Kincaid Company sells flags with team logos. Kincaid has fixed costs of $639,600 per year plus variable costs of $4.20 per flag. Each flag sells for $12.00. Use the income statement equation approach to compute the number of flags Kincaid must sell each year to break even. Use the contribution margin ratio CVP formula to compute the dollar sales Kincaid needs to earn $32,500 in operating income for 2007. Prepare Kincaid’s contribution margin income statement for the year ended December 31, 2007, for sales of 70,000 flags. Cost of goods sold is 60% of variable costs. Operating costs make up the rest of variable costs and all of fixed costs. The company is considering an expansion that will increase fixed costs by 20% and variable costs by 30 cents per flag. Compute the new breakeven point in units and in dollars. Should Kincaid undertake the expansion? Give your reason.

Suppose, due to a technological innovation, the marginal product of each worker rises by two. At the same time, due to tight labor markets, the wages that you must pay rise to $120 per day. Additionally, preferences for your product rise and thus prices rise to $5.00. Given these new conditions, on a piece of scrap paper, fill in a table like the following. The current wage is $120 and the price of output (Q) is equal to $5.00.

NOTE: You will not need to submit this table, but it will help you answer the following THREE questions.

1. How many workers will you hire to maximize profits?
2. What are the maximum profits?
3. Why did the firm change their behavior given the changes above? Be sure to compare the profit if these changes occurred and the firm did not change their labor input to the profit of the firm when they act as a profit maximizer.

Question: The task of stitching together a strategy
 
A Entails addressing a series of hows: how to grow the business, how to please customers, how to outcompete rivals, how to respond to changing market conditions, and how to achieve strategic and financial objectives
 
B Is primarily an exercise in deciding which of several freshly-emerging market opportunities to pursue
 
C Is mainly an exercise that should be dictated by what is comfortable to management from a risk perspective and what is acceptable in terms of capital requirements
 
D Requires trying to copy the strategies of industry leaders as closely as possible
 
E Is mainly an exercise in good planning

Question: The obligations of an investor-owned company’s board of directors in the strategy-making, strategy-executing process include
 
A Coming up with compelling strategy proposals of their own to debate against those put forward by top management
 
B Overseeing the company’s financial accounting and financial reporting practices and evaluating the caliber of senior executives’ strategy-making/strategy-executing skills
 
C Taking the lead in developing the company’s business model and strategic vision
 
D Taking the lead in formulating the company’s strategic plan but then delegating the task of implementing and executing the strategic plan to the company’s CEO and other senior executives
 
E Approving the company’s operating strategies, functional-area strategies, business strategy, and overall corporate strategy

Question: Which of the following conditions acts to weaken buyer bargaining power?
 
A When buyers are unlikely to integrate backward into the business of sellers
 
B When buyers purchase the item frequently and are well-informed about sellers’ products, prices, and costs
 
C When the costs incurred by buyers in switching to competing brands or to substitute products are relatively low
 
D When the products of rival sellers are weakly differentiated and buyers have considerable discretion over whether and when they purchase the product
 
E When buyers are few in number and/or often purchase in large quantities

Question: Which one of the following is not a reason why industry members are often motivated to enter into collaborative partnerships with key suppliers?
 
A To reduce the costs of switching suppliers
 
B To speed the availability of next-generation components
 
C To enhance the quality of parts and components being supplied and reduce defect rates
 
D To squeeze out important cost savings for both themselves and their suppliers
 
E To reduce inventory and logistics costs

Question: What is the foremost question in running a business enterprise?
 
A What must managers do, and do well, to make a company a winner in the marketplace?
 
B What can employees do, and do well, to ensure customer satisfaction?
 
C What can shareholders do, and do well, to ensure a profitable company?
 
D None of these
 
E All of these

Question: A company’s mission statement typically addresses which of the following questions?
 
A Who are we and what do we do?
 
B What objectives and level of performance do we want to achieve?
 
