These scenarios will give you practice applying concepts from the readings to models of real-world situations.
Read the following scenarios and complete the corresponding questions. Please remember to answer in complete and grammatically correct sentences. I am looking for your thought process in the answers to the questions, so be complete in your answers and use the opportunity to clearly demonstrate your newly acquired knowledge.
Scenario 1 (length: 0.5 page)
A pet store is considering adding an employee discount of 25% off anything in the store to the benefits the employees already receive. What are the long-run implications of adding this benefit to the wages that its employees receive and to the type of applicants that the pet store attracts?
Scenario 2 (length: 0.5 page)
According to the textbook, the profitability of the pharmaceutical industry is approximately 25%, higher than any of the other industries listed. Use Porter’s Five Forces to explain why the pharmaceutical industry is as large as it is. State whether each of the five forces is favorable to firms in the pharmaceutical industry and briefly explain why.
Scenario 3 (length: 0.5 – 1 page)
If you were the CEO of a women’s clothing retail firm, what specific strategies can be used to sustain profitability at the firm level? How do those strategies fit the three basic strategies that arise from the resource-based view of sustaining profitability?
Scenario 4 (length: 0.5 – 1 page)
Review the following resources:
- Website: Chinese Currency to Loosen Exchange Rate: Business Chief
- Website: China to Free Yuan in 5 Years, Says Hong Kong Exchanges’ Li
China is considering letting the exchange rate for the yuan freely float instead of being tightly controlled by the government. Currently, the Chinese government sets the official exchange rate* such that the Chinese yuan was undervalued. That is, one can purchase more yuan with a dollar than would be expected if the exchange rate was set by the market. Use supply and demand curves to explain how allowing the exchange rate to freely float would affect United States’ citizens and firms.
*Actually, the Chinese government sets an official rate but allows some deviation, but not significant deviation, from the official rate.