Florida International University

MAR 3023

True/False Questions

Chapter 12-Managing the Product Line

1)According to the text, the most commonly used financial analysis methods that consider time are internal rate of return and net present value.

2. The original and most popular portfolio model is the multifactor portfolio matrix.

3. According to the growth-share matrix, products/businesses with low market growth but high market share are referred to as stars.

4. According to the text, cash cows should represent the firm’s primary internal cash source.

5. Wildcats describe products/businesses that trail market leaders in low-growth markets.

6. According to the growth-share matrix, those products/businesses that are typically viewed as the most risky, because of the inherent uncertainty in high-growth markets and weak market-share position, are known as wildcats.

7. According to the text, the multifactor portfolio matrix is also known as the GE/McKinsey screen.

8. According to the text, the GE/McKinsey screen is only really useful for assessing existing businesses.

9. An example of negative complementarity is when a software customer buys successive versions of a software product.

10. The correct equation of return on assets is profit divided by assets.

11. Market penetration relates to differences among customers that management finds useful in developing marketing strategy.

12. According to the text, product proliferation implies a large number of product variations.

13. Costs that vary directly with sales volume are referred to as variable costs.

14. Direct fixed costs include corporate functions such as R&D, human resources, and shareholder relations.

15. Product cannibalization refers to the situation when a firm introduces a lower-margin product that is expected to lead to reduced sales of a higher-margin product.

Multiple Choice Questions

16. The firm’s                                       is a collection of products under one name or brand. a.) cost of capital

b.) return on asset

c.) product portfolio

d.) net present value

17.                                        allows the firm to balance its objectives and resource allocations across the collection of its various products.

a.) Portfolio management

b.) Strategic management c.) Product cannibalization d.) Product positioning

18. A(n)                                     portfolio occurs when the firm funds too many new products and creates problems with cash flow or other resources.

a.) imbalanced

b.) balanced c.)   cultural d.) conjointed

19.                                            is the firm’s annual profit less an explicit charge for capital. a.) Return on assets

b.) Net present value

c.) Internal rate of return

d.) Economic value added

20. All of the following are examples of financial analysis approaches to developing a successful product management strategy EXCEPT:

a.) Net present value

b.) Conjoint analysis

c.) Internal rate of return d.) Payback

21. Which of the following financial analysis approaches to developing a successful product management strategy is defined in terms of the time it takes to pay back the initial investment?

a.) Net present value b.) Conjoint analysis

c.) Internal rate of return

d.) Payback

22. The discount rate that equalizes the opportunity’s cash inflow and cash outflows is called the

                                  .

a.) external rate of return

b.) internal rate of return

c.) economic profit d.) payback period

23.                                         is the dollar value of an opportunity secured by discounting all cash outflows and inflows by a predetermined factor, typically the firm’s cost of capital.

a.) Net present value

b.) Conjoint analysis

c.) Internal rate of return d.) Payback

24. According to the text, the most commonly used financial analysis methods that consider time are

                                      and                                     . a.) payback and internal rate of return

b.) internal rate of return and net present value c.) payback and net present value d.) cash flow and net present value

25. The original and most popular portfolio model is the                                        .

a.) growth-share matrix

b.) market share divisor c.) brand equity technique

d.) multifactor portfolio matrix

26. Which of the following companies developed and introduced the growth-share matrix? a.) General Electric

b.) Motorola

c.) the Boston Consulting Group

d.) Microsoft

27. For the firm conducting the analysis,                                      is that firm’s market share divided by the largest competitor’s market share.

a.) absolute market share

b.) relative market share

c.) differentiated market share d.) common market share

28. According to the growth-share matrix, products/businesses with low market growth but high market share are often referred to as                                             .

a.) cash cows

b.) dogs c.) stars

d.) wildcats

29. Which of the following describes products/businesses that are typically highly profitable due to good cost position from economies of scale and experience-curve effects and because market leaders are frequently able to command premium prices?

a.) cash cows

b.) dogs c.) stars

d.) wildcats

30. A serious problem with                                      is that management often desires long-run cash flow yet, faced with external requirements imposed by shareholders, unions, and even government, takes short-term action that severely harms long-term prospects.

a.) cash cows

b.) dogs c.) stars

d.) wildcats

31. According to the text, which of the following should represent the firm’s primary internal cash source?

a.) cash cows

b.) dogs c.) stars

d.) wildcats

32. According to the growth-share matrix, products/businesses with low market growth and low market share are called                                                 .

a.) cash cows b.) dogs  c.) stars

d.) wildcats

33. Which of the following describe products/businesses that trail market leaders in low-growth markets?

a.) cash cows

b.) dogs

c.) stars

d.) wildcats

34. According to the growth-share matrix, products/businesses with high market growth and high market share are often called                                                               .

a.) cash cows b.) dogs

c.) stars

d.) wildcats

35. According to the growth-share matrix, those products/businesses that are typically viewed as the most risky, because of the inherent uncertainty in high-growth markets and the weak market-share position are known as                                                                            .

