A firm can be said to have competitive advantage when it has higher stock market valuations than its competitors.

(true/false)

A primary challenge in BPM is employee resistance.

(true/false)

Customers are one of the competitive forces that affect an organization's ability to compete.

(true/false)

A transparent marketplace means that there is high product differentiation.

(true/false)

Studies show that about half of a business firm's profits can be explained by alignment of IT with business.

(true/false)

The greatest barrier to changing business processes is, ironically, management itself.

(true/false)

In the strategy of product differentiation, information systems are used to enable new products and services

(true/false)

BPM is considered concluded when the new processes are both implemented and accepted.

(true/false)

Strong linkages to customers and suppliers increase switching costs.

(true/false)

The effect of the Internet has been to raise bargaining power over suppliers.

(true/false)

In the age of the Internet, Porter's traditional competitive forces model is still at work, but competitive rivalry has become much more intense.

(true/false)

In the value chain model, primary activities are most directly related to the production and distribution of the firm's products and services that create value for the customer.

(true/false)

The value chain model classifies all company activities as either primary or support.

(true/false)

The idea driving synergies is that when the output of some units can be used as inputs to other units, the relationship can lower cost and generate profits

(true/false)

The law of diminishing returns always applies to digital, as well as traditional products.

(true/false)

The more people that use Microsoft Office software and related products, the lower its value

(true/false)

The first movers of a disruptive technology typically benefit the most from the technology; and it is rare that fast followers catch up quickly.

(true/false)

Probably the best single way to reduce quality problems is to reduce cycle time.

(true/false)

Business process reengineering is the radical redesign of business processes

(true/false)

Benchmarks are specific standards for business processes set by industry leaders.

(true/false)

Which of the following is not one of the competitive forces of Porter's model?

A) Suppliers

B) Other competitors

C) External environment

D) Customers

A manufacturer of deep-sea oil rigs may be least concerned about which of these marketplace forces?

A) Product differentiation

B) Traditional competitors

C) Low number of suppliers

D) New market entrants

Which of the following industries has the lowest barrier to entry?

A) Automotive

B) Computer-chip

C) Restaurant

D) Airline

A substitute product of most concern for a cable TV distributor is:

A) satellite TV.

B) broadcast TV.

C) satellite radio.

D) the Internet.

Which of the following can force a business and its competitors to compete on price alone?

A) High product differentiation

B) Poor process efficiency

C) Demand control

D) Transparent marketplace

A firm can exercise greater control over its suppliers by having:

A) more suppliers.

B) fewer suppliers.

C) global suppliers.

D) local suppliers.

Which of the following is not one of the four basic strategies a company can employ to deal with competitive forces?

A) Strengthen customer and supplier intimacy

B) Focus on market niche

C) Differentiate products

D) Compete on employee loyalty

Walmart's continuous replenishment system allows it to:

A) provide mass customization.

B) provide an efficient customer response system.

C) strengthen customer intimacy.

D) achieve economy of scale.

Which of the following illustrates the use of information systems to achieve product differentiation?

A) A hot tub dealer's use of information systems to determine which models and options its customers are most likely to buy

B) A shoe manufacturer's use of information systems in selling custom, made-to-order shoes directly to customers

C) A PC manufacturer's use of information systems to facilitate direct access from suppliers to production schedules

D) A grocery store chain's use of information systems to produce products and services at a lower price than competitors

Which of the following illustrates the use of information systems to strengthen customer and supplier intimacy?

A) A hot tub dealer's use of information systems to determine which models and options its customers are most likely to buy

B) A shoe manufacturer's use of information systems in selling custom, made-to-order shoes directly to customers

C) A PC manufacturer's use of information systems to facilitate direct access from suppliers to production schedules

D) A grocery store chain's use of information systems to produce products and services at a lower price than competitors

Which of the following illustrates the use of information systems to focus on market niche?

A) A hot tub dealer's use of information systems to determine which models and options its customers are most likely to buy

B) A shoe manufacturer's use of information systems in selling custom, made-to-order shoes directly to customers

C) A PC manufacturer's use of information systems to facilitate direct access from suppliers to production schedules

D) A grocery store chain's use of information systems to produce products and services at a lower price than competitors

When a firm provides a specialized product or service for a narrow target market better than competitors, they are using a ________ strategy.

A) product differentiation

B) market niche

C) mass customization

D) process efficiency

________ is the ability to offer individually tailored products or services using the same production resources as bulk production.

