Homework Lance
3.1 True/False Questions
1) An organization’s goals and objectives are determined by its competitive strategy.
Answer: TRUE
Page Ref: 76
Difficulty: Easy
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 1
2) Organizational strategy begins with the formation of a value chain.
Answer: FALSE
Page Ref: 77
Difficulty: Easy
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 2
3) A major drawback associated with Porter’s five forces model is that it ignores the rivalry among firms in the industry.
Answer: FALSE
Page Ref: 77
Difficulty: Easy
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 2
4) A major drawback of the five forces model is that it does not analyze the threat of substitutes when forming a corporate strategy.
Answer: FALSE
Page Ref: 77
Difficulty: Easy
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 2
5) According to Porter’s five forces model, the intensity of each of the forces determines the characteristics of the industry, how profitable it is, and how sustainable that profitability will be.
Answer: TRUE
Page Ref: 77
Difficulty: Easy
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 2
6) The bargaining power of grain farmers in a surplus year is an example of a weak market force.
Answer: TRUE
Page Ref: 77
Difficulty: Moderate
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 2
7) The bargaining power of suppliers is a weak force when considering the example of students purchasing gasoline.
Answer: FALSE
Page Ref: 77
AACSB: Analytic Skills
Difficulty: Moderate
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 2
8) The bargaining power of customers of medicinal drugs is enhanced when pharmaceutical companies patent their products.
Answer: FALSE
Page Ref: 77
AACSB: Analytic Skills
Difficulty: Moderate
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 2
9) An organization responds to the structure of its industry by choosing a competitive strategy.
Answer: TRUE
Page Ref: 78
Difficulty: Easy
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 3
10) A telecom service provider focusing on high-end users is following an industry-wide differentiation strategy.
Answer: FALSE
Page Ref: 78
AACSB: Analytic Skills
Difficulty: Moderate
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 3
11) A furniture dealer offering a wide variety of designs to premium customers alone is following an industry-wide cost leadership strategy.
Answer: FALSE
Page Ref: 78
AACSB: Analytic Skills
Difficulty: Moderate
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 3
12) Providing the lowest cost across an industry can be referred to as focused cost-leadership.
Answer: FALSE
Page Ref: 78
AACSB: Analytic Skills
Difficulty: Moderate
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 3
13) Focused differentiation refers to providing a better product or service within an industry segment.
Answer: TRUE
Page Ref: 78
Difficulty: Moderate
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 3
14) A business that selects a differentiation strategy would naturally structure itself around low-cost activities.
Answer: FALSE
Page Ref: 79
Difficulty: Easy
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 3
15) Porter defines value as the amount of money that a customer is willing to pay for a resource, product, or service.
Answer: TRUE
Page Ref: 79
Difficulty: Easy
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 4
16) The difference between the value that an activity generates and the cost of the activity is called revenue.
Answer: FALSE
Page Ref: 79
Difficulty: Easy
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 4
17) A business with a differentiation strategy will add cost to an activity only as long as the activity has a positive margin.
Answer: TRUE
Page Ref: 79
Difficulty: Moderate
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 4
18) A generic value chain consists of five primary activities and four support activities.
Answer: TRUE
Page Ref: 79
Difficulty: Easy
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 4
19) Inbound logistics is a supporting activity in the value chain of a manufacturing firm.
Answer: FALSE
Page Ref: 79
Difficulty: Easy
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 4
20) Activities such as collecting, storing, and physically distributing the product to buyers are considered as primary activities in a value chain.
Answer: TRUE
Page Ref: 82
Difficulty: Easy
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 4
21) In the inbound logistics activity of a value chain, the manufacturer receives, stores, and disseminates inputs to the product.
Answer: TRUE
Page Ref: 82
Difficulty: Easy
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 4
22) Outbound logistics refer to transforming inputs into the final product.
Answer: FALSE
Page Ref: 82
Difficulty: Easy
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 4
23) A furniture manufacturer delivers products to its customers’ houses. This is an example of inbound logistics.
