Midterm

48) Industry conditions change

because forces create pressures or incentives for industry participants (competitors, customers, suppliers) to alter their actions in important ways.

2) A company's strategy consists of

competitive moves and approaches that managers have developed to grow the business, attract and please customers, conduct operations, and achieve targeted objectives.

36) The most powerful of the five competitive forces is usually the

competitive pressures associated with rivalry among competing sellers in the industry for buyer patronage.

13) Top management's views about where the company is headed and what its future product-customer-market-technology will be

constitutes the strategic vision for the company.

28) The primary managerial purpose of setting objectives is to

convert the strategic vision into specific performance targets.

23) Examples of important cost drivers in a company's value chain do not include

customer service.

51) When things are not going well, the corrective adjustments that top executives need to make include

deciding when adjustments are needed and what adjustments to make.

45) Two analytical tools useful in determining whether a company's prices and costs are competitive are

value chain analysis and benchmarking.

12) A company's business model consists of its

profit formula and customer value proposition.

30) A first-rate SWOT analysis

provides a good basis for crafting a strategy.

21) A benefit of a vivid, engaging, and convincing strategic vision is

providing a beacon for lower-level managers in forming departmental missions.

15) Well-conceived visions are

a reference point for managers in making strategic decisions.

21) The competitive pressures from substitute products tend to be stronger when

buyers are relatively comfortable with the quality and performance of substitutes, and the costs to buyers of switching over to the substitutes are low.

34) Well-stated objectives are

specific, quantifiable or measurable, and challenging, and contain deadlines for achievement.

8) When a company is confronted with significant industry change that mandates radical revision of its strategic course, the company is said to have encountered a(n)

strategic inflection point.

3) The competitive moves and business approaches a company's management is using to grow the business, compete successfully, attract and please customers, conduct operations, respond to changing economic and market conditions, and achieve organizational objectives is referred to as its

strategy.

58) A company's strategic options for internally performed value chain activities do not include

switching to activity-based costing.

56) The greatest danger or risk of an unsound best-cost provider strategy is

that low-cost leaders will be able to steal away some customers on the basis of a lower price, and high-end differentiators will be able to steal away customers with the appeal of better product attributes.

67) 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

the "worry list" sets the management agenda for taking actions to improve the company's performance and business outlook.

25) A company's values concern

the beliefs, traits, and behavioral norms that company personnel are expected to display in conducting the company's business and pursuing its strategic vision and mission.

3) One important indicator of how well a company's present strategy is working is whether

the company is achieving its financial and strategic objectives and whether it is an above-average industry performer.

55) The corporate governance failure at Volkswagen in 2015 included all of the following except

the company policy that precluded former executives from serving on its board.

59) Which of the following is not an appropriate guideline for developing a strategic group map for a given industry?

Variables selected as axes for the map should be highly correlated.

46) Based on an analysis of the five forces that increase or decrease competitive pressures in an industry, in which of the following industries is profitability likely to be highest?

Video streaming services

84) What are the remedies for an internal cost disadvantage?

Ways to reduce costs of internally performed activities and improve cost competitiveness include: (1) implementing best practices, (2) revamping the value chain, (3) relocating high-cost activities, (4) outsourcing, (5) investing in productivity improvements, (6) finding ways to detour around the activities or items, (7) product redesign, and (8) reducing costs at the supplier or distributor level.

70) Costs and price differences among competing companies can have origins in activities performed by

the company's internally performed activities (its own value chain), but also on costs in the value chain of its suppliers and distribution channel allies.

12) The most powerful of the five typical sources of competitive pressures is usually

the competitive pressures associated with the market maneuvering and jockeying for buyer patronage that goes on among rival sellers in the industry.

14) The marketplace being a competitive battlefield is primarily due to

the constant rivalry of firms to strengthen buyer patronage among competing sellers of a product or service, in order to win a competitive edge over rivals.

16) Competitive pressures stemming from buyers' bargaining power tend to be weaker when

the costs incurred by buyers in switching to competing brands or to substitute products are relatively high.

25) Whether supplier-seller relationships in an industry represent a strong or weak source of competitive pressure is a function of

the extent to which suppliers can exercise sufficient bargaining power to influence the terms and conditions of supply in their favor and the extent of seller-supplier collaboration in the industry.

8) A company's resources and capabilities represent

the firm's competitive assets that determine its competitiveness and ability to succeed in the marketplace.

21) A strategy to be the industry's overall low-cost provider tends to be more appealing than a differentiation or focus strategy when

the offerings of rival firms are essentially identical, standardized, commodity-like products.

19) In which of the following circumstances are competitive pressures associated with the bargaining power of buyers not relatively strong?

when buyer demand is growing rapidly

40) A low-cost provider strategy can defeat a differentiation strategy

when customers are basically satisfied and do not think extra attributes are worth a higher price feature.

3) Which of the following are integral parts of the managerial process of crafting and executing strategy?

Developing a strategic vision, setting objectives, crafting a strategy, and initiating corrective adjustments

18) Which of the following is not a common shortcoming of company vision statements?

Focused and narrow—exclusive to a specific direction

6) Which of the following is not something a company's strategy is concerned with?

Management's choices about how quickly and closely to copy the strategies being used by successful rival companies

42) In a single-business company, the strategy-making hierarchy consists of

business strategy, functional strategies, and operating strategies.

31) Which of the following is not typically a trigger to an evolving strategy?

The need to respond to short-term swings in the stock market

47) What is the nitty-gritty issue surrounding a company's business model?

The nitty-gritty issue surrounding a company's business model is whether it can execute its customer value proposition profitably. Just because company managers have crafted a strategy for competing and running the business does not automatically mean the strategy will lead to profitability. It may or it may not.

6) Which of the following questions is not pertinent to company managers in thinking strategically about what directional path should be taken by the company and about developing a strategic vision?

What business approaches and operating practices should we consider in trying to implement and execute our business model?

1) Managers in all types of businesses must develop a clear answer for which of the following questions?

What is the set of actions that we need to take to outperform the company's competitors and achieve superior profitability?

9) The most important aspect(s) of a company's business strategy

are the actions and moves in the marketplace that managers take to gain a sustainable competitive advantage.

43) Functional strategies

concern the actions, approaches, and practices related to particular functions or processes within a business.

38) A winning strategy is one that

fits the company's internal and external situation, builds a sustainable competitive advantage, and improves the company's performance.

