While Uber is a highly valued “unicorn,” with a seemingly high disregard for regulations and other external factors that would slow its growth, other competing firms are taking a somewhat different route to the ride-hailing marketplace. For example, Lyft was also started in San Francisco, and since 2012 it has been growing across the country and the globe. Lyft started out as a ride-sharing service (Zimride) targeting college students heading home for the holidays. The firm continues to focus on building a trusting community of drivers and riders—a community that is both social and cost-effective. In fall 2015 Lyft also announced a partnership with China’s primary ride-hailing service. 59 Another Uber competitor is Sidecar LLC. Sidecar has a ride-hailing app as well as a carpooling app and an app-enabled delivery service. In your groups, do some Internet research about Uber competitors (www.lyft.com and www.side.cr will get you started). 1. What similarities and differences do you find in the way these firms have implemented sometimes similar ideas? 2. Discuss why traditional taxi companies, such as Yellow Cabs and those needing medallions (such as in New York City), are choosing to attempt to prohibit these app-enabled, ride-hailing services rather than aggressively implementing their own app-calling systems.
> How do the perspectives on competitive advantage differ when comparing brick-and-mortar stores to online businesses (e.g., Best Buy vs. Amazon, Barnes & Noble vs. Amazon, The Gap vs. Thread less (noted in Strategy Highlight 1.1), Nordstrom vs. Zappos, an
> The chapter mentions that accounting data do not consider off–balance sheet items. A retailer that owns its stores will list the value of that property as an asset, for example, while a firm that leases its stores will not. What are some of the accountin
> You work as a supervisor in a manufacturing firm. The company has implemented a balanced scorecard performance-appraisal system and a financial bonus for exceeding goals. A major customer order for 1,000 units needs to ship to a destination across the co
> The chapter mentions that one type of resource flow is the loss of key personnel who move to another firm. Assume that the human resources department of your firm has started running ads and billboards for open positions near the office of your top compe
> The chapter notes the U.S. federal government has provided incentives for consumers to purchase electric vehicles (EVs). Some state governments are also providing additional purchase incentives. However, other countries are also encouraging the purchase
> UBS, a venerable Swiss banking institution with global business activities, experienced the significant implications that political factors can have on the bottom line. The U.S. government alleged that by advertising its “tax savings” advantages to U.S.
> How do the five competitive forces in Porter’s model affect the average profitability of the industry? For example, in what way might weak forces increase industry profits, and in what way do strong forces reduce industry profits? Identify an industry in
> The list below shows a sample of various vision/ mission statements. Match the company with their statements. Also, identify whether the statements are principally customer-oriented or product-oriented. Type of Matched Vision/Mission Statement Statem
> Corporate leaders are responsible for setting the firm’s strategies to gain and sustain a competitive advantage. Should managers be concerned only about the company’s financial performance? What responsibility do company managers have for other consequen
> The chapter highlights several firms that are developing business models around a “sharing economy.” The idea being that assets not currently in use by their owners (cars, car seats, homes, rooms, etc.) can be rented to (shared with) others. What other i
> Interface, Inc., is discussed in Strategy Highlight 5.1. It may seem unusual for a business-to-business carpet company to be using a triple-bottom-line approach for its strategy. What other industries do you think could productively use this approach?
> For many people, the shareholder perspective is perhaps the most familiar measure of competitive advantage for publicly traded firms. What are some of the disadvantages of using shareholder value as the sole point of view for defining competitive advanta
> Domino’s Pizza has been in business over 50 years and claimed to be “#1 Worldwide in Pizza Delivery” in 2013. Visit the company’s business-related website (www.dominosbiz.com) and read the company profile under the “Investors” tab. Does the firm focus on
> Much has been said about competitive advantage gained from innovations such as the Internet, high-technology gadgets, and apps. The chapter points out, however, that low-technology innovations such as the razor–razorblade business model can also create v
> The chapter discussed the Internet as a disruptive innovation that has facilitated online retailing. It also, however, has presented challenges to brick and- mortar retailers. How might retailers such as Nordstrom, Neiman Marcus, or Macy’s need to change
> Describe a firm you think has been highly innovative. Which of the four types of innovation—radical, incremental, disruptive, or architectural—did it use? Did the firm use different types over time?