Answer: FALSE
Page Ref: 82
AACSB: Analytic Skills
Difficulty: Easy
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 4
24) The primary activity of sales and marketing is the collection, storage, and physical distribution of the products to the buyers.
Answer: FALSE
Page Ref: 82
Difficulty: Easy
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 4
25) In the value chain, the primary activity of customer service is concerned with inducing the buyers to purchase the product and providing a means for them to do so.
Answer: FALSE
Page Ref: 82
Difficulty: Easy
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 4
26) Each stage of the generic value chain accumulates costs and adds value to the product. The net result of this process is the total margin of the chain.
Answer: TRUE
Page Ref: 82
Difficulty: Easy
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 4
27) Unlike the primary activities, the support activities in the generic value chain do not contribute to the production, sale, and service of the product.
Answer: FALSE
Page Ref: 82
Difficulty: Easy
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 4
28) Operations refer to transforming inputs into the final product.
Answer: TRUE
Page Ref: 82
Difficulty: Moderate
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 4
29) Support activities in a value chain include the processes of finding vendors, setting up contractual arrangements, and negotiating prices.
Answer: TRUE
Page Ref: 82
Difficulty: Easy
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 4
30) A linkage is a network of activities that generate value by transforming inputs into outputs.
Answer: FALSE
Page Ref: 82
Difficulty: Easy
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 4
31) The central idea of business process design is that organizations should automate or improve their existing functional systems.
Answer: FALSE
Page Ref: 83
Difficulty: Easy
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 4
32) Most of the value in a service company is generated by the customer service activities rather than operations and sales.
Answer: FALSE
Page Ref: 83
Difficulty: Moderate
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 4
33) Each activity in a business process is a business function that receives inputs and produces outputs.
Answer: TRUE
Page Ref: 84
Difficulty: Easy
Course LO: Discuss the role of information systems in supporting business processes
Chapter LO: 5
34) The cost of the business process is the cost of the inputs plus the cost of the outputs.
Answer: FALSE
Page Ref: 84
Difficulty: Moderate
Course LO: Discuss the role of information systems in supporting business processes
Chapter LO: 5
35) In a manufacturing business, the materials ordering process transforms cash into a raw materials inventory.
Answer: TRUE
Page Ref: 84
Difficulty: Easy
Course LO: Discuss the role of information systems in supporting business processes
Chapter LO: 5
36) An inventory of raw materials is an example of a repository.
Answer: TRUE
Page Ref: 84
Difficulty: Easy
Course LO: Discuss the role of information systems in supporting business processes
Chapter LO: 5
37) The sales process involves sales and marketing as well as outbound logistics activities.
Answer: TRUE
Page Ref: 84
Difficulty: Easy
Course LO: Discuss the role of information systems in supporting business processes
Chapter LO: 5
38) Streamlining of business processes to increase margin is key to obtaining competitive advantage.
Answer: TRUE
Page Ref: 85
Difficulty: Easy
Course LO: Discuss the role of information systems in supporting business processes
Chapter LO: 5
39) Most process design initiatives require people to work in new ways and to follow different procedures.
Answer: TRUE
Page Ref: 85
Difficulty: Easy
Course LO: Discuss the role of information systems in supporting business processes
Chapter LO: 5
40) A service company asks its customers to fill out application forms before offering service. This is an example of a supporting business process.
Answer: TRUE
Page Ref: 86
AACSB: Analytic Skills
Difficulty: Moderate
Course LO: Discuss the role of information systems in supporting business processes
Chapter LO: 6
41) Business processes that span value-generating activities determine the scope and requirements of each organization’s information systems.
Answer: TRUE
Page Ref: 87
Difficulty: Easy
Course LO: Discuss the role of information systems in supporting business processes
Chapter LO: 6
42) Organizations cannot gain a competitive advantage by enhancing existing products or services.
Answer: FALSE
Page Ref: 87-88
Difficulty: Easy
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 7
43) Creating a new product to add value to customers is an example of using product implementations to achieve competitive advantage.
Answer: TRUE
Page Ref: 87-88
Difficulty: Moderate
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 7
44) An organization minimizes the costs associated with the delivery of its products to obtain a competitive advantage. Here, the organization is using a product implementation tactic to obtain competitive advantage.
