BADM 449 EXAM 2 QUESTIONS WITH CORRECT ANSWERS LATEST UPDATE 2026

BADM 449 EXAM 2 QUESTIONS WITH CORRECT ANSWERS LATEST UPDATE 2026 Corporate Strategy - Answers Where to compete. Determining the scope of business Business Strategy - Answers How to compete. Winning in the given business Functional Strategy - Answers How to implement business strategy What is Business Strategy? - Answers The goal-directed (coherent) actions managers take in their quest for competitive advantage when competing in a single product market Four questions that managers must answer - Answers •Who: which customer segments will we serve? •What: customer needs, wishes, and desires will we satisfy? •Why: do we want to satisfy them? •How: will we satisfy our customers' needs? Strategic trade-offs - Answers •Choices between a cost or value position •Higher value creation → higher cost Cost Leadership Strategy - Answers Seeks to create similar value than competitors Products or services delivered at lower cost Cost Drivers - Answers -Costs of input factors -economies of scale -Learning curve effect -experience curve effects Learning-curve effects - Answers •Learning (repeated actions) drives down costs •The steeper the learning curve, the more learning has taken place Experience-curve effects - Answers •Introduction of new technology or process innovation Shift from a 90% learning curve to a 80% learning curve Differentiation Strategy - Answers -Seeks to maintain similar costs than competitors -Unique products or services creating higher value -Typically (not necessarily) charges higher prices Value drivers - Answers -Product features -Customer service -Complements Blue Ocean Strategy - Answers successfully combines differentiation and cost-leadership activities using value innovation Value innovation - lower costs - Answers -Eliminate. Which of the factors that the industry takes for granted should be eliminated? -Reduce. Which of the factors should be reduced well below the industry's standard? Value innovation - increase perceived consumer benefits: - Answers -Raise. Which of the actors should be raised well above the industry's standard? -Create. Which factors should be created than the industry has never offered? What is Innovation? - Answers Innovation is the successful introduction of a new product, process, or business model. innovation and invention - Answers Innovation = Invention + Commercialization Three criteria of a successful innovation - Answers Product, process, business model Innovation process - Answers -ideas -invention -innovation -imitation Disruptive innovation - Answers New technologies attacking existing markets Competitive Consequences of Innovation - Answers 1. Bounded Rationality 2. Competence-Destroying Entrepreneurship - Answers process by which change agents (entrepreneurs) undertake economic risk to innovate Entrepreneur traits: - Answers -The need for achievement -Locus of control -Risk-taking propensity -Forecasting -Negotiating Industry Life Cycle - Answers Introduction, growth, shakeout, maturity, and decline Introduction Stage - Answers Core competency: R&D Strategic objective: market acceptance & future growth Emphasis: uniqueness & performance Capital-intensive Trying new ideas Producing small quantities Initial market size: small Growth: slow Barriers to entry: high Growth Stage - Answers -Demand increases rapidly -Product/service standards emerge -Core competencies: manufacturing and marketing -Basis of competition: process innovation -Strategic objective: strong strategic position not easily imitated by rivals Product innovation: - Answers New or recombined knowledge embodied in new products Process innovation - Answers New ways to produce existing products or to deliver existing services Shakeout Stage - Answers ¢The rate of growth declines ¢Firms begin to compete more intensely ¢Key success factors: lManufacturing lProcess engineering capabilities ¢Importance of process innovation further increases Maturity Stage - Answers ¢Few large firms remain lThey enjoy economies of scale ¢Industry growth is likely to be zero or negative ¢The market has reached its maximum size ¢Competitive intensity: increases lDecrease in market demand Decline Stage - Answers ¢Demand falls, often rapidly ¢If a technological or business model breakthrough emerges that open up a new industry ¢Managers have four options: lExit: bankruptcy/liquidation lHarvest: reduce further investments lMaintain: support at a given level lConsolidate: buy rivals, near monopoly Customer groups - Answers - Technology enthusiasts: 2.5% - Early Adopters: 13.5% - Early Majority: 34% - Late Majority: 34% - Laggards: 16% Patents - Answers Exclusive rights to a new product, process, substance or design Copyrights - Answers Exclusive rights to artistic, dramatic, and musical works Trademarks - Answers Exclusive rights to words, symbols or other marks to distinguish goods and services Trade Secrets - Answers Protection of chemical formulae, recipes, and industrial processes Complementary Assets - Answers complementary assets providers who profit more from the innovation Licensing - Answers License your technology and let others produce and distribute final products Small risk & commitments, but limited returns Alliances - Answers Make a exclusive partnership to produce and distribute final products Shared risk, commitments, returns Internal Development - Answers Purchase complementary assets and produce/distribute final products on your own. Substantial risk, commitments, returns Open Innovation - Answers -Combining internal and external ideas as well as internal and external paths to market to advance the development of new technologies. -Combining the best of internal and external R&D Closed Innovation - Answers When an organization does all of their own research internally and keeps its innovative ideas as proprietary intellectual property. Three Dimensions of Corporate Strategy - Answers 1. Vertical Integration 2. Horizontal (Diversification) 3. Geographic Scope Vertical Integration - Answers Practice where a single entity controls the entire process of a product, from the raw materials to distribution Backward vertical integration - Answers changes in an industry value chain that involve moving ownership of activities upstream to the originating (inputs) point of the value chain Forward vertical integration - Answers changes in an industry value chain that involve moving ownership of activities closer to the end (customer) point of the value chain Underlying Mechanism - Answers (External) Transaction Costs, Costs associated with using market contracts. VI reduces these costs Specialized assets - Answers unique assets with high opportunity cost Proposition - Answers If vertical transactions are uncertain and require specialized assets, the external transaction costs are high, then the firm should vertically integrate Benefits of Vertical Integration - Answers -lowering costs -improving quality -facilitating scheduling and planning -facilitating investments in specialized assets -securing critical supplies and distribution channels reducing external transaction costs Risks of Vertical Integration - Answers increasing costs, reducing quality, reducing flexibility, increasing the potential for legal repercussions. Increasing internal transaction costs