MBA 705 - Exam #1 Questions with Correct Answers
Capital-Labor Substitution: - ✔✔An organization's ability to substitute labor for
capital or vice versa as production increases.
Experience Curve: - ✔✔ncreases. Experience Curve: The reduction in per-unit
costs that occur as an organization gains experience producing a product or
service.
Functional Strategies: - ✔✔The strategies pursued by each functional area of a
business unit, such as marketing, finance, or production.
Human Capital: - ✔✔The sum of the capabilities of individuals in an organization.
Just-In-Time (JIT) Inventory System: - ✔✔An inventory system, popularized by the
Japanese, in which suppliers deliver parts just at the time they are needed by the
buying organization to use in its production process.
Knowledge Management: - ✔✔People and their skills and abilities (i.e.,
knowledge capital) represent the only resource that cannot readily be reproduced
by a firm's competitors. Knowledge capital must be effectively leveraged if high-
performing firms are to remain as such over the long term.
Learning: - ✔✔The increased efficiency that occurs when an employee performs a
task repeatedly.
Process R & D: - ✔✔R & D activities that seek to reduce the costs of operations
and make them more efficient.
,Product/Service R & D: - ✔✔R & D activities directed toward improvements or
innovations in the quality or uniqueness of a company's outputs.
Total Quality Management (TQM): - ✔✔A broad-based program designed to
improve product and service quality and to increase customer satisfaction by
incorporating a holistic commitment to quality as seen through the eyes of the
customer.
Because functional strategies should be designed to support corporate and
business strategies, they should not be considered until corporate and business
strategies have been formulated.
True or False - ✔✔False.
Although functional strategies are formulated after the corporate and business
strategies have already been established, one still needs to consider the
capabilities of the various functional areas when considering various corporate
and business strategic options.
The most appropriate means of securing funds likely depends on the corporate
and business strategies being pursued.
True or False - ✔✔True.
Some forms of raising capital tend to be more effective than others, depending on
the strategy.
, The reduction in per-unit costs that occurs as an organization gains experience
producing a product or service is known as economies of scale. Economies of
scale is one of the contributing factors to the experience curve.
True or False - ✔✔False.
The reduction in per-unit costs that occurs as an organization gains experience
producing a product or service is known as the experience curve.
The purchasing department in a low-cost business should always purchase raw
materials at the lowest possible cost.
True or False - ✔✔False.
Purchasing departments in low-cost businesses should seek the "best cost"—the
lowest cost within an acceptable range of quality standards.
The human resources department in a low-cost business should always attempt
to hire managers and workers at pay rates below those of their competitors.
True or False - ✔✔False.
Although higher than average pay rates are generally not consistent with the low-
cost strategy, businesses seeking to minimize costs may need to pay market rates
to maintain a competitive workforce.
Capital-Labor Substitution: - ✔✔An organization's ability to substitute labor for
capital or vice versa as production increases.
Experience Curve: - ✔✔ncreases. Experience Curve: The reduction in per-unit
costs that occur as an organization gains experience producing a product or
service.
Functional Strategies: - ✔✔The strategies pursued by each functional area of a
business unit, such as marketing, finance, or production.
Human Capital: - ✔✔The sum of the capabilities of individuals in an organization.
Just-In-Time (JIT) Inventory System: - ✔✔An inventory system, popularized by the
Japanese, in which suppliers deliver parts just at the time they are needed by the
buying organization to use in its production process.
Knowledge Management: - ✔✔People and their skills and abilities (i.e.,
knowledge capital) represent the only resource that cannot readily be reproduced
by a firm's competitors. Knowledge capital must be effectively leveraged if high-
performing firms are to remain as such over the long term.
Learning: - ✔✔The increased efficiency that occurs when an employee performs a
task repeatedly.
Process R & D: - ✔✔R & D activities that seek to reduce the costs of operations
and make them more efficient.
,Product/Service R & D: - ✔✔R & D activities directed toward improvements or
innovations in the quality or uniqueness of a company's outputs.
Total Quality Management (TQM): - ✔✔A broad-based program designed to
improve product and service quality and to increase customer satisfaction by
incorporating a holistic commitment to quality as seen through the eyes of the
customer.
Because functional strategies should be designed to support corporate and
business strategies, they should not be considered until corporate and business
strategies have been formulated.
True or False - ✔✔False.
Although functional strategies are formulated after the corporate and business
strategies have already been established, one still needs to consider the
capabilities of the various functional areas when considering various corporate
and business strategic options.
The most appropriate means of securing funds likely depends on the corporate
and business strategies being pursued.
True or False - ✔✔True.
Some forms of raising capital tend to be more effective than others, depending on
the strategy.
, The reduction in per-unit costs that occurs as an organization gains experience
producing a product or service is known as economies of scale. Economies of
scale is one of the contributing factors to the experience curve.
True or False - ✔✔False.
The reduction in per-unit costs that occurs as an organization gains experience
producing a product or service is known as the experience curve.
The purchasing department in a low-cost business should always purchase raw
materials at the lowest possible cost.
True or False - ✔✔False.
Purchasing departments in low-cost businesses should seek the "best cost"—the
lowest cost within an acceptable range of quality standards.
The human resources department in a low-cost business should always attempt
to hire managers and workers at pay rates below those of their competitors.
True or False - ✔✔False.
Although higher than average pay rates are generally not consistent with the low-
cost strategy, businesses seeking to minimize costs may need to pay market rates
to maintain a competitive workforce.
