Deck 2: Information Systems and Strategy

Question 1

All types of organizational strategies leverage information systems to succeed.

Answer 1

True

Question 2

Power of suppliers is high when there are many suppliers in a market.

Answer 2

False

Question 3

A value chain can be extended by incorporating feedback from customers.

Answer 3

True

Question 4

The threat of substitutes is high when alternative products are available.

Question 5

The threat of new entrants in an industry is very high when startups open business with little capital and few employees.

Question 6

Creative destruction refers to an innovation that fails miserably and leads to huge losses within the industry.

Question 7

The operational requirements for nonprofit businesses are completely different from for-profit businesses.

Question 8

Presence of loyalty programs reduces the switching costs of a product or service.

Question 9

Government action can influence how Porter's five forces operate in industries.

Question 10

Sustaining technologies streamline existing processes and give companies marginal advantages.

Question 11

Procurement and technology support are primary activities of a value chain.

Question 12

Network effects refers to the ability of a product to fit into a new system.

Question 13

E-government involves efforts to make unclassified information available to citizens via the Internet, and offers many interactive online services to save people time-consuming visits to government offices.

Question 14

Companies are embedded in a complex ecosystem where events in one arena affect the whole community.

Question 15

Funds and human effort applied to growing and transforming an organization are closely tied to strategy, innovation, and competitive advantage.

Question 16

Differentiating the product or service for a particular market niche is called product marketing.

Question 17

A benchmark is a reference point used as a baseline measurement.

Question 18

Rivalry within an industry will be high if firms compete mainly on price.

Question 19

A low-cost leadership strategy means offering a highly differentiated product at a price that is lower than the market price.

Question 20

Cost of transportation is one of the five forces proposed by Porter.

Question 21

Which of the following is a valid observation of the rivalry among existing competitors?

A) It is damaging for the competitors.
B) It leads to perfect competition.
C) It results in losses for the customers.
D) It helps the market grow in terms of quality.

Question 22

Videoconferencing has evolved as an alternative for business travelling. This is an example of ________.

A) the threat of substitutes in a market
B) intensification of rivalry among competitors
C) monopolistic competition in markets
D) increased power of the suppliers

Question 23

Which of the following factors increases the power of suppliers?

A) governmental regulations
B) high switching costs
C) low-scale operations
D) competitive pressures

Question 24

ABC Company supplies milk to retail customers in the U.S. There are many sellers offering milk and price is a major determinant of market success. Which of the following predictions about ABC Company is most likely to be true?

A) It will have strong control over its suppliers.
B) It will be in a position to dictate terms with the buyers.
C) It will have to face powerful buyers.
D) It will have strong control over the market.

Question 25

IBF Associates manufactures automotive components such as seat belts, seats, mufflers, etc. The company supplies its products to leading car manufacturers in Europe and America. Which of the following statements, if true, would indicate that IBF has high bargaining power?

A) IBF has only four customers and all of them are large companies.
B) IBF's customers do not expect differentiation in products such as seatbelts and mufflers.
C) Automobile companies have signed a five-year contract with IBF.
D) The automobile industry in Europe is characterized by low levels of competition.

Question 26

Durodoll is a leading manufacturer of decorative crafts in Canada. Which of the following, if true, will indicate that the threat of new entrants is high for Durodoll?

A) Durodoll has a patent for its manufacturing process.
B) The crafts that Durodoll manufactures are low-priced commodities.
C) The process of manufacturing the crafts is labor intensive.
D) The decorative goods' industry is capital intensive.

Question 27

Rivalry in an industry is high when the ________.

A) industry is characterized by differentiation
B) market is in the development stage
C) purchasing power of buyers is low
D) companies compete on price

Question 28

Network effects refer to the ________.

A) increased value of a product or service resulting simply because there are more people using it
B) process of selling a product or service through well established networks and consumer chains
C) value obtained from providing fine services to a complex product or service
D) increased value attached with a product or service that can be used for networking purposes

Question 29

Which of the following is a result of high rivalry among existing competitors?

