Chapter 3

A firm can be said to have competitive advantage when it has higher stock market valuations than its competitors.
TRUE
A primary challenge in BPM is employee resistance.
TRUE
Customers are one of the competitive forces that affect an organization’s ability to compete.
TRUE
A transparent marketplace means that there is high product differentiation.
FALSE
Studies show that about half of a business firm’s profits can be explained by alignment of IT with business.
TRUE
The greatest barrier to changing business processes is, ironically, management itself.
FALSE
In the strategy of product differentiation, information systems are used to enable new products and services.
TRUE
BPM (business processes management) is considered concluded when the new processes are both implemented and accepted.
FALSE
Strong linkages to customers and suppliers increase switching costs.
TRUE
The effect of the Internet has been to raise bargaining power over suppliers.
TRUE
In the age of the Internet, Porter’s traditional competitive forces model is still at work, but competitive rivalry has become much more intense.
TRUE
In the value chain model, primary activities are most directly related to the production and distribution of the firm’s products and services that create value for the customer.
TRUE
The value chain model classifies all company activities as either primary or support.
TRUE
The idea driving synergies is that when the output of some units can be used as inputs to other units, the relationship can lower cost and generate profits.
TRUE
The law of diminishing returns always applies to digital, as well as traditional products.
FALSE
The more people that use Microsoft Office software and related products, the lower its value.
FALSE
The first movers of a disruptive technology typically benefit the most from the technology; and it is rare that fast followers catch up quickly.
FALSE
Probably the best single way to reduce quality problems is to reduce cycle time.
TRUE
Business process reengineering is the radical redesign of business processes.
TRUE
Benchmarks are specific standards for business processes set by industry leaders.
FALSE
Which of the following is not one of the competitive forces of Porter’s model?
A) Suppliers
B) Other competitors
C) External environment
D) Customers
c) external environment
A manufacturer of deep-sea oil rigs may be least concerned about which of these marketplace forces?
A) Product differentiation
B) Traditional competitors
C) Low number of suppliers
D) New market entrants
d) new market entrants
Which of the following industries has the lowest barrier to entry?
A) Automotive
B) Computer-chip
C) Restaurant
D) Airline
c) restaurant
A substitute product of most concern for a cable TV distributor is:
A) satellite TV.
B) broadcast TV.
C) satellite radio.
D) the Internet.
a) satellite TV
Which of the following can force a business and its competitors to compete on price alone?
A) High product differentiation
B) Poor process efficiency
C) Demand control
D) Transparent marketplace
d) transparent marketplace
A firm can exercise greater control over its suppliers by having:
A) more suppliers.
B) fewer suppliers.
C) global suppliers.
D) local suppliers.
a) more suppliers
Which of the following is not one of the four basic strategies a company can employ to deal with competitive forces?
A) Strengthen customer and supplier intimacy
B) Focus on market niche
C) Differentiate products
D) Compete on employee loyalty
d) compete on employee loyalty
Walmart’s continuous replenishment system allows it to:
A) provide mass customization.
B) provide an efficient customer response system.
C) strengthen customer intimacy.
D) achieve economy of scale.
b) provide an efficient customer response system
Which of the following illustrates the use of information systems to achieve product differentiation?
A) A hot tub dealer’s use of information systems to determine which models and options its customers are most likely to buy
B) A shoe manufacturer’s use of information systems in selling custom, made-to-order shoes directly to customers
C) A PC manufacturer’s use of information systems to facilitate direct access from suppliers to production schedules
D) A grocery store chain’s use of information systems to produce products and services at a lower price than competitors
b) A shoe manufacturer’s use of information systems in selling custom, made-to-order shoes directly to customers
Which of the following illustrates the use of information systems to strengthen customer and supplier intimacy?
A) A hot tub dealer’s use of information systems to determine which models and options its customers are most likely to buy
B) A shoe manufacturer’s use of information systems in selling custom, made-to-order shoes directly to customers
C) A PC manufacturer’s use of information systems to facilitate direct access from suppliers to production schedules
D) A grocery store chain’s use of information systems to produce products and services at a lower price than competitors
c) A PC manufacturer’s use of information systems to facilitate direct access from suppliers to production schedules
Which of the following illustrates the use of information systems to focus on market niche?
A) A hot tub dealer’s use of information systems to determine which models and options its customers are most likely to buy
B) A shoe manufacturer’s use of information systems in selling custom, made-to-order shoes directly to customers
C) A PC manufacturer’s use of information systems to facilitate direct access from suppliers to production schedules
D) A grocery store chain’s use of information systems to produce products and services at a lower price than competitors
a) A hot tub dealer’s use of information systems to determine which models and options its customers are most likely to buy
When a firm provides a specialized product or service for a narrow target market better than competitors, they are using a ________ strategy.