23) Ideally, a company's mission statement should be sufficiently descriptive and

identify the specific customer or market that the company intends to serve.

11) A company's business model

is management's blueprint for delivering a valuable product or service to customers in a manner that will yield an attractive profit.

24) A company's strategy is a "work in progress" and evolves over time because of the

ongoing need of company managers to react and respond to changing industry and competitive conditions.

30) Strategic objectives

relate to strengthening a company's overall market standing and competitive vitality.

14) A creative, distinctive strategy that sets a company apart from its rivals and that gives it a sustainable competitive advantage

signals that the company has a bold, ambitious strategic intent that places the achievement of strategic objectives ahead of the achievement of financial objectives.

41) Business strategy concerns

strengthening the company's market position and building competitive advantage.

47) The primary activities included in the value chain include

supply chain management, operations, distribution, sales and marketing, and customer service activities

66) An industry's key success factors

can be determined through identifying an industry's dominant economic characteristics, assessing the five competitive forces, considering the impacts of the driving forces, comparing the market positions of industry members, and forecasting the likely next moves of industry rivals.

33) Opportunities to differentiate a company's product offering

can exist in supply chain activities, R&D, manufacturing activities, distribution and shipping, or marketing, sales, and customer service.

24) Imitation by rivals is most challenging when

capabilities reflect a high level of social complexity and causal ambiguity.

12) Management's strategic vision for an organization

charts a strategic course for the organization ("where we are going") and outlines the company's future product-customer-market-technology focus.

44) Functional area strategies

concern the actions, approaches, and practices to be employed in managing particular functions within a business.

31) A differentiation strategy works best when

technological change is fast-paced and competition revolves around rapidly evolving product features.

54) Accurately assessing the competitiveness of a company's cost structure and value proposition requires

that managers understand an industry's entire value chain system.

54) For a best-cost provider strategy to be successful, a company must have

the capability to incorporate upscale attributes at lower costs than its rivals whose products have similar upscale attributes.

7) Which of the following factors represents the strategically relevant political factors in the macroenvironment that will influence the performance of all firms across the board?

the strength of the federal banking system

2) While there are many routes to competitive advantage, they all involve

delivering superior value to a broad or narrow market of buyers in ways rivals cannot readily match.

41) Rivalry among competing firms tends to be more intense when

demand for the product is growing slowly, one or maybe several industry members become dissatisfied with their market position, buyers have low switching costs, and strong companies outside the industry acquire weak firms in the industry and launch aggressive moves to build market share.

65) A company's competitive strength scores

determine whether a company has a cost-effective value chain.

4) When companies adopt the strategy formulation, strategy execution process, the first step is to

develop a strategic vision, mission, and values.

58) Best-cost provider strategies are appealing in those market situations where

diverse buyer preferences make product differentiation the norm and where a large number of value-conscious buyers can be induced to purchase mid-range products.

28) Easy-to-copy differentiating features

do not offer the promise of sustainable competitive advantage.

43) The two most important parts of SWOT analysis are

drawing conclusions from the SWOT listings about the company's overall situation and translating these conclusions into strategic actions to better match the company's strategy to its resource strengths and market opportunities, correct the important weaknesses, and defend against external threats.

18) A competitive strategy to be the low-cost provider in an industry typically does not work well when

emergent strategies are required to respond to changes in competitor power.

58) A strategic group consists of those firms in an industry that

employ similar competitive approaches and occupy similar positions in the market.

38) The task of stitching together a strategy

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.

31) A balanced scorecard for measuring company performance

entails striking a balance between financial objectives and strategic objectives.

36) Sizing up a company's overall resource strengths and weaknesses

essentially involves constructing a strategic balance sheet on which the company's resource strengths represent competitive assets and its resource weaknesses represent competitive liabilities.

37) A broad differentiation strategy works best in situations characterized by

fast-paced technological change and rapidly evolving product features that drive competition.

38) A broad differentiation strategy generally produces the best results in situations where

few rivals are following a similar differentiation approach.

52) The most difficult part of benchmarking is

figuring out how to gain access to information regarding rivals' practices and costs.

32) A balanced scorecard that includes both strategic and financial performance targets is a conceptually strong approach for judging a company's overall performance because

financial performance measures are lagging indicators that reflect the results of past decisions and organizational activities, whereas strategic performance measures are leading indicators of a company's future financial performance.

36) A company needs performance targets or objectives

for its operations as a whole and for each of its separate businesses, product lines, functional departments, and individual work units.

57) A company's biggest vulnerability in employing a best-cost provider strategy is

getting squeezed between firms employing low-cost provider strategies and those using high-end differentiation strategies.

13) Low-cost leaders who have the lowest industry costs are likely to

have outmanaged its rivals in finding ways to perform value chain activities more cost-effectively

46) Operating strategies primarily entail

how best to manage initiatives of strategic significance within each functional area.

27) Companies can pursue differentiation from many angles except

investing in managerial productivity and enjoying experience curve effects.

50) Driving forces analysis

involves identifying the driving forces, assessing whether their impact will make the industry more or less attractive, and determining what strategy changes a company may need to make to prepare for the impact of the driving forces.

57) A strategic group

is a cluster of industry rivals that have similar competitive approaches and market positions.

49) Identifying the primary and secondary activities that comprise a company's value chain

is the first step in understanding a company's cost structure (since each activity in the value chain gives rise to costs).

22) A company achieves a sustainable competitive advantage when

it develops capabilities proven difficult for competitors to imitate or best.

16) Organizational capabilities are virtually always

knowledge-based.

63) The value of doing competitive strength assessment is to

learn how the company ranks relative to rivals on each of the important factors that determine market success and ascertain whether the company has a net competitive advantage or disadvantage vis-à-vis key rivals.

10) A low-cost leader's basis for competitive advantage is

lower overall costs than competitors.

33) Managers of every company should be willing and ready to modify their strategy because

market conditions and circumstances are changing over time or the current strategy is clearly failing.

10) The common types of valuable resources and competitive capabilities that management should consider when crafting a strategy do not include

market share, profit growth, and increases in stock price.

37) The external market opportunities that are most relevant to a company are the ones that

match up well with the firm's financial resources and competitive capabilities, offer the best growth and profitability, and present the most potential for competitive advantage.

27) A company's core values typically do not include such things as

minimizing innovation, rewarding individuality, and setting financial performance targets.

