Chapter 3 – Multiple Choice

As discussed in the chapter opening case, which of the four generic strategies did Verizon employ to combat the competition offered by AT&T?

A) low-cost leadership
B) focus on market niche
C) customer and supplier intimacy
D) product differentiation

D) product differentiation
The interaction between information systems and organizations is influenced

A) primarily by the decision making of middle- and senior-managers.
B) by many factors, including structure, politics, culture, and environment.
C) by two main microeconomic forces: capital and labor.
D) primarily by the organization’s business processes and culture.

B) by many factors, including structure, politics, culture, and environment.
An organization is a

A) stable, formal social structure that takes resources from the environment and processes them to produce outputs.
B) formal, legal entity with internal rules and procedures that must abide by laws.
C) collection of social elements.
D) B and C
E) A, B, and C

E) A, B, and C
How does the technical view of organizations fall short of understanding the full impacts of information systems in a firm?

A) It sees information systems as a way to rearrange the inputs and outputs of the organization.
B) It sees capital and labor as primary production factors.
C) It sees the inputs and outputs, labor and capital, as being infinitely malleable.
D) It sees the organization as a social structure similar to a machine.

C) It sees the inputs and outputs, labor and capital, as being infinitely malleable.
According to the ________ definition of organizations, an organization is seen as a means by which primary production factors are transformed into outputs consumed by the environment.

A) microeconomic
B) macroeconomic
C) sociotechnical
D) behavioral

A) microeconomic
All of the following are major features of organizations that impact the use of information systems EXCEPT for

A) business processes.
B) environments.
C) goals.
D) agency costs.

D) agency costs.
Business processes are collections of

A) informal practices and behaviors.
B) formalized and documented practices.
C) routines.
D) rights and privileges.

C) routines
Which of the following would NOT be considered a disruptive technology?

A) instant messaging
B) e-mail
C) Internet telephony
D) PCs

A) instant messaging
Mintzberg’s classification of organizational structure categorizes the knowledge-based organization where goods and services depend on the expertise and knowledge of professionals as a(n)

A) entrepreneurial structure.
B) divisionalized bureaucracy.
C) professional bureaucracy.
D) adhocracy.

C) professional bureaucracy.
A large bureaucracy existing in a slowly changing environment that produces standard products and is dominated by centralized management making is classified by Mintzberg as a ________ bureaucracy.

A) machine
B) professional
C) divisionalized
D) multidivisional

A) machine
An example of a professional bureaucracy is a

A) small startup firm.
B) school system.
C) mid-size manufacturing firm.
D) consulting firm.

B) school system.
The costs incurred when a firm buys on the marketplace what it cannot make itself are referred to as

A) switching costs.
B) transaction costs.
C) procurement.
D) agency costs.

B) transaction costs.
Which of the following statements is NOT true about information technology’s impacts on business firms?

A) It helps firms expand in size.
B) It helps firms lower the cost of market participation.
C) It helps reduce internal management costs.
D) It helps reduce transaction costs.

A) It helps firms expand in size.
According to agency theory, the firm is viewed as a(n)

A) unified, profit-maximizing entity.
B) task force organization that must respond to rapidly changing environments.
C) entrepreneurial endeavor.
D) “nexus of contracts” among self-interested individuals.

D) “nexus of contracts” among self-interested individuals.
According to Leavitt’s model of organizational resistance, the four components that must be changed in an organization in order to successfully implement a new information system are

A) environment, organization, structure, tasks.
B) technology, people, culture, and structure.
C) organization, culture, management, and environment
D) tasks, technology, people, and structure.

D) tasks, technology, people, and structure.
The ________ model is used to describe the interaction of external forces that affect an organization’s strategy and ability to compete.

A) network economics
B) competitive forces
C) competitive advantage
D) demand control

B) competitive forces
Which of the following industries has a low barrier to entry?

A) automotive
B) computer chip
C) restaurant
D) airline

C) restaurant
Which of the following is NOT one of the competitive forces?

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 this marketplace force.

