Business Capstone
Midterm Exam
Course Introduction
The Business Capstone course is designed as a culminating experience for students nearing the completion of their business studies. It integrates key concepts from various business disciplines such as management, marketing, finance, and operations through the analysis of real-world case studies and the development of comprehensive strategic plans. Students work collaboratively to solve complex business problems, apply critical thinking skills, and synthesize their learning in practical, scenario-based projects. The course emphasizes strategic decision-making, effective communication, and ethical considerations in business, preparing students for professional roles and lifelong learning in the ever-evolving business landscape.
Recommended Textbook
Strategic Management Concepts BRV 1st Edition by Jeffrey
H. Dyer
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Chapter 1: What Is Business Strategy?
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Q1) Sweetmeats Inc., a deli, produces its own grains, such as corn, wheat, rice, and oats.The employees create different types of breads without having to buy the grains from other sources.This has helped them sell their bread items to customers at much lower prices than other neighboring delis.This scenario best illustrates a(n) _____.
A) complementary service
B) emergent strategy
C) unique value
D) cost advantage
Answer: D
Q2) A company's primary purpose that often specifies the business or businesses in which the firm intends to compete -or the customers it intends to serve-refers to its _____.
Answer: mission
Q3) What is the first decision that a company which is developing a strategic management process must make when it is initiated?
Answer: In a strategic management process, one of the first decisions a company must make is which markets it will serve.
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Chapter 2: Analysis of the External Environment: Opportunities and Threats
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Q1) Define switching costs and the forces that it takes into consideration.
Answer: Switching costs are barriers that help keep firms using the same supplier or buyer by imposing extra costs for switching suppliers or buyers.It includes any cost to the customer for changing brands.Switching costs for buyers are related to the degree of product standardization.Switching costs are a fundamental part of not just rivalry but also the other four forces:
1.Buyer power.If customers, or buyers, can easily switch firms, then buyers have increased power.
2.Supplier power.If firms cannot switch suppliers easily, then suppliers have increased power.
3.New entrants.If buyers can easily switch to new companies attempting to enter the industry, there is a greater threat of new entrants.
4.Substitutes.If buyers can switch to substitute products without much difficulty, firms face an increased threat from those substitutes.
Q2) How is buying power related to switching costs?
Answer: If customers, or buyers, can easily switch firms, then buyers have increased power.
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Page 4
Chapter 3: Internal Analysis: Strengths, Weaknesses, and Competitive Advantage
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Q1) LittleHut Inc., an international food company, has a number of resources to its credit.Over the years, the company has acquired factories, machinery, in-depth knowledge, and a stable reputation.The elements mentioned in this scenario can be best categorized as LittleHut Inc.'s _____.
A) equipment
B) personnel
C) assets
D) capabilities
Answer: C
Q2) Which of the following is a disadvantage of the value chain process?
A) It does not help analyze a company's strength compared to its competitors.
B) It does not take into account firm infrastructure or human resource management.
C) It does not help managers to identify areas in which a firm has an absolute strength.
D) It does not span all of a firm's economic activities.
Answer: A
Q3) The characteristics that make a resource or capability difficult to imitate is known as _____.
Answer: inimitability
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Chapter 4: Cost Advantage
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Q1) A reduction in costs per unit due to increases in efficiency of production as the number of goods being produced increases best defines the term _____.
A) economies of scope
B) economies of finance
C) economies of scale
D) economies of wealth
Q2) String Line Inc.has established a loyal supplier base.The management at String Line had created a system in which it chooses a supplier that is reasonably affordable, and instead of quoting the company's price and demanding that it be met, it complies with the supplier's quotes.Over time, this has established a bond of loyalty with the supplier.When String Line opened a new branch, the supplier built its plant close to the branch so as to save transportation costs.Which of the following has String Line Inc.established with the supplier?
A) Rivalry
B) Cooperation
C) Competition
D) Access
Q3) Which is an important source of proprietary knowledge?
Q4) Define economies of scale and list out its four principle sources.
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Chapter 5: Differentiation Advantage
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Q1) Saturn Inc., a manufacturer of home appliances, familiarizes customers with its products through advertising.Apart from attracting new customers, it offers quick demos in mass media that assist existing customers.Which of the following stages in the consumption chain is depicted in this scenario?
