QUESTION: 249

Economic theory identifies two basic types of goods: inferior goods and superior goods. As consumer income rises, a lower percentage of earnings are expended on inferior goods while a higher percentage of earnings are spent on superior goods. Overall strategies for achieving organizational missions would most likely match with types of goods as follows:

Cost leadership strategies for superior goods, differentiation strategies for inferior goods.
Cost leadership strategies for inferior goods, differentiation strategies for superior goods.
Cost leadership strategies would most likely be used for both inferior and superior goods.
Differentiation strategies would most likely be used for both inferior and superior goods.

Answer(s): B

Explanation:

Rule: Overall strategies are divided into two different types that are defined as follows:
Cost leadership: Organization seeks to capture market share through maintaining the lowest cost. Differentiation: Organization seeks to capture market share by demonstrating product value.
Choice "b" is correct. Organizations that sell economically inferior goods (necessities such as cotton swabs, light bulbs, etc.) are more likely to posture themselves as cost leaders than organizations that sell economically superior goods (luxuries such as cruise packages, fine china, jewelry, etc.) who will likely seek to differentiate the value of their product as part of their strategy.
Choice "a" is incorrect. Economically inferior products would likely be associated with cost leadership, not differentiation while economically superior products would likely be associated with differentiation.
Choice "c" is incorrect. Economically inferior products would likely be associated with cost leadership, not differentiation while economically superior products would likely be associated with differentiation.
Choice "d" is incorrect. Economically inferior products would likely be associated with cost leadership, not differentiation while economically superior products would likely be associated with differentiation.

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QUESTION: 250

Having identified their mission, overall strategy, and critical success factors, organizations often review the internal and external factors that will contribute to their success. This analysis is often referred to as:

TOC evaluation.
Brainstorming.
Balanced scorecard review.
SWOT analysis.

Answer(s): D

Explanation:

Choice "d" is correct. Evaluation of internal and external factors contributing to an organization's success is referred to as Strengths, Weaknesses, Opportunities and Threats (SWOT) analysis. Strengths and weaknesses focus on internal factors while opportunities and threats relate to external factors.
Choice "a" is incorrect. The acronym TOC stands for Theory of Constraints, which is an evaluation technique for optimizing throughput time, it does not relate to overall strategy evaluation.
Choice "b" is incorrect. Brainstorming is a meeting technique used to generate ideas. Although brainstorming could be used as part of an organization's approach to SWOT analysis, it is not, itself, the evaluation of internal and external factors.
Choice "c" is incorrect. A review of the balanced scorecard, which summarizes measures of achievement of critical success factors, does not represent the objective review of internal and external factors that may impact achievement of strategy.

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QUESTION: 251

Under which of the following conditions is the supplier most able to influence or control buyers?

When the supplier's products are not differentiated.
When the supplier does not face the threat of substitute products.
When the industry is controlled by a large number of companies.
When the purchasing industry is an important customer to the supplying industry.

Answer(s): B

Explanation:

Choice "b" is correct. When there are few good substitutes for a supplier's product, the supplier has market power (think of a monopoly). As a result, the supplier is better able to control buyers and act as a price setter rather than a price taker.
Choice "a" is incorrect. When supplier's products are not differentiated, buyers will be indifferent about which supplier they purchase from. In other words, if firms sell identical products (think of perfect competition) the product of one firm is a perfect substitute for the product of another firm. In this case, firms are price takers, not price setters.
Choice "c" is incorrect. When there are a large number of firms, no one firm has much market power.
This is the case of either perfect competition (if all firms sell identical products) or monopolistic competition (if all firms sell slightly differentiated products).
Choice "d" is incorrect. If the purchasing industry is an important customer of the supplier, the purchasing industry (i.e. the buyer) will have some market power. This will diminish the ability of the supplier to influence or control the buyer.

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QUESTION: 252

Which of the following inputs would be most beneficial to consider when management is developing the capital budget?

Supply/demand for the company's products.
Current product sales prices and costs.
Wage trends.
Profit center equipment requests.

Answer(s): D

Explanation:

Choice "d" is correct. In developing its capital budget, management would find the employee input associated with equipment requests from various profit centers most helpful. Departmental requests, appropriately justified, would provide key insights into the capital requirements of the business that are not otherwise known.
Choice "a" is incorrect. Supply and demand for company products is a crucial strategic input in forecasting the future capital requirements. Current year capital budgeting would not benefit as directly from this information, however, as profit center equipment requests.
Choice "b" is incorrect. Current product sales prices and costs represent operating data most relevant to operating rather than capital budgeting.
Choice "c" is incorrect. Wage trends represent operating data most relevant to operating than capital budgeting.

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QUESTION: 249

Explanation:

QUESTION: 250

Explanation:

QUESTION: 251

Explanation:

QUESTION: 252

Explanation: