Deck 2: Information Systems and Strategy

Question 1

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

Answer 1

True

Question 2

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

Answer 2

True

Question 3

All types of organizational strategies leverage information systems to succeed.

Answer 3

True

Question 4

According to Porter's model, cost of transportation is one of the five forces that influence industry competition.

Question 5

A benchmark is a baseline measurement considered as optimal, though it is sometimes simply an industry average.

Question 6

While IT consumes a significant amount of the funds required for running a business, the funds for growing an organization are closely tied to strategy, innovation, and competitive advantage.

Question 7

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

Question 8

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

Question 9

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

Question 10

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

Question 11

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

Question 12

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

Question 13

Sustaining technologies are radical and unexpected breakthroughs that replace lower-end products and rapidly overtake high-end products of the market.

Question 14

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

Question 15

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

Question 16

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

Question 17

Since the operational requirements for nonprofits are completely different from businesses, information systems do not offer any strategic uses to nonprofits.

Question 18

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

Question 19

E-government involves efforts to make unclassified information available to citizens via the Internet.

Question 20

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

Question 21

Which of the following results in decreased market profitability?

A) the absence of the threat of new entrants
B) intense rivalry among competitors, based on price
C) lack of competition among suppliers in an industry
D) a lack of leveraging power over suppliers

Question 22

Which of the following factors increases the power of suppliers?

A) disruptive innovation
B) high switching costs
C) low-scale operations
D) lack of competitive advantage

Question 23

Carbon Automotive manufactures engines for different cars. The company supplies its products to leading car manufacturers in Europe and America. Which of the following statements indicates that Carbon has high bargaining power?

A) Carbon has only four customers and all of them are large companies.
B) Carbon's customers do not expect differentiation in its engines from one vehicle to another.
C) The selling point of many cars is that they contain Carbon engines.
D) The automobile industry in the U.S. is characterized by low levels of competition.

Question 24

Orange, an online-gaming site, has millions of users. The site has many games which pit users against each other. The relative standing of each user is presented in the form of an elaborate ranking system for each game. Users pride themselves on gaining the highest points and the highest rank possible. This rise in user participation has increased the value of Orange significantly. This is an example of ________.

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

Question 25

Durall 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 Durall?

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

Question 26

A substitute poses a greater threat when it ________.

A) operates in a different market in comparison with the focal product
B) has a similar nature to the focal product but operates in a different target market
C) provides the same focal product or service through different means
D) does not directly impact the profitability of another product or service

Question 27

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

A) The power of suppliers
B) The threat of substitutes
C) Network effects
D) The switching cost

Question 28

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

A) Network costs
B) Switching costs
C) Overhead costs
D) Opportunity costs

Question 29

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 mainly compete on price

Question 30

How did online markets affect the dynamics between buyers and suppliers?

A) It decreased the threat of new entrants in many industries.
B) It reduced the network effects of many products.
C) It increased the costs of switching.
D) It granted more power to the buyers.

Question 31

Videoconferencing has evolved as an alternative for business travel. This best illustrates ________.

A) the threat of substitutes in a market
B) the absence of network effects
C) monopolistic competition in markets
D) increased power of the suppliers

Question 32

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

A) A fashion apparel outlet introduces a loyalty program for its customers.
B) A retailer provides discounts on bulk purchases.
C) A kitchenware manufacturer introduces a differentiated range of products.
D) A telecom service provider introduces a family plan that provides free calls within the family.

Question 33

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 34

Which of the following is true according to Porter's model?

A) When start-up costs are low, the threat of new entrants to existing businesses is high.
B) The power of buyers reduces when deep discounts can be demanded of suppliers.
C) The power of suppliers is high when constant competition forces them to innovate.
D) The threat of substitutes is high when there are very few alternative products.

Question 35

Which of the following is a valid observation on price-based rivalry among existing competitors?