Answer: FALSE
Page Ref: 88
AACSB: Analytic Skills
Difficulty: Moderate
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 7
45) An organization is using product implementation to achieve competitive advantage when it tries to reduce operational costs.
Answer: FALSE
Page Ref: 88
Difficulty: Moderate
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 7
46) Information systems create competitive advantage by providing support to a product rather than by becoming a part of the product.
Answer: FALSE
Page Ref: 88
Difficulty: Moderate
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 7
47) Organizations can lock in customers by making it difficult or expensive for them to move to another product.
Answer: TRUE
Page Ref: 88
Difficulty: Easy
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 7
48) The competitive strategy of locking in customers is called establishing high switching costs.
Answer: TRUE
Page Ref: 88
Difficulty: Easy
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 7
49) Establishing alliances with other organizations increases the cost of operations, though they do provide competitive advantages.
Answer: FALSE
Page Ref: 89
Difficulty: Easy
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 7
50) The increasing reliance on the Web for information and commerce has created a digital divide between those who have Internet access and those who do not.
Answer: TRUE
Page Ref: 94
AACSB: Use of Information Technology
Difficulty: Easy
Course LO: Compare and contrast different ways of connecting to the Internet
Chapter LO: 8
3.2 Multiple Choice Questions
1) Which of the following factors determines the structure, features, and functions of the information system used in a company?
A) the competitive strategy
B) the brand value of its brands
C) the size of the company
D) the technology used by competitors
Answer: A
Page Ref: 76
Difficulty: Easy
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 1
2) Porter’s five forces model is used to assess ________.
A) industry structure
B) market share
C) internal competition
D) lifecycles of products
Answer: A
Page Ref: 77
Difficulty: Easy
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 2
3) According to Porter’s five forces model, which of the following firms would be least affected by the threat of substitutes?
A) a used car dealership in New York
B) a convenience store that sells retail products
C) a firm that sells the only drug for a disease
D) corner latte shops in Atlanta
Answer: C
Page Ref: 77
AACSB: Analytic Skills
Difficulty: Moderate
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 2
4) According to Porter’s five forces model, which of the following would be most affected by the threat of substitutes?
A) Microsoft Windows OS
B) Boeing jets
C) Southwest Airlines’ services
D) Google Adwords
Answer: C
Page Ref: 77
AACSB: Analytic Skills
Difficulty: Moderate
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 2
5) In which of the following situations would the bargaining power of suppliers be highest?
A) a single vendor providing raw materials to many department stores
B) a fashion outlet catering to a niche market
C) a bank liquidating during a fire sale
D) a large retailer buying goods from many small suppliers
Answer: A
Page Ref: 77
AACSB: Analytic Skills
Difficulty: Moderate
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 2
6) In which of the following would rivalry be considered as a weak force affecting the market?
A) military services
B) used car dealers
C) book sellers
D) packaged food manufacturers
Answer: A
Page Ref: 77
AACSB: Analytic Skills
Difficulty: Moderate
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 2
7) A new drug that has shown promise in curing lung cancer has been discovered by a famous chemical laboratory. This is the only drug effective for treatment of this disease. The laboratory obtains a patent for the product and decides to sell it. This situation is characterized by ________.
A) low threat of substitutions
B) high bargaining power of customers
C) high threat of new entrants
D) low bargaining power of suppliers
Answer: A
Page Ref: 77
AACSB: Analytic Skills
Difficulty: Moderate
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 2
8) A group of grain farmers in a surplus year will have reduced ________.
A) bargaining power
B) threat of substitutes
C) risk of rivalry
D) threat of new entrants
Answer: A
Page Ref: 77
AACSB: Analytic Skills
Difficulty: Moderate
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 2
9) Bargaining power of customers is likely to be the highest for markets involving ________.
A) public transportation
B) industrial products
C) patented drugs
D) luxury goods
Answer: B
Page Ref: 77
AACSB: Analytic Skills
Difficulty: Moderate
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 2
10) The automobile industry is characterized by many manufacturers and intense competition among them. This statement refers to ________.