35) Company objectives

need to be broken down into performance targets for each of its separate businesses, product lines, functional departments, and individual work units.

20) Effectively communicating the strategic vision down the line to lower-level managers and employees has the value of

not only explaining "where we are going and why" but, more importantly, also inspiring and energizing company personnel to unite to get the company moving in the intended direction.

26) The bargaining leverage of suppliers is greater when

only a small number of suppliers exist and when it is difficult for industry members to switch to attractive substitutes.

21) Different companies across different industries adopt any one of the five generic strategies to gain competitive advantage. Which of the following businesses is most likely to use a low-cost provider strategy?

A baby products retailer sells unassembled baby furniture produced in China

91) Explain the benefits of preparing a competitive strength assessment.

A company's competitive strength scores pinpoint its strengths and weaknesses against its rivals and point to offensive and defensive strategies capable of producing first-rate results. Competitive strength assessments thus provide useful conclusions about a company's competitive situation. Ranking a company against its major rivals shows how a company compares against its rivals, factor by factor (or capability by capability), thus revealing where it is strongest and weakest. Moreover, the overall competitive strength scores indicate whether or not a company is at a net competitive advantage or disadvantage against each rival.

2) ________ is/are the strategically relevant factors outside a company's industry boundaries—economic conditions, political factors, sociocultural forces, technological factors, environmental factors, and legal/regulatory conditions.

A company's macroenvironment

23) Which of the following is not a tangible resource?

A company's reputation for integrity and quality products

78) In conducting a SWOT analysis, is it enough to simply compile lists of the company's strengths, weaknesses, opportunities, and threats? Why or why not?

A first-rate SWOT analysis sizes up a company's internal strengths and competitive deficiencies, its market opportunities, and the external threats to its future well-being. Simply listing a company's strengths, weaknesses, opportunities, and threats is not enough; the payoff from SWOT analysis comes from the conclusions about a company's situation and the implications for strategy improvement that flow from the four lists.

19) Amy's Drive-Thru, a fast food facility near a college campus, offers healthy, sustainably grown vegetarian and vegan fast-food at higher prices than its competitors in the market and has a drive-through and indoor-seated, casual-dining operation. What strategy is Amy's Drive-Thru using to gain a competitive advantage?

A focused differentiation strategy

20) Rainbow Resorts Inc. has multiple tropical resorts in various locations. In a crowded market that caters to all kinds of consumers, this resort caters mainly to LGBTQ customers with a guaranteed hassle-free holiday experience at a premium price. What strategy is Rainbow using to gain competitive advantage?

A focused differentiation strategy

34) Which of the following firms uses an emergent strategy?

A microbrewer invests in building community water wells during a drought.

47) A focused differentiation strategy aims at securing competitive advantage

with a product or service offering carefully designed to appeal to the unique preferences and needs of a narrow, well-defined group of buyers.

51) ________ is a much-used and potent managerial tool for determining whether a company performs particular functions or activities in a manner that represents the best practice when both cost and effectiveness are taken into account.

Benchmarking

55) The target market of a best-cost provider is

value-conscious buyers.

5) Although there are many routes to competitive advantage, the two biggest factors that distinguish one competitive strategy from another are

whether a company's target market is broad or narrow and whether the company is pursuing a low cost or differentiation strategy.

64) Explain why a company's strategy is really a bundle of strategies.

Crafting a strategy is a collaborative team effort that includes managers in various positions and at various organizational levels, involving corporate strategies (in multibusiness firms), business strategies (by division or in single-business firms), functional strategies, and operating strategies.

23) Which of the following is not a good example of a substitute product that triggers stronger competitive pressures?

Dasani water as a substitute for Aquafina water

72) Which of the following factors usually is not a consideration involved with evaluating whether an industry presents a sufficiently attractive business opportunity?

Determining the industry outlook for future profitability

9) A capability of the firm is not considered to be

related to the level of resources available.

25) Which one of the following is a tangible resource?

Financial capital

16) Which of the following are characteristics of an effectively worded strategic vision statement?

Graphic, directional, and focused

21) Which of the following is not a good example of a company's resources?

Having higher earnings per share and a higher stock price than key rivals

53) Which of the following do not qualify as potential driving forces capable of inducing fundamental changes in industry and competitive conditions?

Increases in the economic power and bargaining leverage of customers and suppliers, growing supplier-seller collaboration, and growing buyer-seller collaboration

41) Which of the following questions ought to be used to distinguish a winning strategy from a so-so or flawed strategy?

Is the strategy well matched to the company's situation, helping the company achieve a sustainable competitive advantage and resulting in better company performance?

51) Which of the following are not distinguishing features of a company's successful best-cost provider strategy?

It seeks to be the low-cost provider in the largest and fastest-growing (or best) market segment.

33) Which of the following most accurately reflect a company's resource strengths?

Its core competencies, competitive capabilities, and valuable intangible assets

38) Which of the following is not a market opportunity most relevant to a particular company?

Likely entry of potent new competitors

89) Identify at least five common driving forces, and briefly explain how each one can produce important changes in industry and competitive conditions.

Most drivers of industry and competitive change fall into one of the categories in Table 3.2.

52) Which of the following are most unlikely to qualify as driving forces?

Mounting competition from substitutes and increasing efforts to collaborate with suppliers via strategic alliances

8) Each of the following exemplifies the impact of the macroenvironment on a company's strategic opportunities except

Netflix squares off with Amazon Prime as its most potent rival in the streaming television and film industry.

32) Which one of the following increases the competitive pressures associated with the threat of entry?

Newcomers can expect to earn attractive profits.

38) Which one of the following does not cause the rivalry among competing sellers to be weak?

One or more competitors become dissatisfied with their market position

15) Which of the following is not an action that a company can take to do a better job than its rivals of performing value chain activities more cost-effectively?

Redesigning products to eliminate features that might have market appeal, but excessively increase production costs

88) Identify five factors that tend to intensify competitive rivalry among an industry's member firms.

Rivalry determinants (shown in Figure 3.7) associated with intensified competitive pressures include: (1) competing sellers regularly launch fresh actions to boost their market standing and business performance, (2) competitors are equal in size and capability, (3) markets are slow growing, (4) abating buyer demand and sellers find themselves with excess capacity and/or inventory, (5) periods where it is less costly for buyers to switch brands, (6) industry conditions that tempt competitors to use price cuts or other competitive weapons to boost unit volume, (7) periods when one or more competitors become dissatisfied with their market position, and (8) periods when strong companies outside the industry acquire weak firms in the industry and launch aggressive, well-funded moves to build market share.

