Question 1

Is a certain level of "organizational slack" desirable in the organization?

Accepted Answer

The answer is yes.
Organizational slack or X-inefficiency is defined as the surplus costs that keep the firm from maximum efficiency operation.
By definition, the existence of organizational slack keeps the firm from operating at 100% of its potential maximum performance because some resources are not fully or efficiently employed.
A certain level of organizational slack can be justified by:
-the need to adapt to changes that require instantaneous variations in the available resources
-the time needed to prepare changes and to acquire resources and competences
-a role of testing new capabilities in an organizational "experimenting zone"
-the need to train new members of the organization.
However, the existence of this slack must be periodically reviewed to avoid the trap of wasting resources with an oversized organizational slack.
The right balance is not an easy objective to achieve.

Question 2

BPR has produced only disappointing results

Accepted Answer

A) True 
 B)False  False

Question 3

It is impossible for a firm to be competitive if its output volume is significantly below the Minimum Efficient Plant Size or Minimum Efficient Scale

Accepted Answer

A) True 
 B)False  False

Question 4

Firms should maintain capacity utilization at 100% at all times to minimize costs:

Accepted Answer

A) Yes, this is the right approach 
B) No, since in practice 100% utilization is already beyond normal practical utilization, and increases costs. 
C) No: in practice this is not feasible, and leaves no room for contingencies 
D) Both b and c above 
A) Yes, this is the right approach 
B) No, since in practice 100% utilization is already beyond normal practical utilization, and increases costs. 
C) No: in practice this is not feasible, and leaves no room for contingencies 
D) Both b and c above

Question 5

Motel 6, the US cost leader budget motel:

Accepted Answer

A) Keeps its costs low by building hotels with cheap material 
B) Performs extremely well because of its differentiation strategy 
C) Serves the high end of the hotel market for leisure 
D) Designs its products to keep its costs low 
A) Keeps its costs low by building hotels with cheap material 
B) Performs extremely well because of its differentiation strategy 
C) Serves the high end of the hotel market for leisure 
D) Designs its products to keep its costs low

Question 6

Until a few years ago, the dominant view of large industrial corporations was that strategy was largely about scale-economies and mass-market dominance.

Accepted Answer

A) True 
 B)False

Question 7

During the 20th century, firms were mostly concerned with:

Accepted Answer

A) The quest for market protection. 
B) International competitiveness. 
C) The pursuit of profits 
D) The quest for economies of scale and scope 
A) The quest for market protection. 
B) International competitiveness. 
C) The pursuit of profits 
D) The quest for economies of scale and scope

Question 8

There are seven main cost drivers of cost advantage according to the text.

Accepted Answer

A) True 
 B)False

Question 9

Firms and strategic analysts recognized that cost advantage is the result of multiple factors, and not only the result of the experience curve

Accepted Answer

A) True 
 B)False

Question 10

The more complex or labor intensive a product or a process is:

Accepted Answer

A) The greater the potential for mistakes 
B) The greater the potential for learning 
C) The smaller the potential for learning 
D) All of the above 
A) The greater the potential for mistakes 
B) The greater the potential for learning 
C) The smaller the potential for learning 
D) All of the above

Question 11

A minimum efficient plant size is:

Accepted Answer

A) The minimal size of a plant that achieves an equilibrium between fixed and variable costs 
B) The starting point in terms of output volume for meeting market price at a minimum profit 
C) The minimum size of a plant that acquires the largest market share 
D) The minimum size of a plant that is required for efficient R&D 
A) The minimal size of a plant that achieves an equilibrium between fixed and variable costs 
B) The starting point in terms of output volume for meeting market price at a minimum profit 
C) The minimum size of a plant that acquires the largest market share 
D) The minimum size of a plant that is required for efficient R&D

Question 12

The greatest productivity gains from process innovation typically come from:

Accepted Answer

A) Technology 
B) Total Quality Management 
C) Capital investment 
D) Organizational improvements 
A) Technology 
B) Total Quality Management 
C) Capital investment 
D) Organizational improvements

Question 13

Cost drivers:

Accepted Answer

A) Vary within and across industries 
B) Do not vary much across firms within the same industry 
C) Vary across industries, firms, and activities within the firm 
D) Do not vary across a firm's activities 
A) Vary within and across industries 
B) Do not vary much across firms within the same industry 
C) Vary across industries, firms, and activities within the firm 
D) Do not vary across a firm's activities

Question 14

One founding idea of BPR is to achieve dramatic improvements in cost-efficiency, not achievable through incremental process evolution.

Accepted Answer

A) True 
 B)False

Question 15

For much of the 20th century, many large corporations were obsessed with:

Accepted Answer

A) Minimum Efficient Scale 
B) The experience curve 
C) Economies of scale 
D) Moving production to China. 
A) Minimum Efficient Scale 
B) The experience curve 
C) Economies of scale 
D) Moving production to China.

Question 16

The experience curve is mostly based on learning-by-doing on the part of the individuals and organizations, including redesigning workflows in the light of experience.