A) It is damaging for the competitors and the industry in which they operate.
B) It leads to quality-based competition and innovation.
C) It results in hidden losses for the customers.
D) It decreases the price sensitivity of customers.

Question 36

Which of the following organizations faces higher switching costs?

A) an organization that wants to automate its processes
B) an organization that moves it data center to cloud storage
C) an organization that buys an information system to manage its own records
D) an organization that wants to switch to open-source software

Question 37

Network effects refer to the ________.

A) increased value of a product or service because there are more people using it
B) the additional costs incurred by customers when they change suppliers
C) the leveraging influence of customers over suppliers
D) ability of suppliers to charge more owing to the lack of competition

Question 38

Melloc is one of many suppliers selling milk to retail customers. Since there are many sellers, price is a major determinant of market success. Which of the following statements about Melloc is true?

A) Melloc's customers have to deal with higher switching costs.
B) Melloc will be in a position to dictate terms with its customers.
C) Melloc faces powerful buyers in the retail market.
D) Melloc has a strong control over the market.

Question 39

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

A) A chain of supermarkets offers higher discounts to its regular customers.
B) A vendor reduces the range of products that it distributes to retailers.
C) An automotive company conducts a trade contest.
D) A company offers commission to its employees for pushing the company's products.

Question 40

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

A) threat of substitutes is low
B) network effects are greater
C) buyers have to deal with greater switching costs
D) buyers will have more power

Question 41

Which of the following illustrates a sustaining technology?

A) Digital cameras replaced cameras that required film.
B) Digital music sold over the Internet disallowed simultaneous downloads.
C) LCD monitors were introduced to replace analog monitors.
D) Car manufacturers invented airbags to improve safety of passengers.

Question 42

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

A) The Internet rejigged existing business processes and streamlined them, giving many companies marginal advantages.
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 43

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

A) an email system hosted locally in an organization's data center
B) an information system shared by two or more businesses and accessed via the Internet
C) a standard operating system that can be installed on many computers
D) a mobile connection that supports voice and video calls

Question 44

In the context of Porter's five forces, what impact will patents have on a business?

A) Patents will increase market competition.
B) Patents will increase the number of substitutes for a given product.
C) Patents will reduce the threat of new entrants in an industry.
D) Patents will reduce the bargaining power of suppliers.

Question 45

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

A) assembling automobile parts
B) administration and management of infrastructure
C) human resource management
D) inventory tracking

Question 46

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 47

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 48

A disruptive innovation is ________.

A) a new product or service that is harmful to the people or society
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) a technology that increases switching costs and entry barriers for newcomers

Question 49

Which of the following is true of an ecosystem?

A) An ecosystem insulates Porter's five forces against disruptive innovations.
B) Events in one arena of an ecosystem can affect all players involved.
C) The power of suppliers and the threat of new entrants are reduced in an ecosystem.
D) An ecosystem can reduce the complementary effect between products and services.

Question 50

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 51

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 will increase the rivalry among these four players?

A) a government regulation hindering the entry of new players
B) a significant slowdown in market growth
C) a decision by one of the dominant players to launch its products in Argentina
D) a ban on Internet telephony

Question 52

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 53

Which of the following is a fundamental characteristic of an ecosystem?

A) It opposes any moves to make fundamental changes in an industry.
B) It decreases the impact of the five forces on an industry.
C) It includes the related industries making complementary products and services, the competitors themselves, the suppliers, and the consumers.
D) It groups together multiple unrelated industries to reduce a domino effect or a ripple effect.

Question 54

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) more expensive than locally-hosted versions

Question 55

Which of the following best describes support activities?

A) It refers to activities directly related to the process by which products and services are created, marketed, sold, and delivered.
B) It refers to activities that help the transformation of raw materials to finished products.
C) It refers to processes including administration and management, human resources, procurement, and technology assistance.
D) It refers to activities that comprise multiple tasks and are performed by one person or department.