A) low threat of substitutions
B) high bargaining power of suppliers
C) high levels of rivalry
D) low bargaining power of customers
Answer: C
Page Ref: 77
AACSB: Analytic Skills
Difficulty: Moderate
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 2
11) ABC Motors is the largest manufacturer of cars. The company purchases raw materials from many small-sized sellers across the globe. In this case, ABC Motors ________.
A) faces very low threat of substitute products
B) has high bargaining power over its suppliers
C) faces very low threat of new entrants to market
D) has very high bargaining power over its customers
Answer: B
Page Ref: 77
AACSB: Analytic Skills
Difficulty: Moderate
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 2
12) N-joi Ice Cream was facing competition to their flagship brand of “black currant ice cream”. The competitor began offering three varieties of “black currant ice cream.” N-joi decided to counter the threat by introducing five new varieties of ice creams. Which competitive strategy is N-joi implementing?
A) cost leadership
B) product differentiation
C) cost differentiation in the segment
D) service focus
Answer: B
Page Ref: 78
AACSB: Analytic Skills
Difficulty: Moderate
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 3
13) An automobile company decides to improve the quality of all its products and bring more variety into its product line. The company has decided to adopt ________.
A) focused cost-leadership
B) industry-wide differentiation
C) industry-wide cost leadership
D) focused differentiation
Answer: B
Page Ref: 78
AACSB: Analytic Skills
Difficulty: Hard
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 3
14) Focused differentiation occurs when ________.
A) a better product is provided within an industry segment
B) there is limited competition in an industry
C) the customers are highly price sensitive
D) product quality improves across an entire industry
Answer: A
Page Ref: 78
Difficulty: Moderate
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 3
15) Focused cost leadership is observed when a product has the lowest cost ________.
A) within an industry segment
B) within the product range offered by a company
C) within an industry
D) within the supply chain of a company
Answer: A
Page Ref: 78
Difficulty: Moderate
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 3
16) The difference between the value that an activity generates and the cost of the activity is called the ________.
A) margin
B) turnover
C) revenue
D) value-addition
Answer: A
Page Ref: 79
Difficulty: Easy
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 4
17) Porter defined value as the ________.
A) amount of money that a customer is willing to pay for an offering
B) extent of after-sale service provided to customers
C) perceived satisfaction of the customers and sellers after a transaction
D) actual money exchanged in return of a product/service
Answer: A
Page Ref: 79
Difficulty: Easy
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 4
18) Identify the activity in the value chain that involves receiving, storing, and disseminating inputs to the product.
A) inbound logistics
B) procurement
C) operations
D) outbound logistics
Answer: A
Page Ref: 82
Difficulty: Easy
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 4
19) A retail marketing company sells such products as agricultural produce and consumer products. The company procures materials from farmers and local producers. This process of obtaining the inputs needed for a business is called ________.
A) outbound logistics
B) inbound logistics
C) operations
D) internal marketing
Answer: B
Page Ref: 82
AACSB: Analytic Skills
Difficulty: Easy
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 4
20) Which of the following value chain activities involves transforming raw materials into a finished product or service?
A) operations
B) inbound logistics
C) marketing
D) maintenance
Answer: A
Page Ref: 82
Difficulty: Easy
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 4
21) Which of the following value chain activities involves collecting, storing, and physically distributing the product to buyers?
A) inbound logistics
B) operations
C) customer service
D) outbound logistics
Answer: D
Page Ref: 82
Difficulty: Easy
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 4
22) Which of the following value chain activities involves inducing buyers to get a product and providing a means for them to do so?
A) inbound logistics
B) operations
C) sales and marketing
D) outbound logistics
Answer: C
Page Ref: 82
Difficulty: Easy
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 4
23) Which of the following value chain activities involves assisting users to handle the product after sale, thus maintaining and enhancing the product’s value?
A) inbound logistics
B) customer service
C) operations
D) outbound logistics
Answer: B
Page Ref: 82
Difficulty: Easy
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 4
24) Which of the following is a primary activity in the value chain?