> Select an industry and consider how the industry life cycle has affected business strategy forthe firms in that industry over time. Detail your answer based on each stage: introduction, growth, shakeout, maturity, and decline.
> How do mobility barriers affect the structure of an industry? How do they help us explain firm differences in performance?
> As noted in the chapter, research found that firm effects are more important than industry effects. What does this mean? Can you think of situations where this might not be true? Explain.
> BP’s experience in the Gulf of Mexico has made it the poster company for how not to manage stakeholder relationships effectively (see Strategy Highlight 1.2). What advice would you give to BP’s managers to help them continue to rebuild stakeholder relati
> The Business Roundtable has recommended that the CEO should not also serve as the chairman of the board. Discuss the disadvantages for building a sustainable competitive advantage if the two positions are held by one person. What are the disadvantages fo
> How can a top management team lower the chances that key managers will pursue their own self-interests at the expense of stockholders? At the expense of the employees? At the expense of other key stakeholders?
> The resource-based view of the firm identifies four criteria that managers can use to evaluate whether particular resources and capabilities are core competencies and can, therefore, provide a basis for sustainable competitive advantage. Are these measur
> Why is it important to study the internal resources, capabilities, and activities of firms? What insights can be gained?
> Professor Pankaj Ghemawat delivered a TED talk titled “Actually, the World Isn’t Flat.” Do you agree with his assessment that the world is at most semi-globalized, and that we need to be careful not to fall victim to “globalony”? View the talk at: www.te
> Multinational enterprises (MNEs) have an impact far beyond their firm boundaries. Assume you are working for a small firm that supplies a product or service to an MNE. How might your relationship change as the MNE moves from Globalization 2.0 to Globaliz
> The chapter notes there are key differences between economies of scale and learning effects. Let us put that into practice with a brief example. A company such as Intel has a complex design and manufacturing process. For instance, one fabrication line fo
> In Chapter 4, we discussed the internal value chain activities a firm can perform in its business model (see Exhibit 4.8). Data from Exhibit 4.8: The value chain priorities can be quite different for firms taking different business strategies. Create
> As presented in the chapter, firm-level decisions have a significant impact on the success or failure of organizations. Industry-level effects, however, can also play an important role (see Exhibit 1.1). Exhibit 1.1: -/ Many considerations go into dec
> How can a firm attempting to have a blue ocean business-level strategy manage to avoid being “stuck in the middle”?
> What are some drawbacks and risks to a broad generic business strategy? To a focused strategy?
> Franchising is widely used in the casual dining and fast food industry, yet Starbucks is quite successful with a large number of company-owned stores. In 2014 Starbucks had over 7,000 company owned stores in the United States. How do you explain this dif
> How can related diversification create a competitive advantage for the firm? Keeping the advantages of related diversification in mind, think back to theexample of Delta’s vertical integration decision to acquire an oil refinery—clearly an unrelated dive
> When Walmart decided to incorporate grocery stores into some locations and created “supercenters, “was this a business-level strategy of differentiation or a corporate strategy of diversification? Why? Explain your answer.
> Alliances are often used to pursue business-level goals, but they may be managed at the corporate level. Explain why this portfolio approach to alliance management would make sense.
> An alliance’s purpose can affect which governance structure is optimal. Compare a pharmaceutical R&D alliance with a prescription-drug marketing agreement, and recommend a governing mechanism for each. Provide reasons for your selections.
> Alliances are often used to pursue business-level goals, but they may be managed at the corporate level. Explain why this portfolio approach to alliance management would make sense.
> An alliance’s purpose can affect which governance structure is optimal. Compare a pharmaceutical R&D alliance with a prescription-drug marketing agreement, and recommend a governing mechanism for each. Provide reasons for your selections.
> The chapter identifies three governing mechanisms for strategic alliances: non-equity, equity, and joint venture. List the benefits and downsides for each of these mechanisms.
> Generation Y (born between 1980 and 2001) is entering the work force and advancing their careers now, as the baby boomers begin to retire in large numbers. Given the smaller size of Gen Y compared to the baby boomers, this generation received much more i
> Why is it important for any organization (firms, nonprofits, etc.) to study and understand its external environment?
