2. Globalization has led to

A. lower operational efficiency as firms must transport raw materials and finished goods farther.

B. increasing loyalty of customers for products made domestically.

C. declining returns from investment in research and development.

D. higher product quality.

3. All of the following are assumptions of the industrial organization (I/O) model EXCEPT

A. organizational decision makers are rational and committed to acting in the firms best interests.

B. resources to implement strategies are firm-specific and attached to firms over the long-term.

C. the external environment is assumed to impose pressures and constraints that determine the strategies that result in above-average returns.

D. firms in given industries, or given industry segments, are assumed to control similar strategically relevant resources.

4. An investor is considering in which of two start-up companies she should invest. The investor has faithin the industrial organizational model of above-average returns, and she is using its concepts to make her decision. Both start-up companies propose to manufacture health-focused foods with such characteristics as low salt, low sugar, high fiber, and no artificial additives. RexRich Foods has a business strategy of producing a differentiated product for which consumers will pay more. Green Pastures Foods is in the health-foods industry because of its internal culture and commitment to healthful lifestyles. Which firm will the investor feel is most consistent with the model of industrial organization?

A.

Green Pastures Foods

B.

RexRich Foods

C.

Both firms are consistent with the I/O approach.

D.

At the entrepreneurial stage, the model which companies follow is not important.

5. The likelihood of entry of new competitors is affected by ____ and ____.

A. barriers to entry, expected retaliation of current industry organizations

B. the power of existing suppliers, buyers

C. the profitability of the industry, the market share of its leading firm

D. the demand for the product, the profitability of the competitors

6. Economies of scale refer to the fact that as the

A. quantity of product produced in a given time period increases, the cost of manufacturing each unit increases.

B. quantity of product produced in a given time period increases, the cost of manufacturing each unit remains constant.

C. quantity of product produced in a given time period increases, the cost of manufacturing each unit decreases.

D. quantity of product produced in a given time period decreases, the cost of manufacturing each unit decreases.

7. Blood banks are highly dependent on donors. In the terminology of industry analysis, which statement of donors is accurate?

A. Blood donors are suppliers and are powerful due to the critical nature of what they provide to the blood bank.

B. Blood donors are suppliers and are powerful due to their concentration relative to the blood bank.

C. Blood donors are buyers and are not due to low switching costs needed to change to alternative inputs.

D. Blood donors are buyers and are powerful due to the volumeof blood needed.

8. All of the following are considered generic business-level strategies EXCEPT

A. product diversification.

B. cost leadership.

C. focused differentiation.

D. integrated cost leadership/differentiation.

9. Durable Ceramics, Inc., provides inexpensive ceramic tileto builders of institutional buildings such as schools, prisons, and public administration buildings. It has always competed on a cost leadership basis. Most of its products are purchased by a few commercial construction firms, so it is fairly dependent on these construction firms for selling its product. Durable Ceramics next most-efficient competitor, Cost-Less Ceramics, Inc., earns average returns, while Durable earns above-average returns. The commercial construction firms are putting pressure on Durable to reduce its prices. If Durable reduces its prices below those of Cost-Lesss prices, it is likely that

A. both Durable and Cost-Less will devise additional ways to become more efficient in their production processes.

B. Durable will be unable to absorb the lower cost, and will go out of business.

C. both Cost-Less and Durable will go out of business, leaving the customers with fewer alternative sources of low-cost tile.

D. Cost-Less will go out of business, and Durable will gain higher power over its customers.

10. Which of the following is not a componentof internal analysis leading to competitive advantage?

A. Tangible and intangible resources.

B. Analysis of supplier power.

C. Capabilities.

D. Core competencies.

11. A major department store chainhas a strict policy of banning photographs or videos of its sales floor or back room operations. It also does not allow academicsto conduct studies of it for publication in research journals. In fact, some of its own top managers refer to the managements policies on secrecy as verging on paranoid. These policies indicate that the top management of the firm believes the organizations core competencies are

A. causally ambiguous.

B. unobservable.

C. imitable.

D. common.

12. Outsourcing is the

A. spinning off of a value-creating activity to create a new firm.

B. selling of a value-creating activity to other firms.

C. purchase of a value-creating activity from an external supplier.

D. use of computers to obtain value-creating data from the Internet.