87) Assume a firm is not cost competitive with its rivals because of higher supplier-related costs. Identify three strategic moves that it can make to restore cost parity.

Supplier-related cost disadvantages can be attacked by pressuring suppliers for lower prices, switching to lower-priced substitute inputs, and collaborating closely with suppliers to identify mutual cost-saving opportunities.

24) A fast-food restaurant stocks bread, meat, sauces, and other main ingredients, but does not assemble and cook its burgers and sandwiches until a customer places an order. Which cost driver is the restaurant efficiently using to cut costs?

Supply chain efficiencies

47) Which of the following is not among the principal managerial tasks associated with managing the strategy execution process?

Surveying employees on how employee job satisfaction can be improved

26) Which one of the following is not an intangible resource?

Technological assets

52) A firm pursuing a best-cost provider strategy

seeks to offer more value-adding features than the industry's low-cost providers and lower prices than those pursuing differentiation.

61) What is the meaning of the term "balanced scorecard"? What are the merits of using a balanced scorecard in judging a company's performance?

The balanced scorecard is a widely used method for combining the use of both strategic and financial objectives, tracking their achievement, and giving management a more complete and balanced view of how well an organization is performing. Merely tracking a company's financial performance overlooks the fact that what ultimately enables a company to deliver better financial results is the achievement of strategic objectives that improve its competitiveness and market strength.

4) Which one of the following is not a reliable measure of how well a company's current strategy is working?

The company's development of human capital, organizational capital, and information capital

60) What is the difference between a mission statement and a strategic vision?

The defining characteristic of a well-conceived strategic vision is what it says about the company's future strategic course: "where we are headed and what our future product-customer-market-technology focus will be." The mission statements of most companies say much more about the enterprise's present business scope and purpose: "why we exist."

71) Identify the five questions that form the framework of evaluating a company's resources and competitive position.

The five questions comprising the task of evaluating a company's competitive strength and cost structure are: (1) How well is the company's strategy working? (2) What are the company's competitively important resources and capabilities? (3) What are the company's cost structure and customer value proposition competitive? (4) What is the company's competitive strength relative to key rivals? and (5) What strategic issues and problems must be addressed by management?

48) What is the connection between a company's strategy and its quest for sustainable competitive advantage?

The heart and soul of any strategy consists of the approaches to the marketplace that managers are taking to gain a sustainable competitive edge over their rivals. Five of the most frequently used and dependable strategic approaches to setting a company apart from its rivals and winning a sustainable competitive advantage are: (1) a low-cost provider strategy, (2) a broad differentiation strategy, (3) a focused low-cost strategy, (4) a focused differentiation strategy, and (5) a best-cost provider strategy.

18) Which of the following is not a factor that causes buyers' bargaining power to be stronger?

The industry is composed of a few large sellers, and the customer group consists of numerous buyers that purchase in fairly small quantities.

70) Which of the following factors should a company consider when determining if an industry offers good prospects for attractive profits?

The industry's growth potential, whether competition appears destined to become stronger or weaker, how the industry's driving forces might affect overall industry profitability, the company's competitive position relative to rivals, and the company's proficiency in performing industry key success factors

76) How can a resource-based strategy lead to a sustainable competitive advantage?

The more difficult and more expensive it is to imitate a company's resource or capability, the more likely that it can also provide a sustainable competitive advantage.

23) Which of the following is not one of the basic reasons that a company's strategy evolves over time?

The need on the part of company managers to make no adjustments to the company's business model

58) A well-conceived strategic vision helps prepare a company for the future. True or false? Explain and justify your answer.

True. Developing a strategic vision is necessarily future-oriented in that it charts a company's long-term direction.

1) Which of the following is not one of the five questions that comprise the task of evaluating a company's competitive strength and cost structure?

What are the company's most and least profitable geographic segments?

39) In which one of the following market circumstances is a broad differentiation strategy generally not well suited?

When buyers are homogeneous in their needs and preferences, and are generally satisfied with standardized product

48) Which one of the following does not represent market circumstances that make a focused low-cost or focused differentiation strategy attractive?

When buyers are not strongly brand loyal and a large number of other rivals are attempting to specialize in the same target segment

17) Which of the following conditions acts to weaken buyers' bargaining power?

When buyers are unlikely to integrate backward into the business of sellers

19) In which of the following circumstances is a strategy to be the industry's overall low-cost provider not particularly well matched to the market situation?

When buyers have widely varying needs and special requirements, and when the costs of switching purchases from one seller to another are relatively high

30) In which one of the following instances is supplier bargaining power and leverage not weakened?

When industry members pose a credible threat of backward integration into the business of suppliers

63) In seeking to predict the next moves of close or key rivals, it is not useful to consider which of these questions?

Which rivals have the strongest management team.

55) When looking at the entire industry, the main areas in a company's overall value chain where important differences between a firm's cost and value do not occur are in

a company's own internal activities, the supplier's industry value chain, and the forward channel portion of the industry chain.

20) The difference between a resource and a capability is that

a resource represents a competitive asset that is owned or controlled by the company, whereas a capability is a competently performed internal activity that is developed through the deployment of the company's resources.

10) A creative, distinctive strategy that delivers a sustainable, competitive advantage is important because

a strategy that yields a competitive advantage over rivals is a company's most reliable means of achieving above-average profitability and financial performance.

13) A company achieves sustainable competitive advantage when

a sufficiently large number of buyers have a lasting preference for its products or services as compared to the offerings of competitors.

9) A company's strategic plan consists of

a vision of where it is headed, a set of performance targets, and a strategy to achieve them.

59) Success with a best-cost provider strategy designed to outcompete high-end differentiators requires.

achieving significantly lower costs in providing the upscale features.

56) Managers can pursue any of several strategic approaches to reduce the costs of internally performed value chain activities and improve a company's cost competitiveness by

acquiring suppliers, rivals, or forward channel distributors.

1) A company's broad macroenvironment refers to

all the strategically significant forces and factors outside a company's boundaries—general economic conditions, population demographics, societal values and lifestyles, technological factors, and governmental legislation and regulation.

29) The most appealing approaches to differentiation are those that

are hard or expensive for rivals to duplicate and have considerable buyer appeal.