A) receiving and disseminating inputs to the product
B) negotiating prices with vendors
C) finding suitable vendors to supply raw materials
D) setting up contractual arrangements with various suppliers
Answer: A
Page Ref: 82
Difficulty: Moderate
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 4
25) Mae manages delivery at a custom-kitchen outlet. Working with her customer’s specifications, she contacts Gem Cabinets and places an order for a full-motion wall mount. Which of the following primary activities is Mae performing here?
A) inbound logistics
B) operations
C) customer service
D) marketing
Answer: A
Page Ref: 82
AACSB: Analytic Skills
Difficulty: Moderate
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 4
26) Lynn, the manager of a transportation company, is going through this week’s delivery schedule. She calls her team and assigns territories for each executive. She contacts the fleet supervisor to arrange trucks for transportation. Which activity of the value chain is Lynn executing?
A) inbound logistics
B) marketing
C) customer service
D) outbound logistics
Answer: D
Page Ref: 82
AACSB: Analytic Skills
Difficulty: Moderate
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 4
27) The net result of the difference between the total value added and the total costs incurred is the ________ of the value chain.
A) actual value
B) total margin
C) gross revenue
D) gross turnover
Answer: B
Page Ref: 82
Difficulty: Easy
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 4
28) Which of the following is a support activity in the value chain?
A) receiving inputs to operationalize the production
B) distributing the products to retailers or buyers directly
C) assisting customers in using the product or service
D) setting up contractual arrangements for procurement
Answer: D
Page Ref: 82
Difficulty: Moderate
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 4
29) Which of the following is considered a support activity in the value chain of a business?
A) operations
B) customer service
C) contract negotiation
D) marketing
Answer: C
Page Ref: 82
Difficulty: Moderate
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 4
30) According to Porter’s model of business activities, interactions across value activities are called ________.
A) support activities
B) models
C) linkages
D) cross-functionalities
Answer: C
Page Ref: 82
Difficulty: Easy
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 4
31) Which of the following statements is consistent with the central idea of business process design?
A) Technology should be used to supplement the existing value chain.
B) Business processes should not focus on the core competencies of organizations.
C) Organizations should create new business processes rather than improving existing systems.
D) Technology should be used to modify and improve standard business processes.
Answer: C
Page Ref: 83
Difficulty: Moderate
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 4
32) ________ argues that firms should create new, more efficient business processes that integrate the activities of all departments involved in a value chain.
A) Internal supply chain design
B) Product differentiation model
C) Market differentiation model
D) Business process design
Answer: D
Page Ref: 83
Difficulty: Easy
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 4
33) A(n) ________ is a network of activities that generate value by transforming inputs into outputs.
A) business process
B) competitive strategy
C) linkage
D) information system
Answer: A
Page Ref: 84
Difficulty: Easy
Course LO: Discuss the role of information systems in supporting business processes
Chapter LO: 5
34) The cost of the business process is the sum of the cost of the inputs and the ________.
A) cost of the activities
B) cost of the outputs
C) value of the outputs
D) value of the product/service
Answer: A
Page Ref: 84
Difficulty: Easy
Course LO: Discuss the role of information systems in supporting business processes
Chapter LO: 5
35) A(n) ________ is a collection of something, such as data and raw materials.
A) value chain
B) cache
C) linkage
D) repository
Answer: D
Page Ref: 84
Difficulty: Easy
Course LO: Discuss the role of information systems in supporting business processes
Chapter LO: 5
36) A database is an example of a(n) ________.
A) repository
B) software
C) linkage
D) value chain
Answer: A
Page Ref: 84
AACSB: Use of Information Technology
Difficulty: Easy
Course LO: Discuss the role of information systems in supporting business processes
Chapter LO: 5
37) In a manufacturing business, the ________ process transforms finished goods into cash.
A) inbound operations
B) operations
C) sales
D) inbound logistics
Answer: C
Page Ref: 84
Difficulty: Easy
Course LO: Discuss the role of information systems in supporting business processes
Chapter LO: 5
38) Which of the following is a part of the materials ordering process?
