructure, human resource management, technology development, and procurement, that support the primary value activities. 73. What is the support value activity that hires employees and provides them with training and compensation? A. Procurement. B. Operations resource management. C. Human resource management. D. Firm infrastructure. Answer: C. Human resource management. Rationale: Human resource management provides employee hiring, training, and compensation. 74. Sandy Fiero works as the Chief Knowledge Officer for Bend Lumbar Company. She has been given the responsibility to create a product or service that will bring an added value to its customers to increase the company's revenue. Sandy determines that the best value she can add is by creating a service that offers free next-day shipping on any order over $50. Where in the value chain is Sandy adding value? A. The primary value activity outbound logistics. B. The primary value activity inbound logistics. C. The primary value activity marketing and sales. D. The primary value activity operations. Answer: A. The primary value activity outbound logistics. Rationale: Outbound logistics distributes goods and services to customers. 75. When evaluating the value chain, all of the following are included in the primary value activities except: A. Inbound activities. B. Operations. C. Service. D. MIS development. Answer: D. MIS development. Rationale: The primary value activities include (1) inbound logistics, (2) operations, (3) outbound logistics, (4) marketing and sales, and (5) service. 76. When evaluating the value chain, which of the following is included in the support value activities? A. Inbound activities. B. Marketing and sales. C. Firm infrastructure. D. Finance and sales. Answer: C. Firm infrastructure. Rationale: The support value activities found along the top of the value chain include (1) firm infrastructure, (2) human resource management, (3) technology development, and (4) procurement. 77. Which of the following decisions does a firm need to make as soon as it has identified the activities from the value chain that are bringing the highest added value to their customers? A. Target high value-adding activities to further enhance their value. B. Target low value-adding activities to increase their value. C. Perform some combination of the two. D. All of these. Answer: D. All of these. Rationale: After a firm has identified the activities from the value chain that are bringing the highest added value to their customers, they need to make decisions regarding the competitive advantage by determining whether to (1) target high value-adding activities to further enhance their value, (2) target low value-adding activities to increase their value, or (3) perform some combination of the two. 78. MIS can add value to both primary activities and support activities in the value chain. Which of the following is not an example of a company adding value by using MIS in a primary activity? A. Scottrade Corp. creating an online system for employees to track paychecks, benefits, the wellness-rewards program, and other employee benefit items. B. A system for the sales and marketing departments to track specific sales targets and follow-up processes. C. An easy electronic survey to be sent to the customer right after a service is completed. D. Royal Crest Dairy placing their order and delivery system on an easily accessible Web portal so customers can track delivery status. Answer: A. Scottrade Corp. creating an online system for employees to track paychecks, benefits, the wellness-rewards program, and other employee benefit items. Rationale: MIS can add value to both primary and support activities within a business. All are primary activities except Scottrade Corp. creating an online system for employees to track paychecks, benefits, their wellness-rewards program, and other employee benefit items. This is a support value activity. 79. MIS can add value to both primary and support activities within a business. Which of the following is not an example of a company adding value by the use of MIS in a support activity? A. Netflix creating a business strategy for the video rental market that delivers videos via the mail. B. The human resources department creates a tracking system to efficiently reward employees based on their performance. C. Scottrade Corp. creating an online system for employees to track paychecks, benefits, their wellness-rewards program, and other employee benefit items. D. The University of Forks creates a program to automatically order office supplies, such as pens and pads of paper, for its employees. Answer: A. Netflix creating a business strategy for the video rental market that delivers videos via the mail. Rationale: MIS can add value to both primary and support activities within a business. All are support activities except for the example "Netflix creating a business strategy for the video rental market that delivers videos via the mail." This is a primary value activity. Fill in the Blank Questions 80. Business strategies that match _______ company competencies to opportunities result in a competitive advantage. Answer: Core 81. Competitive __________ is the process of gathering information about the competitive environment, including