A) product differentiation
B) traditional competitors
C) low number of suppliers
D) new market entrants

D) new market entrants
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) transparent marketplace
B) high product differentiation
C) poor process efficiency
D) demand control

A) 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.
Amazon’s use of the Internet as a platform to sell books more efficiently than traditional bookstores illustrates a use of information services for

A) low-cost leadership.
B) marketing effectiveness.
C) focusing on market niche.
D) strengthening supplier intimacy.

A) low-cost leadership.
The four major types of competitive strategy are

A) low-cost leadership; substitute products and services; customers; and suppliers.
B) low-cost leadership; product differentiation; focus on market niche; and customer and supplier intimacy.
C) new market entrants; substitute products and services; customers; and suppliers.
D) low-cost leadership; new market entrants; product differentiation; and focus on market niche.

B) low-cost leadership; product differentiation; focus on market niche; and customer and supplier intimacy.
Wal-Mart’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.
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) Magnitude customization
D) Dimension customization

A) Mass customization
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.
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.
Upon which of the following industries has the Internet as a whole been a disruptive technology?

A) bill payments
B) air travel
C) books
D) real estate

B) air travel
A rival of your company, AutoTown, is going to implement analytic software that mines customer data with a goal of enabling the building of automobiles that customers actually want. This can be categorized as using information systems for which competitive strategy?

A) low-cost leadership
B) product differentiation
C) focus on market niche
D) customer intimacy

D) customer intimacy
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.
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
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.
The primary activities of a firm include

A) inbound logistics, operations, outbound logistics, sales and marketing, and service.
B) inbound logistics, operations, outbound logistics, technology, and service.
C) procurement, inbound logistics, operations, technology, and outbound logistics.
D) procurement, operations, technology, sales and marketing, and services.

A) inbound logistics, operations, outbound logistics, sales and marketing, and service.
Which of the following is one of the support activities in a firm’s value chain?

A) inbound logistics
B) operations
C) sales and marketing
D) technology

D) technology
Which of the following activities would you perform to measure and compare your business processes to similar processes of other companies within your industry?

A) benchmarking
B) best practices
C) value chain analysis
D) strategic systems analysis

A) benchmarking
The most successful solutions or methods for achieving a business objective are called

A) value activities.
B) best processes.
C) core competencies.
D) best practices.

D) best practices.
A collection of independent firms that use information technology to coordinate their value chains to produce a product or service for a market collectively is called a(n)

A) industry value chain.
B) business ecosystem.
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
If two organizations pool markets and expertise that result in lower costs and generate profits it is often referred to as creating

A) a value web.
B) a value chain.
C) synergies.
D) core competencies.

C) synergies
An example of synergy in business is

A) Amazon’s use of the Internet to sell books.
B) JP Morgan Chase’s mergers with other banks that provided JP Morgan with a network of retail branches in new regions.
C) Blockbuster combining traditional video rental with online video rental.
D) Wal-Mart’s order entry and inventory management system to coordinate with suppliers.

B) JP Morgan Chase’s mergers with other banks that provided JP Morgan with a network of retail branches in new regions.
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. This is referred to as

A) the point of no return.
B) the law of diminishing returns.
C) supply and demand.
D) network 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.
An example of a keystone firm within a business ecosystem is

A) Apple and software application writers in the mobile platform ecosystem.
B) GUESS and the fashion ecosystem.
C) Citibank and the ATM ecosystem.
D) American Airlines and the computerized reservation ecosystem.

A) Apple and software application writers in the mobile platform ecosystem.
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, for Amazon.com, of new competitors in the sphere of online shopping illustrates what disadvantage posed by the use of information systems to achieve competitive advantage?

A) E-commerce is affected by the law of diminishing returns.
B) Internet technologies are universal, and therefore usable by all companies.
C) Internet shopping produces cost transparency.
D) The Internet enables the production or sales of substitute products or services.

B) Internet technologies are universal, and therefore usable by all companies.
You are consulting for a beverage distributor who is interested in determining the benefits it could achieve from implementing new information systems. What will you advise as the first step?

A) Identify the business ecosystem the distributor is in.
B) Implement a strategic transition to the new system.
C) Perform a strategic systems analysis.
D) Benchmark existing systems.

C) Perform a strategic systems analysis.