A) outbound logistics
B) marketing
C) operations
D) inbound logistics
Answer: D
Page Ref: 85
Difficulty: Moderate
Course LO: Discuss the role of information systems in supporting business processes
Chapter LO: 5
39) Which of the following statements is true of business process designs?
A) Most process designs require people to work in new ways.
B) Business process designs do not involve change in procedures.
C) Business process designs should be accompanied by a change in management.
D) Process designs attract very little employee resistance.
Answer: A
Page Ref: 85
Difficulty: Easy
Course LO: Discuss the role of information systems in supporting business processes
Chapter LO: 5
40) RAC Associates is a car rental company. The company rents cars to customers in the United States. The company uses controls and procedures to prevent car theft. Such procedures are examples of ________.
A) primary business processes
B) core activities
C) strategic activities
D) supporting business processes
Answer: D
Page Ref: 86
AACSB: Analytic Skills
Difficulty: Moderate
Course LO: Discuss the role of information systems in supporting business processes
Chapter LO: 6
41) RedDart is a premium freight provider in the United States. The company offers premium shipment services to its customers. The company ships faster than its competitors and uses tamperproof containers to ship its products. RedDart company distinguishes itself from competitors by ________.
A) providing an enhanced product
B) locking in its suppliers
C) locking in its customers
D) offering low-cost operations and services
Answer: A
Page Ref: 87-88
AACSB: Analytic Skills
Difficulty: Moderate
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 7
42) Which of the following principles of competitive advantage is associated with product implementations?
A) locking in customers
B) differentiating service offerings
C) locking in suppliers
D) establishing alliances
Answer: B
Page Ref: 88
Difficulty: Moderate
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 7
43) Which of the following principles of competitive advantage is related to process implementations?
A) creating new products
B) enhancing products
C) locking in suppliers
D) differentiating products
Answer: C
Page Ref: 88
Difficulty: Moderate
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 7
44) Huen Software, an application provider to the gaming industry, decided to increase its portfolio by developing 3-D graphics-supported games for the mobile gaming industry. By doing this, which competitive strategy is Huen Software implementing?
A) creation of entry barriers
B) product differentiation
C) reduction of cost
D) locking in of suppliers
Answer: B
Page Ref: 88
AACSB: Analytic Skills
Difficulty: Moderate
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 7
45) PowerCruise, a holiday cruise firm, recently offered its existing customers an extension of six months to their membership without any additional charges. By doing this, which competitive strategy did PowerCruise implement?
A) creation of a new service
B) product differentiation
C) locking in of customers
D) locking in of suppliers
Answer: C
Page Ref: 88
AACSB: Analytic Skills
Difficulty: Moderate
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 7
46) An organization wants to achieve competitive advantage through process implementations. Which of the following actions would help them do that?
A) establishing alliances
B) creating new products
C) enhancing products
D) differentiating services
Answer: A
Page Ref: 88
AACSB: Analytic Skills
Difficulty: Moderate
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 7
47) Synapz, a manufacturer of office automation products, recently received a patent for an advanced therapeutic ergonomics technology. By doing this, Synapz has ________.
A) created entry barriers
B) introduced product differentiation
C) locked in its suppliers
D) reduced the cost of operations
Answer: A
Page Ref: 88
AACSB: Analytic Skills
Difficulty: Hard
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 7
48) Locking in customers by making it difficult or expensive for customers to move to another product is called establishing high ________.
A) entry barriers
B) switching costs
C) product standards
D) value differentiation
Answer: B
Page Ref: 88
Difficulty: Moderate
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 7
49) July Networks provides digital television services across the country. They have a cutting-edge technology that provides high-resolution visuals. Customers are required to pay an up-front fee to cover the first two years of the subscription, when registering with July Networks. By doing this, which competitive strategy is July Networks implementing?
A) differentiating the product
B) enhancing the product
C) locking in customers
D) standardizing the product
Answer: C
Page Ref: 88
AACSB: Analytic Skills
Difficulty: Moderate
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 7
50) A large software manufacturer attempts to lock in customers by making it difficult for customers to change to another product. Identify the strategy used here.