competitors' plans, activities, and products, to improve a company's ability to succeed. Answer: Intelligence 82. Apple utilized the first-mover ________ with its iPod product. Answer: Advantage 83. Michael Porter identified pressures that can hurt potential sales. Knowledgeable customers can force __________ prices by pitting rivals against each other. Answer: Down 84. The Porter's Five-Forces Model analyzes the competitive forces within the environment in which a company operates to assess the potential for __________ in an industry. Answer: Profitability 85. __________ power measures the ability of buyers to affect the price they must pay for an item. Answer: Buyer 86. The threat of substitute products or services is ___________ when there are many alternatives to a product or service and low when there are few alternatives from which to choose. Answer: High 87. The __________ chain consists of all parties involved, directly or indirectly, in obtaining raw materials or a product. Answer: Supply 88. Rivalry among existing competitors is __________ when competition is fierce in a market and low when competitors are more complacent. Answer: High 89. Porter has identified three _________ business strategies for entering a new market: (1) broad cost leadership, (2) broad differentiation, and (3) focused strategy. Answer: Generic 90. Focused strategies concentrate on either cost leadership or ___________. Answer: Differentiation Focused strategies concentrate on either cost leadership or differentiation. 91. Porter suggests adopting only __________ of the three generic strategies. Answer: One 92. A __________ chain analysis views a firm as a series of business processes that each adds value to the product or service. Answer: Value 93. __________ value activities are found at the bottom of the value chain. These include business processes that acquire raw materials and manufacture, deliver, market, sell, and provide after-sales services. Answer: Primary 94. ___________ value activities are found along the top of the value chain and include business processes, such as firm infrastructure, human resource management, technology development, and procurement, that support the primary value activities. Answer: Support True/False Questions 95. Porter's Five-Forces Model outlines the process for a sales strategy. Answer: False Rationale: Porter's Five-Forces Model analyzes the competitive forces within the environment in which a company operates to assess the potential for profitability in an industry. 96. With the Five-Forces Model, companies should watch the forces in the market. If the forces are strong, competition generally increases, and if the forces are weak, competition typically decreases. Answer: True Rationale: With the Five-Forces Model, companies should watch the forces in the market. If the forces are strong, competition generally increases, and if the forces are weak, competition typically decreases. 97. A leadership plan that achieves a specific set of goals or objectives is a business strategy. Answer: True Rationale: A leadership plan that achieves a specific set of goals or objectives. 98. When a company is the first to market with a competitive advantage, it gains a particular benefit known as competitive intelligence. Answer: False Rationale: When a company is the first to market with a competitive advantage, it gains a particular benefit known as a first-mover advantage. 99. Over the past decade the United States has lost an estimated 2.4 million factory jobs to Nepal. Answer: False Rationale: Over the past decade the United States has lost an estimated 2.4 million factory jobs to China. 100. Two ways to reduce buyer power are through switching costs and loyalty programs. Answer: True Rationale: Two ways to reduce buyer power are through switching costs and loyalty programs. 101. Mark Peterson identified the Porter's Five-Forces Model, which analyzes the competitive forces within a business environment. Answer: False Rationale: Michael Porter created the Porter's Five-Forces Model, which analyzes the competitive forces within a business environment. 102. There are many challenges to changing doctors, including transferring medical records and losing the doctor-patient relationship along with the doctor's knowledge of the patient's history. Changing doctors provides a great example of switching costs. Answer: True Rationale: Switching costs are costs that make customers reluctant to switch to another product or service. Switching costs include financial as well as intangible values. 103. Supplier power is one of Porter's five forces, and it measures the suppliers' ability to influence the prices they charge for supplies (including materials, labor, and services). Answer: True Rationale: Supplier power is one of Porter's five forces. It measures the suppliers' ability to influence the prices they charge for supplies (including materials, labor, and services). 104. Polaroid had a unique competitive advantage for many years until it forgot to observe competitive intelligence. The firm went bankrupt when people began taking digital pictures. Polaroid provides a great example of Porter's threat of new entrants. Answer: False Rationale: This is an example of Porter's threat of substitute products or services. 