47) The driving forces in an industry

are major underlying causes of change in industry and competitive conditions and have the biggest influences in reshaping the industry landscape and altering competitive conditions.

65) The key success factors in an industry

are the strategy elements, intangible assets, and competitive capabilities that most affect industry members' abilities to prosper in the marketplace.

36) Broad differentiation strategies generally work best in market circumstances where

buyer needs and preferences are too diverse to be fully satisfied by a standardized product.

49) A focused differentiation strategy can lead to attractive competitive advantage when

buyers are not strongly loyal to a brand and a large number of other rivals are attempting to specialize in the same target segment.

39) A well-conceived strategy builds a company's

ethical worthiness and corporate social responsibility.

8) Which of the following is an issue not likely to be addressed by a company's business strategy?

Actions and approaches to mimic rivals' moves in the marketplace

7) Which of the following is not an element of a company's business strategy?

Actions to revise the company's financial and strategic performance targets

54) Define and explain the importance of the two elements of a company's business model.

A company's business model incorporates its customer value proposition and its profit formula. The customer value proposition lays out the company's approach to satisfying buyer wants and needs at a price customers will consider a good value; that is, the greater the value provided and the lower the price, the more attractive the value proposition is to customers. The profit formula describes the company's approach to determining a cost structure that will allow for acceptable profits given the pricing tied to its customer value proposition; that is, the lower the costs given the customer value proposition, the greater the ability of the business model to be a moneymaker.

52) Why is a company's realized strategy a blend of proactive and adaptive approaches?

A company's realized strategy is a combination of both deliberate or proactively planned elements and unplanned or adaptive emergent elements. This is because changing circumstances and ongoing management efforts to improve the strategy cause a company's strategy to evolve over time—a condition that makes the task of crafting a strategy a work in progress, not a one-time event.

29) Which of the following statements about a company's realized strategy is true?

A company's realized strategy is typically a blend of deliberate and/or planned initiatives and emergent and/or unplanned reactive strategy elements.

51) Why does a company's strategy tend to evolve over time?

A company's strategy tends to evolve over time due to (1) changing circumstances and (2) ongoing management efforts to improve the company's strategy.

18) Allset Motors, a manufacturer of self-driving delivery trucks, is working on developing its next-generation vehicles. It has decided on a strategy of focusing on a narrow buyer segment and outcompeting its rivals by offering buyers customized vehicles at a lower cost than its rivals. What basic strategic approach has Allset Motors decided upon?

Best-cost

37) An industrial air-conditioner manufacturing giant decides to outsource its operations to a new geographical location with cheaper labor amidst ongoing labor strikes in a few of its existing locations (due to proposed job cuts and relocation of the plant offshore). This draws criticism in its home market and affects its current market position and productivity. Which of the following would be an appropriate reactive (emergent) strategy while moving forward?

Canceling the job cuts till the market situation and entry operations stabilize

50) Why are capabilities critical to a company's quest for a sustainable competitive advantage?

Clever rivals can nearly always copy the attributes of a popular product or service, but it is substantially more difficult for rivals to match the know-how and specialized capabilities a company has developed and perfected over a long period.

17) Which one of the following is not a characteristic of an effectively worded strategic vision statement?

Consensus-driven (commits the company to a "mainstream" directional path that most stakeholders will enthusiastically support)

53) Provide at least two examples of a company's competitively valuable capabilities.

See Concepts & Connections 1.2 (Starbucks' Strategy in the Specialty Coffee Market). Several competitively valuable capabilities include: (1) training staff to provide customized products to customers, (2) elevating the customer experience via ambience and store design, (3) creating a supply chain that provides only the highest quality raw materials and ingredients, (4) demonstrating a commitment to corporate social responsibility, (5) pursing opportunities for both domestic and international expansion, and (6) broadening and periodically refreshing the product mix.

2) Which of the following is an integral part of the managerial process of crafting and executing strategy?

Setting objectives and using them as yardsticks for measuring the company's performance and progress

17) Which of the following is not a frequently used strategic approach to setting a company apart from rivals and achieving a sustainable competitive advantage?

Simply trying to mimic the successful strategies of rivals

14) Which one of the following is not an accurate attribute of an organization's strategic vision?

Specifying how the company intends to implement and execute its business model

58) Explain why some companies get to the top of industry rankings and stay there, while others do not.

The better conceived a company's strategy and the more competently it is executed, the more likely that the company will be a standout performer in the marketplace. In stark contrast, a company that lacks clear-cut direction, has a flawed strategy, or cannot execute its strategy competently is a company whose financial performance is probably suffering, whose business is at long-term risk, and whose management is sorely lacking. That is, how well a company performs is directly attributable to the caliber of its strategy and the proficiency with which the strategy is executed.

26) It is normal for a company's strategy to end up being

a blend of deliberate planned actions to improve the company's competitiveness and financial performance and as-needed unplanned reactions to unanticipated developments and fresh market conditions.

39) Crafting strategy requires

a collaborative effort that includes managers in various position at various organizational levels.

11) A company's strategic vision concerns

a company's directional path and future product-customer-market-technology focus.

24) The difference between the concept of a company mission statement and the concept of a strategic vision is that

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 with the company's future business scope (long-term direction and future product-customer-market-technology focus).

57) Why are capabilities needed to build a sustainable competitive advantage so important to a winning business strategy? Cite one of the company examples in the chapter to illustrate your answer.

A strategy should be tailored to the company's collection of competitively important resources and capabilities. It is unwise to build a strategy upon the company's weaknesses or pursue a strategic approach that requires resources that are deficient in the company. Examples include (1) FedEx's superior capabilities in next-day delivery of small packages and (2) Hyundai's advanced manufacturing processes and unparalleled quality control system. The capabilities of both of these companies have proven difficult for competitors to imitate or best and have allowed each to build and sustain a competitive advantage.

55) What are the three criteria that determine whether or not a company has a winning strategy?

A winning strategy must (1) fit the company's external and internal situation, (2) build a sustainable competitive advantage, and (3) improve the company's performance.

59) Explain what affects a company's ultimate success or failure in the marketplace.

Among all the things managers do, nothing affects a company's ultimate success or failure more fundamentally than how well its management team charts the company's direction, develops competitively effective strategic moves and business approaches, and pursues what needs to be done internally to produce good day-in, day-out strategy execution and operating excellence. Indeed, good strategy and good strategy execution are the most telling signs of good management.