A) switching costs strategy
B) low cost operation strategy
C) differentiation strategy
D) consumerist strategy
Answer: A
Page Ref: 88
AACSB: Analytic Skills
Difficulty: Moderate
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 7
51) Organizations can lock in suppliers by making it difficult to switch to another organization or by ________.
A) making it easy for the customers to switch products
B) reducing investments in their supply chain
C) making it easy to work with the organization
D) reducing the bargaining power of consumers
Answer: C
Page Ref: 88-89
Difficulty: Easy
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 7
52) A group of manufacturing organizations purchases raw materials collectively to obtain better deals. This is an example of obtaining competitive advantage by ________.
A) differentiating the industry
B) establishing standards
C) establishing alliances
D) enhancing the products
Answer: C
Page Ref: 89
AACSB: Analytic Skills
Difficulty: Moderate
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 7
53) An organization implements an information system to optimize its supply chain. The system helps the organization reduce wastages and inventory charges. Hence, the system provides a competitive advantage to the organization. Here, the information system helped the organization achieve competitive advantage by ________.
A) locking in customers
B) reducing costs
C) locking in suppliers
D) differentiating the products
Answer: B
Page Ref: 89
AACSB: Analytic Skills
Difficulty: Moderate
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 7
54) A digital divide exists between ________.
A) U.S. software companies and European software companies
B) hardware companies and software companies
C) those who have Internet access and those who do not
D) employees of a software company and the managers of the company
Answer: C
Page Ref: 94
AACSB: Use of Information Technology
Difficulty: Easy
Course LO: Compare and contrast different ways of connecting to the Internet
Chapter LO: 8
3.3 Essay Questions
1) Describe the process by which organizations develop their information systems.
Answer: An organization’s goals and objectives are determined by its competitive strategy. Thus, ultimately, competitive strategy determines the structure, features, and functions of every information system. In short, organizations examine the structure of their industry and determine a competitive strategy. That strategy determines value chains, which, in turn, determine business processes. The structure of business processes determines the design of supporting information systems.
Page Ref: 76
Difficulty: Moderate
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 1
2) Briefly explain Porter’s five forces model.
Answer: Organizational strategy begins with an assessment of the fundamental characteristics and structure of an industry. One model used to assess an industry structure is Porter’s five forces model. According to this model, five competitive forces determine industry profitability: bargaining power of customers, threat of substitutions, bargaining power of suppliers, threat of new entrants, and rivalry among existing firms. The intensity of each of the five forces determines the characteristics of the industry, how profitable it is, and how sustainable that profitability will be.
Page Ref: 77
Difficulty: Moderate
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 2
3) What are the four competitive strategies firms can choose from according to Porter’s model?
Answer: An organization responds to the structure of its industry by choosing a competitive strategy. Porter followed his five forces model with the model of four competitive strategies. According to Porter, firms engage in one of these four strategies. An organization can focus on being the cost leader, or it can focus on differentiating its products from those of the competition. Further, the organization can employ the cost or differentiation strategy across an industry, or it can focus its strategy on a particular industry segment.
Page Ref: 78
Difficulty: Easy
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 3
4) Briefly describe the concepts of value, margin, and value chain.
Answer: Porter defined value as the amount of money that a customer is willing to pay for a resource, product, or service. The difference between the value that an activity generates and the cost of the activity is called the margin. A value chain is a network of value-creating activities. That generic chain consists of five primary activities and four support activities.
Page Ref: 79
Difficulty: Easy
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 4
5) List the primary activities in a generic value chain.
Answer: The primary activities are (1) inbound logistics, (2) operations/manufacturing, (3) outbound logistics, (4) sales and marketing, and (5) customer service.
Page Ref: 79-82
Difficulty: Easy
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 4
6) Distinguish between the primary and support activities of a value chain.
Answer: Primary activities directly add value to the value chain of an organization. Examples are operations and marketing.
The support activities in the generic value chain contribute indirectly to the production, sale, and service of the product. They include procurement, which consists of the processes of finding vendors, setting up contractual arrangements, and negotiating prices.