Accepted Answer

A) True 
 B)False

Question 17

To use the value chain to identify only where the major costs are:

Accepted Answer

A) Is inadvisable, since this ignores whether the costs contribute to value or not 
B) Would save a lot of time, and make the tool more useful 
C) Is no more nor less than it's designed to do 
D) Would identify which managers are wasting money 
A) Is inadvisable, since this ignores whether the costs contribute to value or not 
B) Would save a lot of time, and make the tool more useful 
C) Is no more nor less than it's designed to do 
D) Would identify which managers are wasting money

Question 18

Economies of scale were traditionally associated with:

Accepted Answer

A) Marketing 
B) Manufacturing 
C) Production 
D) Any function where human activity is present 
A) Marketing 
B) Manufacturing 
C) Production 
D) Any function where human activity is present

Question 19

Economies of scale exist where proportionate increases in the amount of inputs employed in a production process result in lower average unit costs

Accepted Answer

A) True 
 B)False

Question 20

The experience curve and / or economies of scale have implications for business:

Accepted Answer

A) A firm must grow its market share to lower costs. 
B) A firm can gain market share with a lower price. 
C) If a firm can be first to market and maintain dominant market share, it will benefit from a cost advantage compared to its rivals 
D) A firm must price on the basis of current costs. 
A) A firm must grow its market share to lower costs. 
B) A firm can gain market share with a lower price. 
C) If a firm can be first to market and maintain dominant market share, it will benefit from a cost advantage compared to its rivals 
D) A firm must price on the basis of current costs.

Is a certain level of "organizational slack" desirable in the organization?

BPR has produced only disappointing results

It is impossible for a firm to be competitive if its output volume is significantly below the Minimum Efficient Plant Size or Minimum Efficient Scale

Firms should maintain capacity utilization at 100% at all times to minimize costs:

Motel 6, the US cost leader budget motel:

Until a few years ago, the dominant view of large industrial corporations was that strategy was largely about scale-economies and mass-market dominance.

During the 20th century, firms were mostly concerned with:

There are seven main cost drivers of cost advantage according to the text.

Firms and strategic analysts recognized that cost advantage is the result of multiple factors, and not only the result of the experience curve

The more complex or labor intensive a product or a process is:

A minimum efficient plant size is:

The greatest productivity gains from process innovation typically come from:

Cost drivers:

One founding idea of BPR is to achieve dramatic improvements in cost-efficiency, not achievable through incremental process evolution.

For much of the 20th century, many large corporations were obsessed with:

The experience curve is mostly based on learning-by-doing on the part of the individuals and organizations, including redesigning workflows in the light of experience.

To use the value chain to identify only where the major costs are:

Economies of scale were traditionally associated with:

Economies of scale exist where proportionate increases in the amount of inputs employed in a production process result in lower average unit costs

The experience curve and / or economies of scale have implications for business:

The Concept of Strategy

Goals, Values and Performance

Industry Analysis: the Fundamentals

Further Topics in Industry and Competitive Analysis

Analyzing Resources and Capabilities

Developing Resources and Capabilities

Organization Structure and Management Systems: the Fundamentals of Strategy Implementation

The Nature and Sources of Competitive Advantage

Differentiation Advantage

Industry Evolution and Strategic Change

Technology-Based Industries and the Management of Innovation

Competitive Advantage in Mature Industries

Vertical Integration and the Scope of the Firm

Global Strategies and the Multinational Corporation

Diversification Strategy

Implementing Corporate Strategy: Management of the Multibusiness Firm

Current Trends in Strategic Management

Filters

Exam 9: Cost Advantage

Is a certain level of "organizational slack" desirable in the organization?

BPR has produced only disappointing results

It is impossible for a firm to be competitive if its output volume is significantly below the Minimum Efficient Plant Size or Minimum Efficient Scale

Firms should maintain capacity utilization at 100% at all times to minimize costs:

Motel 6, the US cost leader budget motel:

Until a few years ago, the dominant view of large industrial corporations was that strategy was largely about scale-economies and mass-market dominance.

During the 20th century, firms were mostly concerned with:

There are seven main cost drivers of cost advantage according to the text.

Firms and strategic analysts recognized that cost advantage is the result of multiple factors, and not only the result of the experience curve

The more complex or labor intensive a product or a process is:

A minimum efficient plant size is:

The greatest productivity gains from process innovation typically come from:

Cost drivers:

One founding idea of BPR is to achieve dramatic improvements in cost-efficiency, not achievable through incremental process evolution.

For much of the 20th century, many large corporations were obsessed with:

The experience curve is mostly based on learning-by-doing on the part of the individuals and organizations, including redesigning workflows in the light of experience.

To use the value chain to identify only where the major costs are:

Economies of scale were traditionally associated with:

Economies of scale exist where proportionate increases in the amount of inputs employed in a production process result in lower average unit costs

The experience curve and / or economies of scale have implications for business:

The Concept of Strategy

Goals, Values and Performance

Industry Analysis: the Fundamentals

Further Topics in Industry and Competitive Analysis

Analyzing Resources and Capabilities

Developing Resources and Capabilities

Organization Structure and Management Systems: the Fundamentals of Strategy Implementation

The Nature and Sources of Competitive Advantage

Differentiation Advantage

Industry Evolution and Strategic Change

Technology-Based Industries and the Management of Innovation

Competitive Advantage in Mature Industries

Vertical Integration and the Scope of the Firm

Global Strategies and the Multinational Corporation

Diversification Strategy

Implementing Corporate Strategy: Management of the Multibusiness Firm

Current Trends in Strategic Management

Filters