A) increased effectiveness of the industry
B) decreased market profitability
C) decreased threat of substitutes
D) increased market prices

Question 30

Substitutes of a product ________.

A) have the same technical specifications as the product
B) are products of similar nature that operate in a different target market
C) provide the same product or service through different means
D) do not have direct impact on the profitability of the product

Question 31

Which of the following strategies is devised to raise switching costs?

A) A major supermarket issues loyalty cards to its customers.
B) A vendor offers short-term incentives to retailers for stocking a product.
C) An automotive company conducts a trade contest.
D) A company offers commission to its employees for pushing the company's products.

Question 32

Facebook, the world's most visited Web site as of June 2011, has millions of users. The large membership base of Facebook would mean that a user is likely to find most of his friends when he logs in to Facebook. Lack of this competence prevents new players from penetrating Facebook's market. This is an example of ________.

A) monopolistic competition
B) internal marketing
C) network effects
D) guerilla marketing

Question 33

Which of the following industries has the highest switching cost?

A) packaged food
B) textile
C) software
D) food and beverage

Question 34

Which of the following companies will have the highest buying power?

A) a company that sells agricultural products procured from numerous farmers
B) a firm that is an exclusive dealer for an automotive company
C) a bank that borrows from the Federal Reserve
D) a company that procures IT services from a large software company

Question 35

________ is high in an industry when alternative products that offer attractive savings are available.

A) Market profitability
B) Threat of substitutes
C) Network effects
D) Threat of new entrants

Question 36

Which of the following is the best example of an attempt to create network effects?

A) An Internet service provider gives free access to social networking sites.
B) A retailer gives volume discounts on large purchases.
C) A kitchenware manufacturer introduces a differentiated range of products.
D) AT&T introduces a family plan that provides free calls within the family.

Question 37

________ are the costs that customers incur when they change suppliers.

A) Network costs
B) Switching costs
C) Capital expenditures
D) Opportunity costs

Question 38

Which of the following is one of the five competitive forces proposed by Porter?

A) employee productivity
B) threat of substitutes
C) market volatility
D) governmental influence

Question 39

How did online markets affect the balance of power between buyers and suppliers?

A) The power imbalance between the buyers and the suppliers decreased.
B) Buyers' focus shifted from being powerful to being cooperative.
C) Sellers became more powerful than the buyers.
D) Buyers became more powerful than the sellers.

Question 40

If a supplier has a limited number of buyers, then the ________.

A) regulators will have less power
B) suppliers will have more power
C) manufacturers will have unlimited power
D) buyers will have more power

Question 41

Which of the following statements is true about the value chain?

A) It ends when the customer buys a product.
B) It involves components that are external to the company.
C) It involves only the primary activities of a business.
D) It does not involve the intermediaries that a company maintains.

Question 42

Which of the following is a support activity of a consumer goods manufacturer?

A) outbound logistics
B) marketing
C) customer service
D) research

Question 43

Which of the following is a primary activity of an automobile manufacturer?

A) procurement management
B) administrative infrastructure management
C) human resource management
D) inventory tracking

Question 44

Which of the following is an example of a disruptive innovation?

A) LCD monitors replaced CRT monitors in televisions.
B) Apple launched iPhone 4 replacing iPhone 3.
C) Ford introduced small cars for the middle class.
D) Land Rover markets most of its four-wheel drives in high-altitude regions.

Question 45

Which of the following can be achieved by introducing anti-trust laws in a market?

A) preventing the intensification of market competition
B) preventing dominant players from abusing their power
C) reducing tariffs and duties for existing players
D) creating entry barriers for new players

Question 46

In cloud computing, employees use information systems that are ________.

A) designed to perform without an Internet connection
B) installed locally within an organization
C) hosted by a vendor in a data center
D) designed specifically for their organization

Question 47

Which of the following is an example of a sustaining technology?

A) Digital cameras replaced chemical cameras that required film.
B) Digital music sold over the Internet allowed one song at a time downloads.
C) LCD monitors were introduced to replace analog monitors.
D) Car manufacturers invented airbags to improve safety of passengers.

Question 48

Which of the following is commonly used by organizations to influence how the Porter's five forces operate?