Page Ref: 79-82
Difficulty: Moderate
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 4
7) What are support activities in a value chain?
Answer: The support activities in the generic value chain contribute indirectly to the production, sale, and service of the product. They include procurement, which consists of the processes of finding vendors, setting up contractual arrangements, and negotiating prices. Supporting functions add value, albeit indirectly, and they also have costs. It is difficult to calculate the margin for such activities because the specific value added by a support activity is difficult to know.
Page Ref: 82
Difficulty: Moderate
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 4
8) Explain linkages with an example.
Answer: Porter’s model of business activities includes linkages, which are interactions across value activities. For example, manufacturing systems use linkages to reduce inventory costs. Such a system uses sales forecasts to plan production; it then uses the production plan to determine raw materials needs and then uses the material needs to schedule purchases. The end result is just-in-time inventory, which reduces inventory sizes and costs.
Page Ref: 82
Difficulty: Moderate
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 4
9) What is the central idea of business process design?
Answer: The central idea of business process design is that organizations should not automate or improve existing functional systems. Rather, they should create new, more efficient business processes that integrate the activities of all departments involved in a value chain.
Page Ref: 83
Difficulty: Moderate
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 4
10) What is a business process? How do you determine the cost and margin of a business process?
Answer: A business process is a network of activities that generate value by transforming inputs into outputs. Each activity is a business function that receives inputs and produces outputs. An activity can be performed by a human, by a computer system, or by both.
The cost of the business process is the cost of the inputs plus the cost of the activities. The margin of the business process is the value of the outputs minus the cost.
Page Ref: 84
Difficulty: Moderate
Course LO: Discuss the role of information systems in supporting business processes
Chapter LO: 5
11) Describe the challenges that an organization will face when changing business processes.
Answer: Changing business processes is not easy to do. Most process design requires people to work in new ways, to follow different procedures, and employees often resist such change.
Page Ref: 85
Difficulty: Easy
Course LO: Discuss the role of information systems in supporting business processes
Chapter LO: 5
12) Summarize how organizations determine the scope and requirements of their information systems.
Answer: Organizations analyze their industry and choose a competitive strategy. Given that strategy, they design business processes that span value-generating activities. Those processes determine the scope and requirements of each organization’s information systems.
Page Ref: 87
Difficulty: Moderate
Course LO: Discuss the role of information systems in supporting business processes
Chapter LO: 6
13) Briefly explain the process-oriented competitive strategies.
Answer: Organizations can use various process-oriented competitive strategies to gain competitive advantage. Organizations can lock in customers by making it difficult or expensive for customers to switch to another product. This strategy is sometimes called establishing high switching costs. Organizations can lock in suppliers by making it difficult to switch to another organization, or, stated positively, by making it easy to connect to and work with the organization. Competitive advantage can also be gained by creating entry barriers that make it difficult and expensive for new competition to enter the market. Another means to gain competitive advantage is to establish alliances with other organizations. Finally, organizations can gain competitive advantage by reducing costs.
Page Ref: 88-89
Difficulty: Moderate
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 7
14) Explain the concept of switching costs with an example.
Answer: Switching costs are the expenses that a customer must pay to move from the current product to a competitor’s offering. By making these switching costs high, it discourages the client from leaving the current provider. In the past, long distance phone service was known to carry high switching costs. Entering an agreement to construct a house also carries high switching costs.
Page Ref: 88-89
Difficulty: Moderate
Course LO: Explain how IS can be used to gain and sustain competitive advantage
Chapter LO: 7
15) What is the digital divide?
Answer: The digital divide is the gap between those who have access to the Internet and those who do not. As the Internet has become a primary source for information in the world, this rift keeps getting deeper and deeper between the haves and the have-nots.
Someone who knows how to search the Internet can learn more readily than someone who does not. And every year, the person with greater knowledge pulls farther and farther ahead.
Page Ref: 94
Difficulty: Easy
Course LO: Compare and contrast different ways of connecting to the Internet
Chapter LO: 8
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