1) Which one of the following is not one of the five stages of an ongoing, continuous strategic management process?

Developing a sustainable business model

37) Which of the following is the best example of a well-stated financial objective?

Increase earnings per share by 15 percent annually.

33) Why should long-run objectives take precedence over short-run objectives?

Long-run objectives are necessary for achieving long-term performance and stand as a barrier to undue focus on short-term results.

19) Which of the following are common shortcomings of company vision statements?

Too broad, vague or incomplete, bland/uninspiring, not distinctive, and too reliant on superlatives

25) Changing circumstances and ongoing managerial efforts to improve the strategy

account for why a company's strategy evolves over time.

29) A company needs financial objectives

because without adequate profitability and financial strength, the company's ultimate survival is jeopardized.

27) Crafting a strategy involves

blending deliberate, planned initiatives with emergent, unplanned reactive responses to changing circumstances, while abandoning planned strategy elements that have failed in the marketplace.

30) A company's realized business strategy is made up of

both deliberate and/or planned initiatives that have proven themselves in the marketplace and newly launched initiatives aimed at further boosting performance and emergent and/or reactive adjustments to unanticipated strategic moves by rivals, unexpected changes in customer preferences, and new market opportunities.

4) The essence of strategy is

developing lasting success that can support growth and secure the company's future over the long term.

43) In evaluating proposed or existing strategies, managers should

scrutinize the company's existing strategies on a regular basis to ensure they offer a good strategic fit, create a competitive advantage, and contribute to an above-average performance.

73) What are the key questions that form the framework of thinking strategically about a company's industry and competitive environment?

Questions include: (1) Do macroenvironmental factors and industry characteristics offer sellers opportunities for growth and attractive profits? (2) What kinds of competitive forces are industry members facing, and how strong is each force? (3) What forces are driving industry change, and what impact will these changes have on competitive intensity and industry profitability? (4) What market positions do industry rivals occupy—who is strongly positioned and who is not? (5) What strategic moves are rivals likely to make next? (6) What are the key factors of competitive success? (7) Does the industry outlook offer good prospects for profitability?

34) Which of the following is generally not considered as a barrier to entry?

Rapid market growth

89) What are the three main approaches to rectify a weakness in a company's customer value proposition?

Rectifying a weakness in a company's customer value proposition can include one or more of the following three approaches: (1) implement the use of best practices throughout the company, particularly for activities that are important for creating customer value—product design, product quality, or customer service; (2) adopt best practices for marketing, brand management, and customer relationship management to improve brand image and customer loyalty; and (3) reallocate resources to activities having a significant impact on value delivered to customers—larger R&D budgets, new state-of-the-art production facilities, new distribution centers, modernized service centers, or enhanced budgets for marketing campaigns.

86) Identify and briefly explain any four of the factors that influence the strength or intensity of competitive rivalry among an industry's member firms.

Rivalry determinants (shown in Figure 3.7) associated with competitive intensity include: (1) jockeying for position, (2) industries concentration or fragmentation, (3) size and scale of incumbents, (4) level of consumer demand, (5) industry growth rate, (6) buyer switching costs, and (7) degree of standardization or differentiation among rivals, products, and services.

87) Identify five factors that tend to weaken the intensity of competitive rivalry among an industry's member firms.

Rivalry determinants (shown in Figure 3.7) associated with weaker competitive pressures include: (1) industries consisting of vast numbers of small rivals, (2) industries composed of fewer than five rivals, (3) slow-growing markets, (4) incumbents who are not aggressive in drawing sales and market share away from other incumbents, (5) significantly differentiated products and high customer loyalty, (6) high buyer switching costs, and (7) high buyer demand.

29) ________ is identifying and appraising a company's resource strengths and weaknesses and its external opportunities and threats.

SWOT analysis

2) Which of the following is not a component of evaluating a company's competitive strength and cost structure?

Scanning the environment to determine a company's best and most profitable customers

76) Identify and describe the interactions among the competitive forces that comprise the five-forces model of competition. Which of these competitive forces is typically the strongest? Explain.

See Figure 3.2. These interactions stem from competitive pressures with respect to supplier bargaining power, buyer bargaining power, the threat of new entrants, and the threat of substitutes. These, in turn, influence competitive pressures among rival sellers, which is typically the strongest of the five forces.

79) Identify and briefly discuss any three of the factors that influence the bargaining strength and leverage of buyers.

See Figure 3.3. Among these factors are: (1) cost of buyers switching to competing brands or substitutes, (2) number of buyers or if a customer is particularly important to a seller, (3) level of buyer demand, (4) degree to which buyers are well informed about competing products and prices, and (5) degree to which buyers pose a credible threat to integrating backward into the business of sellers.

59) Explain why an organization needs a strategic vision. What purpose does a strategic vision serve?

A clearly articulated strategic vision communicates management's aspirations to stakeholders about "where we are going" and helps steer the energies of company personnel in a common direction. The defining characteristic of a well-conceived strategic vision is what it says about the company's future strategic course: "where we are headed and what our future product-customer-market-technology focus will be."

75) Why do a company's core competencies matter in crafting strategy?

A core competence is a proficiently performed internal activity that is central to a company's strategy and competitiveness. A core competence is a more competitively valuable strength than a competence because of the activity's key role in the company's strategy and the contribution it makes to the company's market success and profitability. Often, core competencies can be leveraged to create new markets or new product demand, serving as the engine behind a company's growth.

61) Identify cost drivers in a company's value chain. Explain how these drivers impact a firm's generic strategy.

A cost driver is a factor having a strong effect on the cost of a company's value chain activities and cost structure. See Figure 5.2 for a list of cost drivers. Aspects of a low-cost leadership strategy can include: (1) striving to capture all available economies of scale, (2) taking full advantage of experience and learning curve effects, (3) trying to operate facilities at full capacity, (4) substituting lower-cost inputs whenever there's little or no sacrifice in product quality or product performance, (5) employing advanced production technology and process design to improve overall efficiency, (6) using communication systems and information technology to achieve operating efficiencies, (7) using the company's bargaining power vis-à-vis suppliers to gain concessions, (8) being alert to the cost advantages of outsourcing and vertical integration, and (9) pursuing ways to boost labor productivity and lower overall compensation costs.

65) What are the distinctive features of a focused differentiation strategy? How is it different from a broad differentiation strategy?