A) Mass customization

B) Size customization

C) Personalization

D) Demand customization

An information system can enable a company to focus on a market niche through:

A) complex trend forecasting.

B) tailoring products to the client.

C) intensive product trend analysis.

D) intensive customer data analysis.

Hilton Hotels' use of customer information software to identify the most profitable customers to direct services to is an example of using information systems to:

A) strengthen customer intimacy.

B) differentiate their service.

C) focus on market niche.

D) increase efficiency.

All of the following industries have been severely disrupted by the Internet except:

A) air travel.

B) PC manufacturer.

C) publishing.

D) software.

To what competitive force did the printed encyclopedia industry succumb?

A) Positioning and rivalry among competitors

B) Low cost of entry

C) Substitute products or services

D) Customer's bargaining power

Internet technology:

A) makes it easy for rivals to compete on price alone.

B) imposes a significant cost of entry, due to infrastructure requirements.

C) increases the difference between competitors because of the wide availability of information.

D) makes it easy to sustain operational advantages.

The Internet raises the bargaining power of customers by:

A) creating new opportunities for building loyal customer bases.

B) making more products available.

C) making information available to everyone.

D) lowering transaction costs.

The value chain model:

A) categorizes five related advantages for adding value to a firm's products or services.

B) sees the supply chain as the primary activity for adding value.

C) categorizes four basic strategies a firm can use to enhance its value chain.

D) helps a firm identify points at which information technology can most effectively enhance its competitive position.

All of the following are considered primary activities of a firm except:

A) inbound logistics.

B) sales and marketing.

C) procurement.

D) service

The support activities of a firm include:

A) inbound logistics, technology, outbound logistics, sales and marketing, and service.

B) inbound logistics, organization infrastructure, outbound logistics, technology, and procurement.

C) organization infrastructure, human resources, sales and marketing, and technology.

D) organization infrastructure, human resources, technology, and procurement

Benchmarking:

A) compares the efficiency and effectiveness of your business processes against strict standards.

B) allows industry participants to develop industry-wide standards.

C) is used to measure the speed and responsiveness of information technology.

D) synchronizes the business processes of customers, suppliers, and trading partners

The most successful solutions or methods for achieving a business objective are called:

A) core processes.

B) best processes.

C) benchmarks.

D) best practices.

A firm's value chain is linked to the:

A) value webs of its industry.

B) value chains of its suppliers, distributors, and customers.

C) value webs of its suppliers and distributors.

D) value chains of its suppliers and customers.

A ________ is a collection of independent firms that use information technology to coordinate their value chains to produce a product or service for a market collectively.

A) value chain

B) business network

C) value web

D) consortia

How are information systems used at the industry level to achieve strategic advantage?

A) By building industry-wide, IT-supported consortia and symposia

B) By raising the bargaining power of suppliers

C) By encouraging the entry of new competitors

D) By enforcing standards that reduce the differences between competitors

When the output of some units can be used as inputs to other units, or if two organizations pool markets and expertise that result in lower costs and generate profits, it is often referred to as creating:

A) value webs.

B) value chains.

C) synergies.

D) core competencies

An information system can enhance core competencies by:

A) providing better reporting facilities.

B) creating educational opportunities for management.

C) allowing operational employees to interact with management.

D) encouraging the sharing of knowledge across business units.

The more any given resource is applied to production, the lower the marginal gain in output, until a point is reached where the additional inputs produce no additional output is referred to as:

A) the point of no return.

B) the law of diminishing returns.

C) supply and demand.

D) inelasticity.

Network economics:

A) applies the law of diminishing returns to communities of users.

B) applies traditional economics to networked users.

C) sees the cost of adding new members as inconsequential.

D) balances the high cost of adding new members to a community against the lower cost of using network infrastructure.

In network economics, the value of a commercial software vendor's software products:

A) increases as more people use them.

B) decreases as more people use them.

C) increases due to higher marginal gain in output.

D) decreases according to the law of diminishing returns.

A virtual company:

A) uses the capabilities of other companies without being physically tied to those companies.

B) uses Internet technology to maintain a virtual storefront.

C) uses Internet technology to maintain a networked community of users.

D) provides entirely Internet-driven services, or virtual products.

The emergence of the World Wide Web acted as a disruptive technology for:

A) the typewriter industry.

B) print publishing.

C) PC manufacturers.

D) microprocessor firms.

Which of the following best describes business globalization?

A) Businesses whose suppliers are located overseas

B) Businesses selling their products worldwide

C) Businesses moving manufacturing overseas

D) All of the above.

