MBA 620 2-1 Quiz: Milestone One Quiz |
Questions and Answers | 2026/2027 Updated
| 100% Correct - SNHU.
Practice Question Bank & Answer Rationale
THIS PACK CONTAINS
98 exam-style multiple-choice questions. Each question includes the correct answer and a complete rationale
for focused revision.
COVERAGE
MBA 620 Milestone One Quiz assesses mastery of foundational strategy frameworks, industry analysis,
competitive dynamics, and the strategy formulation process. The exam emphasizes applied critical thinking,
case-based reasoning, and synthesis of classic and contemporary strategic management theory.
STUDY GUIDE
Recommended duration: 2 hours. Passing target: 80%.
HIGHP - Page 1 of 33
,1. A firm's ROIC consistently exceeds its WACC, yet its economic value added has
declined for three consecutive years. Which of the following most plausibly explains this
apparent paradox?
[ ] A. The firm's invested capital base has grown faster than its net operating profit after tax, eroding the
spread between ROIC and WACC.
[ ] B. The firm's WACC has fallen below the industry average, making its positive spread misleading.
[ ] C. ROIC is calculated using book value of equity, which understates the true cost of capital.
[ ] D. EVA is a lagging indicator and cannot decline while ROIC exceeds WACC.
CORRECT: A. The firm's invested capital base has grown faster than its net operating profit after tax,
eroding the spread between ROIC and WACC.
EVA = (ROIC WACC) × Invested Capital. Even if ROIC > WACC, a shrinking spread (due to capital growth
outpacing NOPAT) reduces EVA. Distractors misstate EVA mechanics or confuse WACC directionality.
2. In a fragmented industry with low entry barriers and high buyer price sensitivity, which
generic strategy is most likely to yield sustainable above-average returns?
[ ] A. Broad differentiation
[ ] B. Cost leadership
[ ] C. Focused differentiation
[ ] D. Integrated cost leadership/differentiation
CORRECT: B. Cost leadership
Low entry barriers and price-sensitive buyers favor cost leadership to defend against margin erosion.
Differentiation is hard to sustain without switching costs or unique resources, and integration is costly in
fragmented settings.
3. A diversified conglomerate's corporate parent adds value primarily by imposing strict
financial controls and decentralizing operations. This best exemplifies which corporate
strategy?
[ ] A. Related diversification with operational synergies
[ ] B. Unrelated diversification with financial economies
[ ] C. Vertical integration to capture upstream margins
[ ] D. Market power through cross-subsidization
CORRECT: B. Unrelated diversification with financial economies
Financial economies arise when a parent allocates capital efficiently and uses internal controls to manage
unrelated businesses. Related diversification and vertical integration require operational linkages, which are
absent here.
HIGHP - Page 2 of 33
,4. Which of the following best illustrates a dynamic capability rather than a static
resource?
[ ] A. A patented manufacturing process
[ ] B. A brand with high customer loyalty
[ ] C. A routine for rapidly reconfiguring product lines in response to demand shifts
[ ] D. A large distribution network
CORRECT: C. A routine for rapidly reconfiguring product lines in response to demand shifts
Dynamic capabilities involve sensing, seizing, and reconfiguring resources. Patents, brands, and distribution
networks are static resources; only the reconfiguration routine reflects a dynamic capability.
5. A pharmaceutical firm faces high supplier concentration for a key API and high buyer
concentration among hospital GPOs. According to Five Forces, which action most directly
improves its bargaining position?
[ ] A. Increasing advertising to end consumers
[ ] B. Developing an alternative API supplier or backward integrating
[ ] C. Lobbying for stricter FDA regulations
[ ] D. Outsourcing R&D to reduce fixed costs
CORRECT: B. Developing an alternative API supplier or backward integrating
Reducing supplier concentration or backward integration directly lowers supplier power. Advertising targets
buyers, not suppliers; regulation and R&D outsourcing do not address supplier leverage.
6. A firm's value chain analysis reveals that inbound logistics and operations are
commoditized, but outbound logistics and service are highly differentiated. Which activity
configuration is most consistent with a differentiation strategy?
[ ] A. Outsourcing outbound logistics to a low-cost provider
[ ] B. Investing in proprietary last-mile delivery and after-sales support
[ ] C. Standardizing all primary activities to reduce cost
[ ] D. Centralizing procurement to gain scale economies
CORRECT: B. Investing in proprietary last-mile delivery and after-sales support
Differentiation is built in activities that create unique value. Proprietary last-mile and after-sales support
enhance differentiation, while outsourcing or standardizing those activities erodes it.