A focused differentiation strategy is keyed to offering carefully designed products or services to appeal to the unique preferences and needs of a narrow, well-defined group of buyers, or market niche, whereas a broad differentiation strategy is aimed at a mass market composed of many buyer groups and market segments.

67) Which one of the five generic competitive strategies is most likely to be best suited for an industry whose product is a commodity? Explain.

A low-cost provider strategy tends to work best when the products of rival sellers are essentially identical and are readily available from several sellers. Commodity-like products and/or ample supplies set the stage for lively price competition; in such markets, it is the less-efficient, higher-cost companies that are most vulnerable.

32) To which of the following firms is the term "repeatedly evolving strategy" most applicable?

A mobile company, established in a saturated market, that aims at a quarterly release of new products

91) Identify at least three benefits of constructing a strategic group map.

A strategic group consists of those industry members with similar competitive approaches and positions in the market. Companies in the same strategic group can resemble one another in a variety of ways. For example, they may have comparable product-line breadth, emphasize the same distribution channels, depend on identical technological approaches, or offer buyers essentially the same product attributes or similar services and technical assistance. Among the benefits of constructing a strategic group map are: (1) examining what strategic groups exist; (2) identifying the companies within each group; (3) determining if a competitive "white space" exists, that is, where industry competitors are able to create and capture altogether new demand; (4) tabulating the number of strategic groups in an industry; and (5) determining their respective market positions.

63) What are the distinctive features of a focused low-cost strategy? How does a focused low-cost strategy differ from a low-cost leadership strategy?

Achieving a low-cost edge over rivals comes from eliminating and/or curbing "nonessential" activities and outmanaging rivals in performing essential activities. A cost driver is a factor having a strong effect on the cost of a company's value chain activities and cost structure. See Figure 5.2 for a list of cost drivers. Aspects of a low-cost leadership strategy can include: (1) striving to capture all available economies of scale, (2) taking full advantage of experience and learning curve effects, (3) trying to operate facilities at full capacity, (4) substituting lower-cost inputs whenever there's little or no sacrifice in product quality or product performance, (5) employing advanced production technology and process design to improve overall efficiency, (6) using communication systems and information technology to achieve operating efficiencies, (7) using the company's bargaining power vis-à-vis suppliers to gain concessions, (8) being alert to the cost advantages of outsourcing and vertical integration, and (9) pursuing ways to boost labor productivity and lower overall compensation costs. A focused strategy based on low cost, on the other hand, aims at securing a competitive advantage by serving buyers in a target market niche at a lower cost and a lower price than rival competitors. This strategy has considerable attraction when a firm can lower costs significantly by limiting its customer base to a well-defined buyer segment. The avenues to achieving a cost advantage over rivals also serving the target market niche are the same as for low-cost leadership: outmanaging rivals in keeping the costs to a bare minimum and searching for innovative ways to bypass or reduce nonessential activities. The only real difference between a low-cost provider strategy and a focused low-cost strategy is the size of the buyer group to which a company is appealing.

94) Identify four key success factors (KSFs) that affect whether an industry does or does not present a company with a good business opportunity.

An industry's KSFs are those competitive factors that most affect industry members' ability to survive and prosper in the marketplace. These include: (1) the particular strategy elements, (2) product attributes, (3) operational approaches, and (4) resources and competitive capabilities that spell the difference between being a strong competitor and a weak competitor—and between profit and loss.

6) Which of the following is likely to have the biggest strategy-shaping impact on on-demand transportation providers such as Uber and Lyft?

Apple and Ford launch a global network of autonomous driverless cars, buses, and trucks on demand via a mobile app.

66) In what market and competitive circumstances are focused low-cost and focused differentiation strategies attractive?

As opposed to broader market strategies, a focused strategy based on low cost aims at securing a competitive advantage by serving buyers in the target market niche at a lower cost and a lower price than rival competitors. This strategy has considerable attraction when a firm can lower costs significantly by limiting its customer base to a well-defined buyer segment. Focused differentiation strategies, on the other hand, are keyed to offering carefully designed products or services to appeal to the unique preferences and needs of a narrow, well-defined group of buyers, or market niche, instead of a broad differentiation strategy that is aimed at many buyer groups and market segments.

75) What are the relevant factors and forces comprising the environmental context in which a pizza restaurant company operates. Which of these factors and forces constitute the company's macroenvironment, and which constitute the industry and competitive environment? Explain.

As shown in Figure 3.1, a pizza restaurant's broad macroenvironment encompasses all of the relevant factors—political factors, economic conditions in the firm's general environment, sociocultural forces, technological factors, environmental forces, and legal/regulatory factors—whereas its industry and competitive environment represent the "inner ring" or narrower part of that operating environment.

81) What is benchmarking and why is it a strategically important analytical tool?

Benchmarking is a potent tool for learning which companies are best at performing particular activities and then using their techniques (or "best practices") to improve the cost and effectiveness of a company's own internal activities.

82) What benefits might management expect to gain from benchmarking the "best practices" of those in other industries?

Benchmarking is a potent tool for learning which companies are best at performing particular activities and then using their techniques (or "best practices") to improve the cost and effectiveness of a company's own internal activities.

31) Which one of the following is not part of conducting a SWOT analysis?

Benchmarking the company's resource strengths and competitive capabilities against industry key success factors

8) A boutique hotel chain provides upscale rooms and superior customer service at value prices. What strategy is the hotelier using to gain competitive advantage?

Best-cost provider strategy

26) Domino's Pizza has a well-known slogan: "We'll deliver in 30 minutes or less, or it's free!" By using this slogan, what has the pizza maker achieved?

Built a unique customer value proposition

20) Which of the following factors is not a relevant consideration in judging whether buyers' bargaining power is relatively strong or relatively weak?

Buyer needs and expectations are changing slowly or rapidly.

24) In which of the following instances are industry members not subject to stronger competitive pressures from substitute products?

Buyers are dubious about using substitutes.

88) What must a company do to translate its performance of value chain activities into competitive advantage?

Companies must undertake ongoing and persistent efforts to be cost-efficient and develop differentiation advantages. A company's value-creating activities can offer a competitive advantage in one of two ways: contribute to greater efficiency and lower costs and provide a basis for differentiation.

94) Identify and explain something that can be learned from conducting a competitive strength assessment.