> Identify an industry that is undergoing intense competition or is being featured in the business press. Discuss how scenario planning might be used by companies to prepare for future events. Can some industries benefit more than others from this type of
> This chapter introduces three different levels appropriate for strategic considerations (see Exhibit 2.5). Data from exhibit 2.5: In what situations would some of these levels be more important than others? For example, what issues might be considered
> In what situations is top-down planning likely to be superior to bottom-up emergent strategy development?
> What characteristics does an effective mission statement have?
> One industry with an impact on both undergraduate and MBA students is textbook publishing. On the one hand, traditional printed textbooks are being challenged by self-publishing firms offering very low prices for specific instructor materials, and on the
> It is not unusual for even large corporate boards to have no women or minorities on them. In the United States, women held 19 percent of board seats at Fortune 500 companies in 2012. In her book, Lean In, Sheryl Sandberg points out that this number has b
> 1. The table that follows includes a list of prominent firms. Select one of the five categories of generic business-level strategies—broad cost leadership, focused cost leadership, broad differentiation, focused differentiation, and val
> As discussed in the chapter, a balanced scorecard views the performance of an organization through four lenses: customer, innovation and learning, internal business, and financial. According to surveys from Bain & Company (a consulting firm), in recent y
> The outsourcing of IT programming jobs to India is now commonly understood after years of this trend. However, more recently some accounting functions have also begun to flow into India’s large technically trained and English-speaking work force. For exa
> Why may corporate managers not specifically aim at profit (or wealth) maximization for their companies?
> Discuss the meaning of the term principal-agent problem. Why does this problem exist?
> Discuss the difference between the calculation of shareholder wealth and the concept of Market Value Added. Which of the two would appear to be more meaningful from the viewpoint of a shareholder?
> Explain the term satisfice as it relates to the operations of a large corporation.
> Discuss the difference between profit maximization and shareholder wealth maximization. Which of these is a more comprehensive statement of a company’s economic objectives?
> The outsourcing of important parts of a company’s production has been growing in recent years. How would you explain these changes? How has the Internet contributed to these changes?
> What are transaction costs? How does opportunistic behavior tend to increase transaction costs?
> Do you believe that the profit maximization model can be applied to the activities of a multinational corporation? Explain.
> Is the maximization of profit margin (profit as a percentage of total sales) a valid financial objective of a corporation? Discuss.
> You have a choice of opening your own business or being employed by someone else in a similar type of business. What are some of the considerations in terms of opportunity costs that you would have to include in arriving at your decision?
> Suppose a firm has the following demand equation: Q = 1,000 - 3,000P + 10A where Q = quantity demanded P = product price (in dollars) A = advertising expenditure (in dollars) Assume for the following questions that P = $3 and A = $2,000. a. Suppose the f
> The following is a quote from a New York Times article: “If a company makes product donations to the school—computers for instance—then the image of a company goes up as graduate students use the company’s products.” Does such action square with a compan
> Because of inflation, a company must replace one of its (fully depreciated) machines at twice the nominal price paid for a similar machine 8 years ago. Based on present accounting rules, will the company have covered the entire cost of the new machine th
> (Optional) Have you been personally involved in the making of a decision for a business concerning what, how, or for whom? If so, explain your rationale for making such decisions. Were these decisions guided by the market process, the command process, or
> What do you think is the key to success in the soft drink industry? What chance do you think Global Foods has in succeeding in its new venture into the soft drink market? Explain. (Answer these questions on the basis of the information provided in the ch
> Compare and contrast microeconomics with macroeconomics. Although managerial economics is based primarily on microeconomics, explain why it is also important for managers to understand macroeconomics.
> Explain the differences between management skills and entrepreneurship. Discuss how each factor contributes to the economic success of a business.
> Discuss the importance of the command process and the traditional process in the making of management decisions. Illustrate specific ways in which managers must take these two processes into account.
> Define the market process, the command process, and the traditional process. How does each process deal with the basic questions of what, how, and for whom?
> “The growth of consumer information organizations, legal requirements, and warranty requirements has caused significant increases in the cost of customer satisfaction. Thus it is no longer useful to talk about profit maximization as a company objective.”