7. In a Blue Ocean strategy context, which of the following best describes the 'value
innovation' logic?
[ ] A. Pursuing simultaneous differentiation and low cost by eliminating and reducing non-value-adding
factors
HIGHP - Page 3 of 33
, [ ] B. Outspending rivals on R&D to achieve technological leadership
[ ] C. Focusing on a niche segment with premium pricing
[ ] D. Imitating the market leader's cost structure to compete on price
CORRECT: A. Pursuing simultaneous differentiation and low cost by eliminating and reducing
non-value-adding factors
Value innovation seeks to break the value-cost trade-off by raising buyer value and lowering costs through
eliminating/reducing/raising/creating factors. Other options reflect conventional competitive or niche
strategies.
8. A firm's acquisition of a key supplier is most likely to create value when:
[ ] A. The supplier's products are standardized and widely available
[ ] B. The transaction-specific investments between the firms are high and contracts are incomplete
[ ] C. The supplier has lower bargaining power than the firm
[ ] D. The acquisition is financed entirely with debt
CORRECT: B. The transaction-specific investments between the firms are high and contracts are
incomplete
Vertical integration is justified when asset specificity and contractual hazards are high. Standardized inputs,
low supplier power, or debt financing do not by themselves create value from integration.
9. Which of the following is the most direct indicator that a firm's competitive advantage is
sustainable according to the resource-based view?
[ ] A. High market share in the current period
[ ] B. The resource is valuable, rare, inimitable, and non-substitutable
[ ] C. The firm has a first-mover advantage in a new market
[ ] D. The firm's products are protected by a patent for 20 years
CORRECT: B. The resource is valuable, rare, inimitable, and non-substitutable
The VRIN/VRIO framework defines sustainability via value, rarity, inimitability, and non-substitutability. Market
share, first-mover status, or a single patent may be temporary and do not fully capture the framework.
10. A multinational corporation faces pressure for cost reduction and local
responsiveness. Which organizational structure is most appropriate?
[ ] A. Global product division structure
[ ] B. International division structure
[ ] C. Transnational structure
[ ] D. Geographic area structure
HIGHP - Page 4 of 33
Questions and Answers | 2026/2027 Updated
| 100% Correct - SNHU.
Practice Question Bank & Answer Rationale
THIS PACK CONTAINS
98 exam-style multiple-choice questions. Each question includes the correct answer and a complete rationale
for focused revision.
COVERAGE
MBA 620 Milestone One Quiz assesses mastery of foundational strategy frameworks, industry analysis,
competitive dynamics, and the strategy formulation process. The exam emphasizes applied critical thinking,
case-based reasoning, and synthesis of classic and contemporary strategic management theory.
STUDY GUIDE
Recommended duration: 2 hours. Passing target: 80%.
HIGHP - Page 1 of 33
,1. A firm's ROIC consistently exceeds its WACC, yet its economic value added has
declined for three consecutive years. Which of the following most plausibly explains this
apparent paradox?
[ ] A. The firm's invested capital base has grown faster than its net operating profit after tax, eroding the
spread between ROIC and WACC.
[ ] B. The firm's WACC has fallen below the industry average, making its positive spread misleading.
[ ] C. ROIC is calculated using book value of equity, which understates the true cost of capital.
[ ] D. EVA is a lagging indicator and cannot decline while ROIC exceeds WACC.
CORRECT: A. The firm's invested capital base has grown faster than its net operating profit after tax,
eroding the spread between ROIC and WACC.
EVA = (ROIC WACC) × Invested Capital. Even if ROIC > WACC, a shrinking spread (due to capital growth
outpacing NOPAT) reduces EVA. Distractors misstate EVA mechanics or confuse WACC directionality.
2. In a fragmented industry with low entry barriers and high buyer price sensitivity, which
generic strategy is most likely to yield sustainable above-average returns?
[ ] A. Broad differentiation
[ ] B. Cost leadership
[ ] C. Focused differentiation
[ ] D. Integrated cost leadership/differentiation
CORRECT: B. Cost leadership
Low entry barriers and price-sensitive buyers favor cost leadership to defend against margin erosion.
Differentiation is hard to sustain without switching costs or unique resources, and integration is costly in
fragmented settings.
3. A diversified conglomerate's corporate parent adds value primarily by imposing strict
financial controls and decentralizing operations. This best exemplifies which corporate
strategy?