A) evasion of taxes to effect governmental action
B) selling at prices below the existing market price
C) lobbying for governmental action
D) selling at prices above the existing market price

Question 49

A disruptive innovation is ________.

A) a new product or service that is harmful to the society or the people
B) a method used in production that raises environmental concerns
C) a new product or service that has the potential to reshape an industry
D) an immediate response to a difficulty or a threat to a product or service

Question 50

Why were innovations like Apple's iTunes considered to be disruptive innovations?

A) These innovations, when introduced, were not legal.
B) These innovations had a negative effect on all the existing market players.
C) These innovations allowed the parent company to benefit in other product categories.
D) These innovations involved more operational costs.

Question 51

Which of the following is most closely associated with sustaining technologies?

A) improvements that streamline existing processes
B) radical breakthrough that replaces low-end products
C) potential to reshape and reform an industry
D) association with new product or service led by technology

Question 52

The activities that are directly related to the process by which products and services are created, marketed, sold, and delivered are called ________ activities.

A) composite
B) support
C) compound
D) primary

Question 53

Which of the following governmental actions will increase the threat of new entrants in a market?

A) The Federal Reserve reduces the interest rates on credit for small businesses.
B) The Department of Commerce offers a patent to an existing player.
C) The Government squeezes money from the market through open-market operations.
D) The Federal Reserve increases the cash reserve ratio to tackle inflation.

Question 54

Competition is not severe in the telecommunication industry in Brazil. More than ninety percent of the market is dominated by four large players. Which of the following, if true, will increase the rivalry among these four players?

A) A recent regulation by the government has made the entry of new players more difficult.
B) The market growth has slowed down significantly in recent months.
C) One of the dominant players decides to launch its products in Argentina.
D) In order to strengthen national security, the Brazilian government has banned the use of Internet telephony.

Question 55

The ecosystem in which a company is embedded is a(n) ________.

A) natural community that is restricted to the members of its value chain
B) economic community that includes related industries
C) economic community that focuses entirely on the company and its immediate competitors
D) community constituted by markets that are not related to the company

Question 56

Which of the following is based on the cloud computing concept?

A) MS Access
B) Google Docs
C) Acrobat Reader
D) Internet Explorer

Question 57

Which of the following is the most accurate justification for the view that the Internet is the most important disruptive innovation of the twentieth century?

A) The Internet created uncertainties in the market by providing a platform for online trade.
B) Switching costs have increased after the advent of the Internet as a medium of trade.
C) The Internet reduced entry barriers for newcomers and empowered buyers with more information.
D) Competition became oligopolistic with only a few companies investing in technology.

Question 58

Which of the following pairs of products are complimentary to each other?

A) computer and software
B) tea and coffee
C) petroleum and natural gas
D) gold and silver

Question 59

Creative destruction occurs when ________.

A) disruptive innovations threaten established players
B) sustaining technologies replace old procedures and processes
C) bad industrial practices are eradicated through government regulations
D) new products or services are introduced by underperforming players

Question 60

What impact will patents have on a business with respect to Porter's five forces?

A) Patents will result in increased market competition.
B) Patents will result in increased rivalry within an industry.
C) Patents will result in reduced threat of new entrants.
D) Patents will result in increased bargaining power of buyers.

Question 61

"The value chain does not end when the buyer pays for the product or service." Which of the following statements contradicts this judgment?

A) Customer orientation is the key to success in modern business.
B) Value chain includes all components that add value to a product or service.
C) Total value transfer of tangible goods happens at the point of sale.
D) Marketing success should be measured in terms of customer satisfaction.

Question 62

Which of the following is a useful benchmark for information systems?

A) amount of IT spending per employee
B) IT spending per square feet of office area
C) number of computers in an organization
D) number of programs installed on a computer

Question 63

Which of the following statements describes the product differentiation strategy?

A) special features for which customers are willing to pay more
B) products sold in more than one market at different price levels
C) prices of product or service are held at moderate levels
D) products sold to the entire market

Question 64

Which of the following is a key attribute of the low-cost leadership strategy?