A) product differentiation
B) market niche
C) mass customization
D) process efficiency
b) market niche
________ is the ability to offer individually tailored products or services using the same production resources as bulk production.
A) Mass customization
B) Size customization
C) Personalization
D) Demand customization
a) mass customization
An information system can enable a company to focus on a market niche through:
A) complex trend forecasting.
B) tailoring products to the client.
C) intensive product trend analysis.
D) intensive customer data analysis.
d) intensive customer data analysis
Hilton Hotels’ use of customer information software to identify the most profitable customers to direct services to is an example of using information systems to:
A) strengthen customer intimacy.
B) differentiate their service.
C) focus on market niche.
D) increase efficiency.
c) focus on market niche
All of the following industries have been severely disrupted by the Internet except:
A) air travel.
B) PC manufacturer.
C) publishing.
D) software.
b) PC manufacturer
To what competitive force did the printed encyclopedia industry succumb?
A) Positioning and rivalry among competitors
B) Low cost of entry
C) Substitute products or services
D) Customer’s bargaining power
c) Substitute products or services
Internet technology:
A) makes it easy for rivals to compete on price alone.
B) imposes a significant cost of entry, due to infrastructure requirements.
C) increases the difference between competitors because of the wide availability of information.
D) makes it easy to sustain operational advantages.
a) makes it easy for rivals to compete on price alone
The Internet raises the bargaining power of customers by:
A) creating new opportunities for building loyal customer bases.
B) making more products available.
C) making information available to everyone.
D) lowering transaction costs.
c) making information available to everyone
The value chain model:
A) categorizes five related advantages for adding value to a firm’s products or services.
B) sees the supply chain as the primary activity for adding value.
C) categorizes four basic strategies a firm can use to enhance its value chain.
D) helps a firm identify points at which information technology can most effectively enhance its competitive position.
d) helps a firm identify points at which information technology can most effectively enhance its competitive position
All of the following are considered primary activities of a firm except:
A) inbound logistics.
B) sales and marketing.
C) procurement.
D) service.
c) procurement
The support activities of a firm include:
A) inbound logistics, technology, outbound logistics, sales and marketing, and service.
B) inbound logistics, organization infrastructure, outbound logistics, technology, and procurement.
C) organization infrastructure, human resources, sales and marketing, and technology.
D) organization infrastructure, human resources, technology, and procurement.
d) organization infrastructure, human resources, technology, and procurement
Benchmarking:
A) compares the efficiency and effectiveness of your business processes against strict standards.
B) allows industry participants to develop industry-wide standards.
C) is used to measure the speed and responsiveness of information technology.
D) synchronizes the business processes of customers, suppliers, and trading partners.
a) compares the efficiency and effectiveness of your business processes against strict standards
The most successful solutions or methods for achieving a business objective are called:
A) core processes.
B) best processes.
C) benchmarks.
D) best practices.
d) best practices
A firm’s value chain is linked to the:
A) value webs of its industry.
B) value chains of its suppliers, distributors, and customers.
C) value webs of its suppliers and distributors.
D) value chains of its suppliers and customers.
b) value chains of its supplier, distributors, and customers
A ________ is a collection of independent firms that use information technology to coordinate their value chains to produce a product or service for a market collectively.
A) value chain
B) business network
C) value web
D) consortia
c) value web
How are information systems used at the industry level to achieve strategic advantage?
A) By building industry-wide, IT-supported consortia and symposia
B) By raising the bargaining power of suppliers
C) By encouraging the entry of new competitors
D) By enforcing standards that reduce the differences between competitors
a) By building industry-wide, IT-supported consortia and symposia
When the output of some units can be used as inputs to other units, or if two organizations pool markets and expertise that result in lower costs and generate profits, it is often referred to as creating:
A) value webs.
B) value chains.
C) synergies.
D) core competencies.
c) synergies
An information system can enhance core competencies by:
A) providing better reporting facilities.
B) creating educational opportunities for management.
C) allowing operational employees to interact with management.
D) encouraging the sharing of knowledge across business units.
d) encouraging the sharing of knowledge across business units
The more any given resource is applied to production, the lower the marginal gain in output, until a point is reached where the additional inputs produce no additional output is referred to as:
A) the point of no return.
B) the law of diminishing returns.
C) supply and demand.
D) inelasticity.
b) the law of diminishing returns
Network economics:
A) applies the law of diminishing returns to communities of users.
B) applies traditional economics to networked users.
C) sees the cost of adding new members as inconsequential.
D) balances the high cost of adding new members to a community against the lower cost of using network infrastructure.
c) sees the cost of adding new members as inconsequential
In network economics, the value of a commercial software vendor’s software products:
A) increases as more people use them.
B) decreases as more people use them.
C) increases due to higher marginal gain in output.