Question 56

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) community focused entirely on the immediate competitors of a company
D) community constituted by markets that are not related to the company

Question 57

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

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

Question 58

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

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

Question 59

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) supporting
C) compound
D) primary

Question 60

Which of the following is true of creative destruction?

A) It makes use of illegal innovations and techniques to displace established businesses.
B) It presents newcomers with an opportunity to succeed against incumbents in an industry.
C) It happens when technologies that provide process-streamlining advantages come to the fore.
D) It increases the operational costs of the entire industry and reduces profits.

Question 61

________ is a reference point used as a baseline measurement.

A) A focused niche strategy
B) A value chain model
C) A benchmark
D) A strategic enabler

Question 62

Which of the following is a shortcoming of the extended value chain?

A) It is difficult to allocate responsibility in the event of a mishap.
B) It reduces the strategic advantages offered by a shorter chain.
C) It alienates customers by not taking their opinions into account.
D) It cannot be expanded beyond the support activities of a company.

Question 63

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 expenditures
D) offering products and services with superior qualities

Question 64

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

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

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

How can a company avoid the trap of competing only on price?

A) by keeping the price at a level higher than the competitors
B) by following a pricing strategy inconsistent with the market equilibrium
C) by differentiating the products or services that it offers
D) by selling at a price much lower than the competition

Question 67

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

A) The value chain ends when the customer buys a product.
B) The value chain includes primary and support activities used to produce a product.
C) The value chain's extended activities neither offer strategic opportunities nor risks.
D) The value chain does not involve the intermediaries that a company maintains.

Question 68

Which of the following statements describes the product differentiation strategy?

A) adding special features to a product for which customers are willing to pay more
B) selling the same product in more than one market at different price levels
C) pricing of product or services at moderate levels
D) selling a range of products across different geographical locations

Question 69

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

Question 70

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 71

Southwest Airlines offers better fares compared to most of its competitors. This helps the company attract customers. 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 72

eBay's customers enrich the website by reviewing products that they purchase. These reviews are used by buyers to evaluate the sellers on 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 73

Which of the following illustrates a low-cost leadership strategy?

A) CGlass sells inexpensive, fashionable eyewear in comparison with its competitors.
B) Brown Valley offers huge discounts on bulk purchases from its retail outlets.
C) Clay Mansion imports ceramic vases from Europe and Asia.
D) Felt sells consumer durables through franchise outlets.

Question 74

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

A) Understanding a customer's own value chain does not offer strategic advantages to a company.
B) As the extended value chain lengthens, responsibility for harmful consequences becomes more diffuse.
C) The value chain ends at product delivery and any extension to it has no bearing on strategic advantages.
D) A company's value chain is limited to the internal activities of the company and does not depend on external factors.

Question 75

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 76

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

A) the amount of IT spending per employee in an organization
B) the number of temporary employees in an organization
C) the number of unused computers in an organization
D) the number of monthly employee promotions in an organization

Question 77

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 78

"Total value transfer of tangible goods happens at the point of sale." Which of the following statements contradicts this judgment?

A) The drive to reduce costs can lead to ethically questionable decisions.
B) Events in the external parts of the chain can also offer strategic opportunities.
C) The value chain does not end when the buyer pays for the product or service.
D) As the extended value chain lengthens, responsibility for harmful consequences becomes more diffuse.

Question 79

Which of the following actions of a sugar manufacturing company is an extension of its value chain beyond its own primary and support activities?

A) The company intensifies its marketing activities to cater to new customers.
B) The company buys a large sugarcane plantation in another country.
C) The company adds a few more distributors to extend the reach of its products.
D) The company launches a new promotional campaign to attract more buyers.

Question 80

Roland Inc. is a fashion apparels retailer in the U.S. It wants to measure how its investment is helping create value in comparison with its competitors. Which of the following metrics used by Roland can be classified as a benchmark in this scenario?

A) the number of leaves taken by employees
B) the total number of brand outlets
C) the average number of sales made per day
D) the number of customers on a sales promotion list