> Elaborate on the basic economic questions of what, how, and for whom. Provide specific examples of these questions with respect to the use of a country’s scarce resources.
> Over the years, the market demand for “long-playing records made of polyvinyl has fallen considerably as new technologies replaced the old “LP.” Yet, LPs are still available for sale and they sell at price points higher (in some cases much higher) than C
> Define scarcity and opportunity cost. What role do these two concepts play in the making of management decisions?
> The following are the monthly changes in the index of leading economic indicators during 2001 and January 2002: What would be your prediction for the U.S. economy in 2002? January February +.1 August September October +.1 -.6 March -.3 +.1 April Мa
> (Read the “The Market for Used Automobiles” section in Appendix 4A before answering the question.) When prices of used cars dropped about 10 percent in October 2001, their sales increased by 4.5 percent. Does this mean that the demand elasticity for used
> A Canadian apparel company, Roots, agreed to provide the U.S. Olympic team at the 2002 Winter Olympics with various types of clothing, including berets, for free, and further, to turn over a portion of its profits on sales of this clothing to the U.S. Ol
> A company has 2 million shares outstanding. It paid a dividend of $2 during the past year, and expects that dividends will grow at 6 percent annually in the future. Stockholders require a rate of return of 13 percent. What would you expect the price of e
> What are some reasons for companies internalizing transaction costs?
> If the income elasticity of tomatoes is estimated to approximate +0.25, what would you expect to happen to the consumption of tomatoes as personal income rises?
> You have been asked to produce a forecast for your company’s product, bottled water. Discuss the kind of information you would look for in order to make this forecast.
> If a demand curve facing a firm is horizontal or nearly so, what does it say about this firm’s competition?
> Various depreciation methods can be used to arrive at an accounting profit number. From the viewpoint of the economist, how should annual depreciation be determined?
> Illustrate the example of the world sugar market with supply and demand diagrams. Be sure to show how the relative shifts in supply and demand have led to the reduction in the world price of sugar.
> Could a straight-line demand curve ever have the same elasticity on all its points?
> How do implicit costs lead to a difference between accounting and economic profits?
> The immediate effect of gasoline price increases in the aftermath of the Persian Gulf crisis in August 1990 on gasoline consumption was not very significant. Would you expect the consumption of gasoline to be more severely affected if these higher prices
> Do you believe that profit (or shareholder wealth) maximization still represents the best overall economic objective for today’s corporation?
> Which products would exhibit a higher elasticity with respect to interest rates, automobiles or small appliances? Why?
> Why is it unlikely that a firm would sell at a price and quantity where its demand curve is price inelastic?
> Manhattan was allegedly purchased from Native Americans in 1626 for $24. If the sellers had invested this sum at a 6 percent interest rate compounded semiannually, how much would it amount to today?
> Following are examples of typical economic decisions made by the managers of a firm. Determine whether each is an example of what, how, or for whom. a. Should the company make its own spare parts or buy them from an outside vendor? b. Should the company
> List the key non price factors that influence demand and supply.
> How do econometric models differ from “naive” projection methods? Is it always advisable to use the former in forecasting?
> Joy’s Frozen Yogurt shops have enjoyed rapid growth in northeastern states in recent years. From the analysis of Joy’s various outlets, it was found that the demand curve follows this pattern: Q = 200 - 300P + 120I + 65T - 250Ac + 400Aj where Q = number
> Describe projections that use either moving averages or exponential smoothing. Under what conditions can these techniques be used? Which of the two appears to be the more useful?
> The compound growth rate is frequently used to forecast various quantities (sales, profits, and so on). Do you believe this is a good method? Should any cautions be exercised in making such projections?
> Discuss some of the important criticisms of the forecasting ability of the leading economic indicators.
> a. Why are manufacturers’ new orders, nondefense capital goods, an appropriate leading indicator? b. Why is the index of industrial production an appropriate coincident indicator? c. Why is the average prime rate charged by banks an appropriate lagging i
> Discuss the benefits and drawbacks of the following methods of forecasting: a. Jury of executive opinion b. The Delphi method c. Opinion polls Each method has its uses. What are they?
> Enumerate methods of qualitative and quantitative forecasting. What are the major differences between the two?