105. Product differentiation occurs when a company develops unique differences in its products or services with the intent to influence demand. Answer: True Rationale: Product differentiation occurs when a company develops unique differences in its products or services with the intent to influence demand. 106. Buyer power is the ability of buyers to affect the price they must pay for an item. Answer: True Rationale: Buyer power is the ability of buyers to affect the price they must pay for an item. 107. Tiffany & Company competes in the marketplace by offering high-cost custom jewelry. Tiffany & Company is following a broad market and cost leadership strategy. Answer: False Rationale: Tiffany & Company is following a focused market with high cost differentiation strategy. 108. Porter has identified three generic business strategies, including focused, broad cost leadership, and switching strategy. Answer: False Rationale: Porter has identified three generic business strategies: (1) broad cost leadership, (2) broad differentiation, and (3) focused strategy. 109. According to Porter's three generic strategies, Walmart is following a business strategy that focuses on "broad market and low cost." Answer: True Rationale: An example of a business that uses the business strategy "broad market and low cost" is Walmart. 110. Value chain analysis views a firm as a series of business processes that each adds value to the product or service. Answer: True Rationale: Value chain analysis views a firm as a series of business processes that each adds value to the product or service. 111. A standardized set of activities that accomplish a specific task is called a supply chain component. Answer: False Rationale: A standardized set of activities that accomplish a specific task is called a business process. 112. The value chain will group a company's activities into two categories: primary value activities and support value activities. Answer: True Rationale: The value chain will group a company's activities into two categories: primary value activities and support value activities. Essay Questions 113. Explain why competitive advantages are temporary. Answer: A competitive advantage is a feature of a product or service on which customers place a greater value than they do on similar offerings from competitors. Competitive advantages provide the same product or service either at a lower price or with additional value that can fetch premium prices. Unfortunately, competitive advantages are typically temporary, because competitors often quickly seek ways to duplicate them. In turn, organizations must develop a strategy based on a new competitive advantage. Ways that companies duplicate competitive advantages include acquiring the new technology, copying business processes, and hiring away employees. 114. Describe Porter's Five-Forces Model and explain each of the five forces. Answer: Porter's Five-Forces Model analyzes the competitive forces within the environment in which a company operates, to assess the potential for profitability in an industry. Buyer power is the ability of buyers to affect the price they must pay for an item. Supplier power is the suppliers' ability to influence the prices they charge for supplies (including materials, labor, and services). Threat of substitute products or services is high when there are many alternatives to a product or service and low when there are few alternatives from which to choose. Threat of new entrants is high when it is easy for new competitors to enter a market and low when there are significant entry barriers to entering a market. Rivalry among existing competitors is high when competition is fierce in a market and low when competition is more complacent. 115. Compare Porter's three generic strategies. Answer: Organizations typically follow one of Porter's three generic strategies when entering a new market: (1) broad cost leadership, (2) broad differentiation, or (3) focused strategy. Broad strategies reach a large market segment. Focused strategies target a niche market. Focused strategies concentrate on either cost leadership or differentiation. 116. Demonstrate how a company can add value by using Porter's value chain analysis. Answer: To identify competitive advantages, Michael Porter created value chain analysis, which views a firm as a series of business processes that each add value to the product or service. The goal of value chain analysis is to identify processes in which the firm can add value for the customer and create a competitive advantage for itself, with a cost advantage or product differentiation. The value chain groups a firm's activities into two categories-primary value activities and support value activities. Primary value activities acquire raw materials and manufacture, deliver, market, sell, and provide after-sales services. Support value activities, along the top of the value chain in the figure, include firm infrastructure, human resource management, technology development, and procurement. Not surprisingly, these support the primary value activities. Test Bank for Business Driven Technology Paige Baltzan 9780073376844, 9781259924927, 9781260727814, 9780073376905

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