The greatest impact the Internet has had on globalization is in lowering the costs of:

A) labor.

B) telecommunications.

C) network infrastructure.

D) entry to global-scale operations

The ________ strategy concentrates financial management and control out of a central home base while decentralizing production, sales, and marketing operations to units in other countries.

A) domestic exporter

B) multinational

C) franchise

D) transnational

The ________ strategy is characterized by heavy centralization of corporate activities in the home country of origin.

A) domestic exporter

B) multinational

C) franchise

D) transnational

 In a ________ system configuration, separate information systems are designed and managed by each foreign unit.

A) duplicated

B) centralized

C) decentralized

D) networked

________ systems are those in which development occurs at the home base, but operations are handed over to autonomous units in foreign locations.

A) Transnational

B) Decentralized

C) Duplicated

D) Networked

A firm that locates all systems development and operations at its headquarters is using a ________ system configuration.

A) unilateral

B) centralized

C) decentralized

D) networked

________ typically develop a single information system, usually at the home base, and then replicate it around the world.

A) Domestic exporters

B) Multinational firms

C) Franchisers

D) Transnational firms

Which of the following does not describe a difference between the way customers and producers see quality?

A) For a consumer, quality means uniformity of the product.

B) Consumers are concerned with the quality of the service.

C) A consumer view of quality includes its durability and safety.

D) For a producer, quality can be measured with a test.

) Seeing quality as the responsibility of all people and functions in an organization is central to the concept of:

A) Six Sigma.

B) TQM.

C) quality control.

D) cycle time reduction

The reduction of errors to 3.4 defects per million opportunities is central to the concept of:

A) Six Sigma.

B) TQM.

C) benchmarking.

D) cycle time reduction.

Which of the following is not an advantage for new companies entering the marketplace?

A) They can implement new systems and equipment.

B) They are not locked into an existing brand image.

C) They are more highly motivated.

D) They can establish new relationships with suppliers

Based on your reading of the chapter case, which of the four generic business strategies was Ford Motor company following in implementing its new software and apps?

A) Low-cost leadership

B) Product differentiation

C) Focus on market niche

D) Customer and supplier intimacy

The iPad can be seen as a disruptive technology for the ________ industry.

A) publishing

B) music

C) software

D) travel

All of the following have been disruptive technologies except:

A) the PageRank algorithm.

B) the flash drive.

C) minicomputers.

D) the iPod.

All of the following are ways to improve quality except:

A) improving products and services based on customer demands.

B) simplifying the production process.

C) implementing a new information system.

D) improving production precision.

Mass customization allows a company to offer individually tailored products using the same production resources as mass production.

(true/false)

You are the production manager for a manufacturer of bicycle parts. Which of the following tools or technologies would you use to improve production precision?

A) value chain

B) CAD software

C) benchmarking

D) industry best practices

A value web is a collection of independent firms that use information technology to coordinate their value chains to collectively produce a product or service for a market.

(true/false)

The activities that measure the performance of your business processes against strict standards are called best practices.

(true/false)

A ________ is an activity at which a firm excels as a world-class leader.

A) best practice

B) competitive advantage

C) primary activity

D) core competency

All of the following are psychological aspects of quality except:

A) effective marketing.

B) company's knowledge of its products.

C) the product's reputation.

D) the courtesy of salespeople.

A micromultinational is a small firm operating on a global scale.

(true/false)

Franchisers are firms that have their product created, designed, financed, and initially produced in the home country but rely heavily on foreign personnel for further production, marketing, and human resources.

(true/false)

Quality control is seen as an end in itself in Six Sigma.

(true/false)

In some instances, BPM will lead to a paradigm shift that transforms the nature of the business itself.

(true/false)

BPM is business process management, and is the practice of continuously improving business processes. The steps in BPM are (1) identifying processes for change, (2) analyzing existing processes, (3) designing the new process, (4) implementing the new process, and (5) continuous measurement.

Value chain analysis is useful at the business level to highlight specific activities in the business where information systems are most likely to have a strategic impact. Discuss this model, identify the activities, and describe how the model can be applied to the concept of information technology.