C Where are we going and what should our strategy be?
 
D What approach should we take to achieve sustainable competitive advantage?
 
E What business model should we employ to achieve our objectives and our vision?

Question: Which of the following is not one of the basic reasons that a company’s strategy evolves over time?
 
A The need on the part of company managers to initiate fresh strategic actions that boost employee commitment and create a results-oriented culture
 
B The proactive efforts of company managers to fine-tune and improve one or more pieces of the strategy
 
C An ongoing need to abandon those strategy features that are no longer working well
 
D The need to respond to the actions and competitive moves of rival firms
 
E The need to keep strategy in step with changing market conditions and changing customer needs and expectations

Question: The intensity of rivalry among competing sellers does not depend on whether
 
A The industry has more than two strong driving forces and whether the industry has more than two strategic groups
 
B Competitors are diverse in terms of visions, strategic intents, objectives, strategies, resources and countries of origin
 
C Strong companies outside the industry have acquired weak firms in the industry and are launching aggressive moves to transform the acquired companies into strong market contenders
 
D One or two rivals have particularly powerful and successful strategies
 
E Industry conditions tempt industry members to use price cuts or other competitive weapons to boost unit sales

Question: Quantitative measures of a company’s competitive strength
 
A Signal which competitor has the most distinctive competencies and which competitor has the fewest
 
B Provide useful indicators of how a company compares against key rivals, factor by factor and capability by capability – thus indicating whether the company has a net overall competitive advantage or disadvantage against each rival
 
C Reveal which competitors are in the best and worst strategic groups
 
D Show which industry rival has the best overall market opportunities and which competitor has the poorest market opportunities
 
E Pinpoint which industry rival is subject to the least amount of competitive pressures from the five competitive forces
 
Question: To build a competitive advantage by out-managing rivals in performing value chain activities, a company must
 
A Position itself in the industry’s more favorably situated strategic group
 
B Develop resources strengths that will enable it to pursue the industry’s most attractive opportunities
 
C Develop core competencies and maybe a distinctive competence that rivals don’t have or can’t quite match and that are instrumental in helping it deliver attractive value to customers or else be more cost efficient in how it performs value chain activities such that it has a low-cost advantage
 
D Outsource all of its value chain activities to world-class vendors and suppliers
 
E Eliminate its resource weaknesses

Question: Identifying the strategic issues a company faces and compiling a worry list of problems and roadblocks is an important component of company situation analysis because
 
A Without a precise fix on what problems/issues a company confronts, managers cannot know what the industry’s key success factors are
 
B The worry list sets the management agenda for taking actions to improve the company’s performance and business outlook
 
C Without a precise fix on what problems/roadblocks a company confronts, managers are less clear about what value chain activities to benchmark
 
D The worry list helps company managers clarify their thinking about how best to modify the company’s value chain
 
E These issues and obstacles must be cleared before management can focus clearly on what is the best strategy for the company to pursue

Question: Top management efforts to communicate the strategic vision to company personnel
 
A Ought to be done in writing rather than orally so as to leave no room for company personnel to misinterpret what the strategic vision really is
 
B Should be done in language that inspires and motivates company personnel to unite behind executive efforts to get the company moving in the intended direction
 
C Tends to be more effective when top management avoids trying to capture the essence of the strategic vision in a catchy slogan
 
D Is most efficiently and effectively done by posting the strategic vision prominently on the company’s website and encouraging employees to read it
 
E Should be attempted only after management has explained the company’s strategic intent, strategy, and business model to company personnel

Question: Thinking strategically about industry and competitive conditions in a given industry involves evaluating such considerations as
 
A The forces driving change in the industry
 
B The dominant economic features of the industry in which the company operates
 
C The kinds of competitive forces industry members are facing and the strength of each competitive force
 
D The key factors influencing future competitive success in the industry
 
E All of the above

Question: The competitive power of a company’s core competence or distinctive competence depends on
 