A) The eighth step: what do customers need help with when they use a product?
B) The ninth step: what if customers aren't satisfied and need a return or exchange?
C) The third step: how do customers make their final selections?
D) The fourth step: how do customers order and purchase a product?
Q2) The research and development department of Chi Inc.studies the buying patterns of its customers.If it starts with the customers in the first step of the consumption chain, which of the following does it most likely study?
A) How do its customers find its products?
B) How do its customers order its products?
C) How do its customers become aware of their needs?
D) How do its customers pay for the products?
Q3) What are the three ways in which product features can be offered for the purpose of differentiation?
Q4) Explain product differentiation.
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Page 7
Chapter 6: Corporate Strategy
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Q1) Movement into adjacent markets by a firm along its own value chain can be best termed _____.
A) vertical integration
B) horizontal specialization
C) horizontal diversification
D) unrelated diversification
Q2) Pisces Corp.is an apparel manufacturing company.It purchased a few of its raw material suppliers and set up their factories close to the clothing stores so that the company does not have to invest on transportation charges.This is an example of
A) downward diversification
B) forward integration
C) backward integration
D) horizontal diversification
Q3) Explain the ways in which diversification adds value.
Q4) What does the term adjacent market mean?
Q5) Mention the factors that lead to destroying value through diversification.Explain any three of them.
Q6) What is a greenfield entry? When should a company use it?
Q7) How does diversification help exploit existing customer-facing resources?
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Chapter 7: Vertical Integration and Outsourcing
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Q1) Teal Motors Inc., an automobile company, outsources the manufacturing of most of the automobile parts to several other companies that specialize in making parts such as ignition boxes, coil wires, and grills.Teal Motors makes sure to get these parts manufactured at a much lesser rate than it would if it manufactures its own parts.In this scenario, Teal Motors Inc.is effectively avoiding a _____.
A) loss of identity
B) loss of frequency
C) loss of facility
D) loss of focus
Q2) Coral Corp.is a company that initially used to manufacture handbags.It has now set up a store in which it sells its own products rather than supplying them to different stores.This initiation by Coral Corp.best illustrates _____.
A) forward integration
B) backward integration
C) horizontal diversification
D) market penetration
Q3) In the context of vertical integration, when is flexibility most valuable?
Q4) What are the disadvantages to outsourcing?
Q5) What are some of the advantages of outsourcing?
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Chapter 8: Strategic Alliances
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Q1) Marcel, the CEO of an automobile company, considers extending his research and development facility by collaborating with a multinational company.He believes that a contractual alliance will be ideal for this collaboration, but other senior members of the management oppose a contractual alliance.Which of the following statements is likely to strengthen Marcel's argument?
A) The relationship between the two firms is likely to be supported by equity investments.
B) The two firms are likely to seek a joint venture through the collaboration.
C) Cooperation between the two firms is not likely to depend on cross-equity holdings.
D) Interdependence between the two firms is not likely to be low.
Q2) Two organizations, Purple Inc.and Spring Corp., are positioned at a common stage of the value chain.However, they do not have a supplier-buyer relationship.They form an alliance to benefit from complementary activities.Which of the following is exemplified in this scenario?
A) A horizontal alliance
B) A vertical alliance
C) A joint venture
D) A supply agreement
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Page 10
Chapter 9: International Strategy
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Q1) _____ is the need to tailor an organization's products, marketing, and distribution strategies to the local customers in a foreign country.
Q2) A healthcare company deals with significant management challenges.The production units are based in various geographic locations, which results in cultural and linguistic barriers.Operations require relying on a local firm to adapt the products to meet the needs of the local market.In this case, the company is likely to be engaging in
A) Exporting
B) Importing
C) Offshoring
D) Alliances
Q3) In the context of modes of international market entry, which of the following statements is true of licensing and franchising?
A) It offers the highest amount of control of all the various modes of entry.
B) It is easy to extract knowledge for use in other locations through this mode.
C) It can increase the cost of selling in a foreign market.
D) It involves the risk of a local firm in alliance to become a competitor.
Q4) Write a note on cultural distance.
Q5) Explain why firms choose to compete in international markets.