a.) cash cows b.) dogs

c.) stars

d.) wildcats

36. Which of the following describe products/businesses that are often marginally profitable, yet, to continue to hold position and grow with the market, they consume substantial cash for investment in fixed assets and working capital?

a.) cash cows b.) dogs

c.) stars

d.) wildcats

37. According to the text, the multifactor portfolio matrix is also known as the                                  . a.) Microsoft/Intel screen

b.) GE/McKinsey screen

c.) IBM/Oracle screen d.) growth-share matrix

38. The major advantage of using the growth-share matrix versus the multifactor portfolio approach in choosing among investment opportunities is                                                     .

a.) the subjective nature of the growth-share approach

b.) the limited number of criteria for the growth-share approach c.) the unambiguous nature of the growth-share approach

d.) the objective nature of the growth-share approach

39. Which of the following portfolio approaches to choosing among investment opportunities is useful both for assessing investment potential in current businesses and evaluating totally new opportunities?

a.) Microsoft/Intel screen

b.) GE/McKinsey screen

c.) IBM/Oracle screen d.) growth-share matrix

40. The growth-share matrix has only two criteria:                                 and                                   . a.) profitability and market growth rate

b.) market growth rate and relative market share

c.) profitability and relative market share d.) cost of capital and market growth rate

41. According to the text, the                                     approach to choosing among investment opportunities is only really useful for assessing existing products/businesses.

a.) Microsoft/Intel screen b.) GE/McKinsey screen c.) IBM/Oracle screen

d.) growth-share matrix

42. Which of the following is mentioned in the text as the approach that many firms use as a starting point for a portfolio approach to product line management?

a.) Microsoft/Intel screen b.) GE/McKinsey screen c.) IBM/Oracle screen

d.) growth-share matrix

43. An example of                                       is when a software customer buys successive versions of a software product.

a.) negative complementarity b.) post complementarity

c.) positive complementarity

d.) dual complementarity

44. Which of the following describes the concept when customers believe their interests are ill-served by the firm’s actions and as a result reduces consumption of the firm’s products and/or services?

a.) negative complementarity

b.) post complementarity

c.) positive complementarity d.) dual complementarity

45. Which of the following is the correct equation for return on asset? a.) assets/profits

b.) profits/assets

c.) revenues/expenses d.) inventory/profits

46.                                         relates to differences among customers that management finds useful in developing marketing strategy.

a.) Market segmentation

b.)   Market penetration c.) Product concentration d.) Product proliferation

47. According to the text,                                          implies a large number of product variations.

a.) market segmentation b.)   market penetration c.) product concentration

d.) product proliferation

48. All of the following are examples of products in which companies use the time availability dimension to implement product proliferation EXCEPT:

a.) Plastic producers sometimes sell high-quality plastics for rigorous uses and degraded product for less-severe uses.

b.) Package services, such as FedEx, deliver before 10 a.m. but also later the same day for different prices.

c.) Publishers offer hardcover books for enthusiasts and paperback books for those who can’t wait. d.) Airlines develop a variety of products for a single flight based on time of booking.

49. Common differentiations of versions or variations offered to customers by firms to tap different customer needs include all of the following EXCEPT:

a.) market scalability

b.) time availability

c.) product performance

d.) limitations on access and functionality

50. Which of the following types of costs include raw materials and direct labor?

a.) variable costs

b.) direct fixed costs c.) indirect fixed costs d.) total costs

51. According to   the   text,   costs   that   vary   directly   with   sales   volume   are   referred   to   as

                                     .

a.) variable costs

b.) direct fixed costs c.) indirect fixed costs d.) total costs

52.                                       do not directly with the number of units sold, but are associated with individual products.

a.) Variable costs

b.) Direct fixed costs

c.) Indirect fixed costs d.) Marginal fixed costs

53. Which of the following types of costs are associated with the individual products, such as product managers, specialized production supervisors, and other technical personnel?

a.) variable costs

b.) direct fixed costs

c.) indirect fixed costs d.) total costs

54.                                          include corporate functions such as R&D, human resources, and shareholder relations.

a.) Variable costs

b.) Direct fixed costs

c.) Indirect fixed costs

d.) Total costs

55. A case in which a firm introduces a lower-margin product that is expected to lead to reduced sales of a higher-margin product is referred to as                                           .

a.) product cannibalization

b.)   market skimming c.) product proliferation

d.) customer proliferation

Essay Questions

56. In a short essay, list and discuss the four classic strategic recommendations that are derived from the Boston Consulting Group growth-share matrix.

57. In a short essay, provide a comparison of the growth-share and multifactor portfolio methods.

58. In a short essay, discuss the nature of both positive and negative complementarity between a firm’s products and its customers. Include specific examples to support your answer.

59. In a short essay, discuss variable costs, direct fixed costs, and indirect fixed costs. Include specific examples to support your answer.

60. In a short essay, discuss the concept of product cannibalization.