The value chain model highlights activities in the business where competitive strategies can best be applied and where information systems are most likely to have a strategic impact. This model identifies specific, critical leverage points where a firm can use information technology most effectively to enhance its competitive position. The value chain model views the firm as a series or chain of basic activities that add a margin of value to a firm's products or services. These activities can be categorized as either primary activities or support activities. Primary activities are most directly related to the production and distribution of the firm's products and services, which create value for the customer, including inbound logistics, operations, outbound logistics, sales and marketing, and service. Support activities make the delivery of the primary activities possible and consist of organization infrastructure (administration and management), human resources, technology (improving products and the production process), and procurement. In value chain analysis, you ask at each stage of the value chain, "How can we use information systems to improve operational efficiency and improve customer and supplier intimacy?" The model allows you to critically examine how you perform value-adding activities at each stage and how the business processes might be improved. You can ask how information systems can be used to improve the relationship with customers and with suppliers who lie outside the firm value chain, but belong to the firm's extended value chain where they are absolutely critical to your success. Here, supply chain management systems that coordinate the flow of resources into your firm, and customer relationship management systems that coordinate your sales and support employees with customers are two of the most common system applications that result from a business value chain analysis.

Select a popular product or company that you are familiar with, such as Apple's iPod. Apply Porter's competitive forces model to that product and/or company. Which of the four generic strategies is the company using?

Student answers will vary. One example answer using Apple's iPod is:

• Competitors to the iPod include the Zune. There are many other competitors in the portable mp3 category, but few as widely known.

• New market entrants: There is not a huge barrier to entry in this field; other cell phone and technology companies have versions of mp3 players.

• Substitute products and services: People using their cell phones as portable mp3 players is a substitute product or service. However, the iPhone is a market leader in this category.

• Customers: The perception of the iPod as unique and far superior to its competitors means that customers do not have bargaining power. However, this advantage will diminish if other similar products can persuade customers that their product is as innovative and as well designed.

In terms of the iPod, Apple seems to be focused on product differentiation by creating a product with unique features and capabilities.

Research has shown that the more successfully a firm can align its IT with its business goals, the more profitable it will be. What practical steps should a firm use in aligning IT with its goals?

:  Steps to align IT with your organization's goals include: identifying your business strategy and goals and breaking these goals into concrete activities and processes; identifying how you measure progress toward these goals; determining how IT can help achieve these goals and improve business processes and activities; and measuring the actual performance of the business.

Smalltown Computer will have difficulty in low-cost leadership, because it cannot exert economies of scale or other efficiencies of large PC manufacturers. However, it could emphasize customer intimacy, through face-to-face interaction with customers. It could also emphasize product differentiation, in that it supplies a hands-on, local experience and more trustworthy, higher quality service. Because it builds computers to order, the firm could also focus on market niche, by specializing in certain types of custom computers, also.

You are advising the owner of Smalltown Computer, a new, local computer repair store that also builds custom computers to order. How is the concept of core competency relevant to this business? Define the concept and give examples.

A core competency is an activity for which a company is a world leader, and from this perspective, Smalltown Computer does not have a core competency, as there are thousands of similar firms with longer track records. However, it might be good business practice for Smalltown Computer to define its core competencies in ways that differentiate its products from those of competitors and enable it to provide superior service or products. In defining a core competency, the business management can then determine ways to enable employees to understand and reach higher levels of quality production and service. For example, Smalltown Computer might define a core competency as being able to advise customers as to the type of system they really need, and Smalltown Computer could engage in knowledge-gathering activities to help employees assess customer need.

You are consulting with the owner of Better Bodies, a national chain of gyms. How could the use of information systems help them exert each of the four generic strategies in achieving competitive advantage?

:  Information systems can help improve quality by reducing the number of steps and time taken to manufacture the product. The fewer and simpler the steps, the fewer occasions for human error to be introduced. Reducing the length of time taken in producing a product will also help limit mistakes, because shorter cycle times mean that problems are caught earlier, and that production tasks are easier to understand and perform.

Information systems can also improve quality by providing analysis tools for measuring the success of procedures, establishing standards, and measuring performance against those standards (benchmarking). Information systems can play a key role in improving and automating design and production, as in the use of CAD. The ability of information systems to easily record and analyze customer data, as well as automate, customize, and improve customer service, also contributes to the overall quality of the product or service.

In network economics, the cost of adding a participant to the network is negligible, while the gain in value is relatively much larger. The Internet itself is an example of a successful implementation of network economics – the more people participate, the more valuable and essential a commodity it is. If a company were to provide a service through the Internet such as a project management application, the costs to the company of adding another user are small (as the software infrastructure or application is already built), and the more users are signed up the more profit is made.

Why should a company engage in business process reengineering? How would a company know if it needed or would gain from BPR?