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Chapter 10: Innovative Strategies That Change the Nature of Competition
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Q1) Peach Corp.continues to refine its chocolate products even as they look for innovative ways to reach customers through marketing and new distribution channels.In this case, the organization is in the _____ stage of the product life cycle.
A) introduction
B) growth
C) maturity
D) decline
Q2) Explain mass customization with an example.
Q3) An organization launched a new product in the market.It offered a free trial of the basic model to gain widespread initial use, after which users were offered a nonfree premium version of the same product.Which of the following strategies is used by the company in this case?
A) A blue ocean strategy
B) A cross-sell strategy
C) A third-party pay strategy
D) A bundling strategy
Q4) What is a business model? Briefly explain the revenue model.
Q5) Explain the four stages of the product life cycle.
Q6) _____ coined the term hypercompetition.
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Chapter 11: Competitive Strategy
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Q1) An organization has few rivals in the industry.These rivals are considering such moves as price changes, capacity adjustments, or new product features.Which of the following will help the organization predict the strategic actions most likely to be taken by its rivals?
A) Structural analysis
B) Game theory
C) Strategic canvas
D) Study of productivity
Q2) Alex, the CEO of a manufacturing company, is asked by the board if he will consider switching strategic groups.However, Alex thinks it might not be advisable.Which of the following statements strengthens Alex's belief?
A) Marketers will be more able to identify rivals if they switch to another strategic group.
B) The customers of his company are not brand conscious and loyal.
C) His company has tough competition from firms outside their strategic group.
D) His company has rigid systems, which have been in place for many years
Q3) An analysis that breaks down the structure of a market or industry into its constituent groups is called a(n) _____.
Q4) Briefly describe the game theory.
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Page 13
Chapter 12: Implementing Strategy
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Q1) Which of the following statements is true of the unfreezing phase of organizational change?
A) It allows organizations to maintain the progress they made through change.
B) It means moving from one set of behaviors and activities to another.
C) It is the phase where an organization engages in a trial and error process.
D) It provides the fundamental motivation for change.
Q2) Walker and Harris are senior research fellows at a global non-profit organization.They are working on a project that studies the growth trend of a multinational corporation, Garcia Inc.When Walker and Harris decide to consolidate their study findings, Walker is of the opinion that Garcia is in the 'change process' phase, while Harris believes that the company is in the 'refreeze' phase.Which of the following statements, if true, would strengthen Harris' belief?
A) Garcia Inc. publicly admits that the current situation is not working.
B) Garcia Inc. formalizes and institutionalizes its new growth strategies.
C) Garcia Inc. adopts a trial and error method to decide on the best growth strategy.
D) Garcia Inc. decides to adapt to its environment and learn new growth-inducing behaviors.
Q3) What are the three phases of changes?
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Chapter 13: Corporate Governance and Ethics
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Q1) Tinos Inc.is a company that manufactures toys.Which of the following would be its primary stakeholder?
A) Other local toy manufacturers
B) Foreign toy manufacturers
C) People who purchase its toys
D) People who purchase toys in foreign countries
Q2) Ria and Maria start an investment firm together that is not a separate legal entity.They have an equal share of the profits and the liabilities of the business.This type of business ownership can be best categorized as a(n) _____.
A) cooperative
B) partnership
C) corporation
D) individual proprietorship
Q3) _____ is a model of the corporation suggesting that a firm is the sum total of its contracts with different stakeholders.
A) Nexus of contracts
B) Shareholder primacy
C) Stakeholder model
D) Supplier contracts
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Page 15
Chapter 14: Strategy and Society
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Q1) Foodoid Inc., a fast food restaurant, enters into a tie-up with SimplyBake Inc., a bakery chain, to procure croissants, garlic loafs, and other essential food ingredients.In the context of the value net model, SimplyBake assumes the role of a(n) _____.
A) principal investor
B) competitor
C) complementor
D) franchisor
Q2) Which of the following statements is true of institutional change?
A) Institutional change is most effective in organizations pursuing multiple goals of equal importance.
B) Institutional change makes customers value an organization's output more because of its product or service.
C) Institutional change entails transferring the ability to effectively perform tasks from one organization to another.
D) Institutional change agents typically focus on large-scale social problems that have proven difficult for governments or other social actors to solve.
Q3) Discuss the four fundamental social responsibilities of a business.
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