D) decreases according to the law of diminishing returns.
a) increases as more people use them
A virtual company:
A) uses the capabilities of other companies without being physically tied to those companies.
B) uses Internet technology to maintain a virtual storefront.
C) uses Internet technology to maintain a networked community of users.
D) provides entirely Internet-driven services, or virtual products.
a) uses the capabilities of other companies without being physically tied to those companies
The emergence of the World Wide Web acted as a disruptive technology for:
A) the typewriter industry.
B) print publishing.
C) PC manufacturers.
D) microprocessor firms.
b) print publishing
Which of the following best describes business globalization?
A) Businesses whose suppliers are located overseas
B) Businesses selling their products worldwide
C) Businesses moving manufacturing overseas
D) All of the above.
b) Businesses selling their products worldwide
The greatest impact the Internet has had on globalization is in lowering the costs of:
A) labor.
B) telecommunications.
C) network infrastructure.
D) entry to global-scale operations.
d) entry to global-scale operations
The ________ strategy concentrates financial management and control out of a central home base while decentralizing production, sales, and marketing operations to units in other countries.
A) domestic exporter
B) multinational
C) franchise
D) transnational
b) multinational
The ________ strategy is characterized by heavy centralization of corporate activities in the home country of origin.
A) domestic exporter
B) multinational
C) franchise
D) transnational
a) domestic exporter
In a ________ system configuration, separate information systems are designed and managed by each foreign unit.
A) duplicated
B) centralized
C) decentralized
D) networked
c) decentralized
________ systems are those in which development occurs at the home base, but operations are handed over to autonomous units in foreign locations.
A) Transnational
B) Decentralized
C) Duplicated
D) Networked
c) Duplicated
A firm that locates all systems development and operations at its headquarters is using a ________ system configuration.
A) unilateral
B) centralized
C) decentralized
D) networked
b) centralized
________ typically develop a single information system, usually at the home base, and then replicate it around the world.
A) Domestic exporters
B) Multinational firms
C) Franchisers
D) Transnational firms
c) franchisers
Which of the following does not describe a difference between the way customers and producers see quality?
A) For a consumer, quality means uniformity of the product.
B) Consumers are concerned with the quality of the service.
C) A consumer view of quality includes its durability and safety.
D) For a producer, quality can be measured with a test.
a) For a consumer, quality means uniformity of the product
Seeing quality as the responsibility of all people and functions in an organization is central to the concept of:
A) Six Sigma.
B) TQM.
C) quality control.
D) cycle time reduction.
b) TQM
The reduction of errors to 3.4 defects per million opportunities is central to the concept of:
A) Six Sigma.
B) TQM.
C) benchmarking.
D) cycle time reduction.
a) six sigma
Which of the following is not an advantage for new companies entering the marketplace?
A) They can implement new systems and equipment.
B) They are not locked into an existing brand image.
C) They are more highly motivated.
D) They can establish new relationships with suppliers.
d) They can establish new relationships with suppliers
Based on your reading of the chapter case, which of the four generic business strategies was Ford Motor company following in implementing its new software and apps?
A) Low-cost leadership
B) Product differentiation
C) Focus on market niche
D) Customer and supplier intimacy
b) Product differentiation
The iPad can be seen as a disruptive technology for the ________ industry.
A) publishing
B) music
C) software
D) travel
a) publishing
All of the following have been disruptive technologies except:
A) the PageRank algorithm.
B) the flash drive.
C) minicomputers.
D) the iPod.
c) minicomputers
All of the following are ways to improve quality except:
A) improving products and services based on customer demands.
B) simplifying the production process.
C) implementing a new information system.
D) improving production precision.
c) implementing a new information system
Mass customization allows a company to offer individually tailored products using the same production resources as mass production.
TRUE
You are the production manager for a manufacturer of bicycle parts. Which of the following tools or technologies would you use to improve production precision?
A) value chain
B) CAD software
C) benchmarking
D) industry best practices
b) CAD software
A value web is a collection of independent firms that use information technology to coordinate their value chains to collectively produce a product or service for a market.
TRUE
The activities that measure the performance of your business processes against strict standards are called best practices.
FALSE
A ________ is an activity at which a firm excels as a world-class leader.
A) best practice
B) competitive advantage
C) primary activity
D) core competency
d) core competency
All of the following are psychological aspects of quality except:
A) effective marketing.
B) company’s knowledge of its products.
C) the product’s reputation.
D) the courtesy of salespeople.
a) effective marketing
A micromultinational is a small firm operating on a global scale.
TRUE
Franchisers are firms that have their product created, designed, financed, and initially produced in the home country but rely heavily on foreign personnel for further production, marketing, and human resources.
TRUE
Quality control is seen as an end in itself in Six Sigma.
FALSE
In some instances, BPM will lead to a paradigm shift that transforms the nature of the business itself.
FALSE