A) providing unique add-ons to supplement the products or services
B) focusing on a specific market segment
C) optimizing the value chain by eliminating unwanted costs
D) offering products and services with superior qualities

Question 65

Which of the following is a major ethical issue arising out of value chain extension?

A) Who is responsible when there is damage?
B) How many members should there be in the chain?
C) What should be the marketing strategy?
D) Should the company make revenue by expansion?

Question 66

Lifetime Television, an American cable television company, specifically targets women viewers. The channel is devoted to movies, sitcoms, and dramas that are either geared toward women or feature women in lead roles. This is an example of a ________ strategy.

A) market leadership
B) cost leadership
C) focused
D) price leadership

Question 67

"low-cost leaders must automate their processes." Which of the following is the most compelling reason to support this argument?

A) Automation will help them differentiate their products.
B) Automation will help them achieve significant improvements in quality.
C) Automation will help them eliminate costly human labor.
D) Automation can help the company improve its brand image.

Question 68

The iPad challenges even the low-cost providers in the market due to its attractive features. Which of the following strategies is being used by Apple?

A) focused strategy
B) market leadership
C) cost leadership strategy
D) product differentiation

Question 69

"The information and communications technology (ICT) component is at the very heart of the company's competitive advantage." Which of the following statements is the most accurate justification of this claim?

A) Companies benefit from the cost savings made possible through information systems.
B) Cost of implementing technology has increased over a period of time.
C) Most businesses involve the sale of technical or technological services.
D) Global technological investments have increased in the past ten years.

Question 70

Which of the following is NOT a typical component of a company's value chain?

A) competitors
B) suppliers
C) customers
D) intermediaries

Question 71

A benchmark is a(n) ________.

A) quantitative standard used in manufacturing
B) minimum standard of performance in certain industries
C) reference point used as a baseline measurement
D) evaluative standard used to compare two industries

Question 72

Alduro Plastics, a utensils manufacturing company, decides to extend its value chain by acquiring a manufacturer of raw materials. Which of the following, if true, would most support Alduro's decision?

A) The company's major supplier displays a sloppy attitude while supplying materials.
B) The company's production schedule is seasonal.
C) The company has projected a growth of 8 percent for the current financial year.
D) The company's managing director has resigned recently.

Question 73

Which of the following is essential if an organization has to follow a low-cost leadership strategy?

A) market leadership on product quality
B) relentless search for ways to reduce operating expenses
C) product differentiation to distinguish itself from competitors
D) focus on a segment or sector of the market

Question 74

Which of the following typically is the biggest cost component in an organization's IT spending?

A) cost of keeping the IT services running
B) cost of buying computer hardware
C) cost of buying new software
D) cost of building IT infrastructure other than computers

Question 75

eBay's customers enrich the Web site by giving their reviews after every purchase. These reviews are used by buyers to evaluate the sellers in eBay. eBay also provides special privileges to sellers who have higher ratings. This is an example of ________.

A) reverse engineering
B) value chain extension
C) focused strategy
D) niche marketing

Question 76

Which of the following actions of a sugar manufacturing company is an extension of its value chain?

A) The company intensifies its marketing activities.
B) The company buys a large sugar cane plantation in Cuba.
C) The company adds a few more distributors.
D) The company launches a new promotional program.

Question 77

Southwest Airlines offers better fares compared to most of its competitors. This helps the company attract customers who care for economic travelling. Which of the following strategies is being used by Southwest Airlines?

A) product differentiation
B) focused strategy
C) focused differentiation
D) low-cost leadership strategy

Question 78

Differentiating the product or service for a particular market niche is called a ________.

A) market leadership strategy
B) focused strategy
C) market penetration strategy
D) cost leadership strategy

Question 79

An IT company uses industry average as a standard for measuring its financial performance. Here, the industry standard is used as a(n) ________.

A) scheme
B) outline
C) benchmark
D) objective

Question 80

A company incorporates contributions from buyers who help add value to the company's products and services. Which of the following best describes this action?

A) creation of a supply chain
B) performing a promotional activity
C) creation of a value chain
D) extension of the value chain