MBA 705 Exam 3 – Advanced Business Administration Study Guide & Practice
Capital-Labor Substitution: - (answer)An organization's ability to substitute labor for capital or vice versa
as production increases.
Experience Curve: - (answer)ncreases. Experience Curve: The reduction in per-unit costs that occur as an
organization gains experience producing a product or service.
Functional Strategies: - (answer)The strategies pursued by each functional area of a business unit, such
as marketing, finance, or production.
Human Capital: - (answer)The sum of the capabilities of individuals in an organization.
Just-In-Time (JIT) Inventory System: - (answer)An inventory system, popularized by the Japanese, in
which suppliers deliver parts just at the time they are needed by the buying organization to use in its
production process.
Knowledge Management: - (answer)People and their skills and abilities (i.e., knowledge capital)
represent the only resource that cannot readily be reproduced by a firm's competitors. Knowledge
capital must be effectively leveraged if high-performing firms are to remain as such over the long term.
Learning: - (answer)The increased efficiency that occurs when an employee performs a task repeatedly.
Process R & D: - (answer)R & D activities that seek to reduce the costs of operations and make them
more efficient.
Product/Service R & D: - (answer)R & D activities directed toward improvements or innovations in the
quality or uniqueness of a company's outputs.
Total Quality Management (TQM): - (answer)A broad-based program designed to improve product and
service quality and to increase customer satisfaction by incorporating a holistic commitment to quality
as seen through the eyes of the customer.
,MBA 705 Exam 3 – Advanced Business Administration Study Guide & Practice
Because functional strategies should be designed to support corporate and business strategies, they
should not be considered until corporate and business strategies have been formulated.
True or False - (answer)False.
Although functional strategies are formulated after the corporate and business strategies have already
been established, one still needs to consider the capabilities of the various functional areas when
considering various corporate and business strategic options.
The most appropriate means of securing funds likely depends on the corporate and business strategies
being pursued.
True or False - (answer)True.
Some forms of raising capital tend to be more effective than others, depending on the strategy.
The reduction in per-unit costs that occurs as an organization gains experience producing a product or
service is known as economies of scale. Economies of scale is one of the contributing factors to the
experience curve.
True or False - (answer)False.
The reduction in per-unit costs that occurs as an organization gains experience producing a product or
service is known as the experience curve.
The purchasing department in a low-cost business should always purchase raw materials at the lowest
possible cost.
True or False - (answer)False.
, MBA 705 Exam 3 – Advanced Business Administration Study Guide & Practice
Purchasing departments in low-cost businesses should seek the "best cost"—the lowest cost within an
acceptable range of quality standards.
The human resources department in a low-cost business should always attempt to hire managers and
workers at pay rates below those of their competitors.
True or False - (answer)False.
Although higher than average pay rates are generally not consistent with the low-cost strategy,
businesses seeking to minimize costs may need to pay market rates to maintain a competitive
workforce.
A key characteristic of an effective information system is its ability to serve and help integrate the other
functional areas of the business.
True or False - (answer)True.
The information system can provide data to support all of the other functional areas of the business.
Functional strategies should
A. be integrated across the business unit.
B. support the business strategy.
C. support the corporate strategy.
D. all of the above - (answer)D. Functional strategies should be integrated to support the business and
corporate strategies
Which of the following is not part of the marketing strategy?
A. pricing
B. distribution
Capital-Labor Substitution: - (answer)An organization's ability to substitute labor for capital or vice versa
as production increases.
Experience Curve: - (answer)ncreases. Experience Curve: The reduction in per-unit costs that occur as an
organization gains experience producing a product or service.
Functional Strategies: - (answer)The strategies pursued by each functional area of a business unit, such
as marketing, finance, or production.
Human Capital: - (answer)The sum of the capabilities of individuals in an organization.
Just-In-Time (JIT) Inventory System: - (answer)An inventory system, popularized by the Japanese, in
which suppliers deliver parts just at the time they are needed by the buying organization to use in its
production process.
Knowledge Management: - (answer)People and their skills and abilities (i.e., knowledge capital)
represent the only resource that cannot readily be reproduced by a firm's competitors. Knowledge
capital must be effectively leveraged if high-performing firms are to remain as such over the long term.
Learning: - (answer)The increased efficiency that occurs when an employee performs a task repeatedly.
Process R & D: - (answer)R & D activities that seek to reduce the costs of operations and make them
more efficient.
Product/Service R & D: - (answer)R & D activities directed toward improvements or innovations in the
quality or uniqueness of a company's outputs.
Total Quality Management (TQM): - (answer)A broad-based program designed to improve product and
service quality and to increase customer satisfaction by incorporating a holistic commitment to quality
as seen through the eyes of the customer.
,MBA 705 Exam 3 – Advanced Business Administration Study Guide & Practice
Because functional strategies should be designed to support corporate and business strategies, they
should not be considered until corporate and business strategies have been formulated.
True or False - (answer)False.
Although functional strategies are formulated after the corporate and business strategies have already
been established, one still needs to consider the capabilities of the various functional areas when
considering various corporate and business strategic options.
The most appropriate means of securing funds likely depends on the corporate and business strategies
being pursued.
True or False - (answer)True.
Some forms of raising capital tend to be more effective than others, depending on the strategy.
The reduction in per-unit costs that occurs as an organization gains experience producing a product or
service is known as economies of scale. Economies of scale is one of the contributing factors to the
experience curve.
True or False - (answer)False.
The reduction in per-unit costs that occurs as an organization gains experience producing a product or
service is known as the experience curve.
The purchasing department in a low-cost business should always purchase raw materials at the lowest
possible cost.
True or False - (answer)False.
, MBA 705 Exam 3 – Advanced Business Administration Study Guide & Practice
Purchasing departments in low-cost businesses should seek the "best cost"—the lowest cost within an
acceptable range of quality standards.
The human resources department in a low-cost business should always attempt to hire managers and
workers at pay rates below those of their competitors.
True or False - (answer)False.
Although higher than average pay rates are generally not consistent with the low-cost strategy,
businesses seeking to minimize costs may need to pay market rates to maintain a competitive
workforce.
A key characteristic of an effective information system is its ability to serve and help integrate the other
functional areas of the business.
True or False - (answer)True.
The information system can provide data to support all of the other functional areas of the business.
Functional strategies should
A. be integrated across the business unit.
B. support the business strategy.
C. support the corporate strategy.
D. all of the above - (answer)D. Functional strategies should be integrated to support the business and
corporate strategies
Which of the following is not part of the marketing strategy?
A. pricing
B. distribution