A Whether it helps differentiate a company’s product offering from the product offerings of rival firms
 
B How hard it is to copy and how easily it can be trumped by substitute resource strengths and competitive capabilities of rivals
 
C Whether customers are aware of the competence and view the competence positively enough to boost the company’s brand name reputation
 
D Whether the competence is one of the industry’s key success factors
 
E Whether the competence is technology-based or based on superior marketing know-how

Question: A competitive environment where there is strong rivalry among sellers, low entry barriers, strong competition from substitute products, and considerable bargaining leverage on the part of both suppliers and customers
 
A Is competitively unattractive from the standpoint of earning good profits
 
B Offers little ability to build a sustainable competitive advantage
 
C Is highly conducive to achieving strong product differentiation and high customer loyalty to the company’s brand
 
D Offers moderate to good prospects for making a reasonable profit and building a sustainable competitive advantage
 
E Requires that industry members have a strongly differentiated product offering in order to be profitable

Question: Developing a strategic vision for a company entails
 
A Prescribing a strategic direction for the company to pursue and a rationale for why this strategic path makes good business sense
 
B Describing its business model and the kind of value that it is trying to deliver to customers
 
C Putting together a story line of why the business will be a moneymaker
 
D Describing who we are and what we do
 
E Coming up with a long-term plan for outcompeting rivals and achieving a competitive advantage

Question: Using the five-forces model of competition to determine what competition is like in a given industry involves
 
A Building the picture of competition in three steps: (1) identifying the specific competitive pressures associated with each of the five competitive forces; (2) evaluating how strong the pressures comprising each competitive force are; and (3) determining whether the collective impact of all five competitive forces is conducive to earning attractive profits
 
B Building the picture of competition in two steps: (1) determining which rival has the biggest competitive advantage and (2) assessing whether the competitive advantages possessed by various industry members allow most industry members to earn above-average profits
 
C Evaluating whether competition is being intensified or weakened by the industry’s driving forces and key success factors
 
D Assessing whether the collective impact of all five forces is weak enough to allow industry members to go on the offensive or use a defensive strategy to insulate against fierce competitive pressures
 
E Gauging the overall strength of competition based on how many industry rivals are operating with a competitive advantage and how many are operating at a competitive disadvantage

Question: In crafting a company’s strategy
 
A Management’s biggest challenge is how closely to mimic the strategies of successful companies in the industry
 
B Managers have comparatively little freedom in choosing the hows of strategy
 
C Managers are wise not to decide on concrete courses of action in order to preserve maximum strategic flexibility
 
D Managers need to come up with some distinctive Aha! element to the strategy that draws in customers and produces a competitive edge over rivals
 
E Managers are well-advised to be risk averse and develop a conservative strategy – dare-to-be-different strategies rarely are successful

Question: Assigning a weight to each measure of competitive strength assessment is generally analytically superior because
 
A A weighted ranking identifies which competitive advantages are most powerful
 
B An unweighted ranking doesn’t discriminate between companies with high and low market shares
 
C It singles out which competitor has the most competitively potent core competencies
 
D Weighting each company’s overall competitive strength by its percentage share of total industry profits produces a more accurate measure of its true competitive strength
 
E All of the various measures of competitive strength are not equally important

Question: Doing a competitive strength assessment entails
 
A Determining whether a company has a cost-effective value chain
 
B Ranking the company against major rivals on each of the important factors that determine market success and ascertaining whether the company has a net competitive advantage or disadvantage versus major rivals
 
C Identifying a company’s core competencies and distinctive competencies (if any)
 
D Analyzing whether a company is well positioned to gain market share and be the industry’s profit leader
 
E Developing quantitative measures of a company’s chances for future profitability

Question: The difference between the concept of a company mission statement and the concept of a strategic vision is that
 
A A mission concerns what to do to achieve short-run objectives and a strategic vision concerns what to do to achieve long-run performance targets
 