[ ] A. Related diversification with operational synergies
[ ] B. Unrelated diversification with financial economies
[ ] C. Vertical integration to capture upstream margins
[ ] D. Market power through cross-subsidization
CORRECT: B. Unrelated diversification with financial economies
Financial economies arise when a parent allocates capital efficiently and uses internal controls to manage
unrelated businesses. Related diversification and vertical integration require operational linkages, which are
absent here.
HIGHP - Page 2 of 33
,4. Which of the following best illustrates a dynamic capability rather than a static
resource?
[ ] A. A patented manufacturing process
[ ] B. A brand with high customer loyalty
[ ] C. A routine for rapidly reconfiguring product lines in response to demand shifts
[ ] D. A large distribution network
CORRECT: C. A routine for rapidly reconfiguring product lines in response to demand shifts
Dynamic capabilities involve sensing, seizing, and reconfiguring resources. Patents, brands, and distribution
networks are static resources; only the reconfiguration routine reflects a dynamic capability.
5. A pharmaceutical firm faces high supplier concentration for a key API and high buyer
concentration among hospital GPOs. According to Five Forces, which action most directly
improves its bargaining position?
[ ] A. Increasing advertising to end consumers
[ ] B. Developing an alternative API supplier or backward integrating
[ ] C. Lobbying for stricter FDA regulations
[ ] D. Outsourcing R&D to reduce fixed costs
CORRECT: B. Developing an alternative API supplier or backward integrating
Reducing supplier concentration or backward integration directly lowers supplier power. Advertising targets
buyers, not suppliers; regulation and R&D outsourcing do not address supplier leverage.
6. A firm's value chain analysis reveals that inbound logistics and operations are
commoditized, but outbound logistics and service are highly differentiated. Which activity
configuration is most consistent with a differentiation strategy?
[ ] A. Outsourcing outbound logistics to a low-cost provider
[ ] B. Investing in proprietary last-mile delivery and after-sales support
[ ] C. Standardizing all primary activities to reduce cost
[ ] D. Centralizing procurement to gain scale economies
CORRECT: B. Investing in proprietary last-mile delivery and after-sales support
Differentiation is built in activities that create unique value. Proprietary last-mile and after-sales support
enhance differentiation, while outsourcing or standardizing those activities erodes it.
7. In a Blue Ocean strategy context, which of the following best describes the 'value
innovation' logic?
[ ] A. Pursuing simultaneous differentiation and low cost by eliminating and reducing non-value-adding
factors
HIGHP - Page 3 of 33
, [ ] B. Outspending rivals on R&D to achieve technological leadership
[ ] C. Focusing on a niche segment with premium pricing
[ ] D. Imitating the market leader's cost structure to compete on price
CORRECT: A. Pursuing simultaneous differentiation and low cost by eliminating and reducing
non-value-adding factors
Value innovation seeks to break the value-cost trade-off by raising buyer value and lowering costs through
eliminating/reducing/raising/creating factors. Other options reflect conventional competitive or niche
strategies.
8. A firm's acquisition of a key supplier is most likely to create value when:
[ ] A. The supplier's products are standardized and widely available
[ ] B. The transaction-specific investments between the firms are high and contracts are incomplete
[ ] C. The supplier has lower bargaining power than the firm
[ ] D. The acquisition is financed entirely with debt
CORRECT: B. The transaction-specific investments between the firms are high and contracts are
incomplete
Vertical integration is justified when asset specificity and contractual hazards are high. Standardized inputs,
low supplier power, or debt financing do not by themselves create value from integration.
9. Which of the following is the most direct indicator that a firm's competitive advantage is
sustainable according to the resource-based view?
[ ] A. High market share in the current period
[ ] B. The resource is valuable, rare, inimitable, and non-substitutable
[ ] C. The firm has a first-mover advantage in a new market
[ ] D. The firm's products are protected by a patent for 20 years
CORRECT: B. The resource is valuable, rare, inimitable, and non-substitutable
The VRIN/VRIO framework defines sustainability via value, rarity, inimitability, and non-substitutability. Market
share, first-mover status, or a single patent may be temporary and do not fully capture the framework.
10. A multinational corporation faces pressure for cost reduction and local
responsiveness. Which organizational structure is most appropriate?
[ ] A. Global product division structure
[ ] B. International division structure
[ ] C. Transnational structure
[ ] D. Geographic area structure
HIGHP - Page 4 of 33