B The mission is to make a profit, whereas a strategic vision concerns what business model to employ in striving to make a profit
 
C A mission statement deals with what to accomplish on behalf of shareholders and a strategic vision concerns what to accomplish on behalf of customers
 
D A mission statement typically concerns a company’s present business scope (who we are and what we do) whereas the principal concern of a strategic vision is the company’s long-term direction and future product-market-customer-technology focus
 
E A mission statement deals with where we are headed, whereas a strategic vision provides the critical answer to how will we get there

Question: A higher company’s overall weighted strength rating does not signal
 
A Greater implied net competitive advantage
 
B Stronger overall competitiveness versus rivals
 
C Weaker overall competitiveness versus rivals
 
D Possession of competitive advantage
 
E None of these

Question: Which of the following is not a primary focus of a company’s strategy?
 
A How to attract and please customers
 
B How each functional piece of the business will be operated
 
C How to achieve above-average gains in the company’s stock price and thereby meet or beat shareholder expectations
 
D How to compete successfully
 
E How to grow the business

Question: The competitive moves and business approaches a company’s management is using to grow the business, stake out a market position, attract and please customers, compete successfully, conduct operations, and achieve organizational objectives is referred to as its
 
A Strategy
 
B Mission statement
 
C Strategic intent
 
D Business model
 
E Strategic vision

Question: Which of the following is not one of the central questions in evaluating a company’s business prospects?
 
A What is the company’s present situation?
 
B What are the key products or service attributes demanded by consumers?
 
C Where does the company need to go from here?
 
D How should it get there?
 
E All of the above are pertinent in evaluating a company’s business prospects

Federalism and Conflicts

The United States operates under a unique system of federalism in which power, authority, and responsibility are divided or shared between the federal government and the state, tribal, and local governments. This decentralized or fragmented system helps the government remain responsive at the grass-roots level and avoid totalitarianism, but also contributes to inherent conflicts between and among federal, state, and local laws. One reason that conflicts occur is because the Constitution is somewhat vague about how the powers of the federal, state, and local governments are divided or shared. Another reason is because the interests and needs of federal, state, and local governments related to policy areas, such as education and healthcare, often overlap. For this Discussion, you explore federalism and how it sometimes contributes to conflicts between and among federal, state, and local laws. Later in the week, you explore how such conflicts are resolved.

To prepare for this Discussion:

• Review the online article, “ Federalism Checks the Power of the Central Government.” Pay particular attention to the definition of federalism and the overlap between federal and state interests and powers.
• Review the article, “Federalism and Environmental Policy: The Case of Solid Waste Management” and the course media “The Courts–Federal, State, and Local Conflicts.” Think about how federalism might contribute to conflicts between and among federal, state, and local laws.
• Review the article, “Federalism: How the Principle Works on State and Local Levels.” Consider how federalism might contribute to conflicts between state and local laws.
• Select a policy area (e.g. – education, healthcare, drug use, immigration, the environment, etc.) to use for this assignment.
• Using the Internet and/or the Walden Library, find an example in which federalism contributed to a conflict between federal and state laws or between state and local laws related to the policy area you selected.

With these thoughts in mind:

Post by Day 4 a brief description of the policy area you selected. Then explain how federalism contributed to a conflict between federal and state laws or state and local laws related to the policy area you selected. Be specific.

Be sure to support your postings and responses with specific references to the Learning Resources.

Read a selection of your colleagues’ postings.

Respond by Day 6 to at least one of your colleagues’ postings in one or more of the following ways:

• Ask a probing question.
• Share an insight from having read your colleague’s posting.
• Offer and support an opinion.
• Validate an idea with your own experience.
• Make a suggestion.
• Expand on your colleague’s posting.

Return to this Discussion in a few days to read the responses to your initial posting. Note what you have learned and/or any insights you have gained as a result of the comments your colleagues made.