Competitive strength scores provide useful conclusions about a company's competitive situation, including the cost-effectiveness of its value chain, as shown in Table 4.3. Moreover, the overall competitive strength scores indicate whether or not a company's value chain places it at a net competitive advantage or disadvantage against each rival

93) Identify and explain something that cannot be learned from doing a competitive strength assessment.

Competitive strength scores provide useful conclusions about a company's competitive situation, including the cost-effectiveness of its value chain, as shown in Table 4.3. Moreover, the strength rating provides guidance in all areas above, except regarding whether or not a company should shore up its weaknesses by adopting best practices and/or revamping the makeup of its value chain.

96) Why is it important for company managers to develop a "worry list" of strategic issues and problems that they need to address and to resolve? What should they consider to develop this list?

Compiling a "worry list" of problems and issues creates an agenda for managerial strategy making. Pinpointing the precise things that management needs to worry about sets the agenda for deciding what actions to take next to improve the company's performance and business outlook.

16) Which of the following is a not a frequently used strategic approach to setting a company apart from rivals and achieving a sustainable competitive advantage?

Copying rivals on their competitive moves

15) Which of the following is not included in proven approaches to winning a sustainable competitive advantage?

Crafting a broad-cost provider strategy

36) A luxury hot-tub manufacturer offered monogrammed bathrobes as a gimmick when their hot tubs did not sell. Their monogrammed bathrobes became famous among some women and led to a line of exclusive bath products for women. The bathtub manufacturer established shops in various regional locations and hired celebrities to market their products to enhance sales. Today, its products are sold through retail outlets and online sites throughout the world. Which of the following is accurate?

Creating a subbrand that offered exclusive bath products for women was an emergent strategy.

90) In doing driving forces analysis, is it sufficient to simply identify the driving forces that are operating to alter industry and competitive conditions? Why or why not? If not, then explain what else is required for a complete driving forces assessment.

Driving forces analysis consists of not one but three steps: (1) identifying what the driving forces are; (2) assessing whether the drivers of change are, individually or collectively, acting to make the industry more or less attractive; and (3) determining what strategy changes are needed to prepare for the impact of the driving forces.

4) Which of the following is not one of the principal components of strategic significance in the PESTEL analysis?

Environmental forces that include the competitive structure, the degree of industry fragmentation, and the mobility barriers that inhibit business

68) Identify and briefly discuss at least two examples of faulty oversight by a company's board of directors in corporate governance and/or the strategy formulation, strategy execution process.

Feedback: According to the illustration capsule in Concepts and Connections 2.4, Volkswagen did not have a strong independent board of directors that (1) was willing to accept responsibility, (2) even questioned whether or not it was the appropriate role of the board to be aware of such problems, and (3) included as chairman Ferdinand Piech, a former chief executive and a member of the Porsche family that had a 50 percent interest in the company.

6) Which of the following is not one of the five generic types of competitive strategy?

Focused best-cost provider strategy

69) Which of the following is a good example of a manufacturing-related key success factor?

High labor productivity (especially if the production process has high labor content)

68) Which of the following is not a good example of a marketing-related key success factor (KSF)?

High utilization of fixed assets

54) Which one of the following is not among the chief duties or responsibilities of a company's board of directors insofar as the strategy-making, strategy-executing process is concerned?

Hire and fire senior-level executives and work with the company's chief strategic planning officer to improve the company's performance.

3) Which of the following is not a major question to ask in thinking strategically about industry and competitive conditions in a given industry?

How many companies in the industry have good track records for revenue growth and profitability?

68) Which of the following is not accurate as concerns the task of identifying the strategic issues and problems that merit front-burner managerial attention?

Identifying the strategic issues and problems that the company faces is the first thing that company managers need to do before starting to analyze the company's internal and external environment.

57) Which of the following is not a good option for trying to remedy high internal costs vis-à-vis rival firms?

Implementing aggressive strategic resource mapping to permit across-the-board cost reduction

63) The achievement of financial objectives tends to be a lagging indicator of a company's performance while the achievement of strategic objectives tends to be a leading indicator of a company's future financial performance. True or false? Support and explain your answer.

In contrast to strategic objectives, which are leading indicators of a company's market standing and competitive vitality, a company's financial objectives are really lagging indicators that reflect the results of past decisions and organizational activities. The results of past decisions and organizational activities are often unreliable indicators of a company's future prospects. Companies that have been poor financial performers are sometimes able to turn things around, and good financial performers on occasion fall upon hard times. Hence, the best and most reliable predictors of a company's success in the marketplace and future financial performance are strategic objectives.

54) Which one of the following is not a common type of driving force?

Increasing efforts on the part of industry members to collaborate closely with their suppliers

16) Which of the following is not one of the ways that a company can achieve a cost advantage by revamping its value chain?

Increasing production capacity and then striving hard to operate at full capacity

92) Explain why a weighted competitive strength assessment is important.

Industry and competitive analyses reveal the key success factors and competitive forces that separate industry winners from losers. Benchmarking data and scouting key competitors provide a basis for judging rivals' competitive strength on several factors such as cost, key product attributes, customer service, image and reputation, financial strength, technological skills, distribution capability, and other factors. Resource and capability analysis reveals which of these are competitively important, given the external situation, and whether the company's competitive advantages are sustainable. Weights are assigned to each of the measures of competitive strength based on their perceived importance. High-weighted competitive strength ratings signal a strong competitive position and possession of competitive advantage; low ratings signal a weak position and competitive disadvantage. In addition to showing how competitively strong or weak a company is relative to its rivals, the strength ratings provide guidelines for designing wise offensive and defensive strategies. Based on these ratings, a clear picture emerges on exactly what strategic and competitive challenges confront the company, which of the company's competitive shortcomings need fixing, and what specific problems merit the company managers' front-burner attention.

31) Which one of the following does not intensify the competitive pressures associated with the threat of entry?

Industry members are struggling to earn good profits.

42) A pharmaceutical giant acquires a manufacturer of rare specialty drugs to improve its falling share prices and invests all its wealth into the deal. Due to a deficit, it agrees to do a joint venture for the acquisition and involves a major automobile giant to fund the deal. After a rocky start, the companies now have a strong market position and generate good profits. Which of the following regarding the company's strategy is true?

It is a winning strategy.

93) What are industry key success factors (KSFs)? Why is it important for strategy makers to have a clear understanding of an industry's KSFs?

KSFs are the strategy elements, product attributes, competitive capabilities, or intangible assets with the greatest impact on future success in the marketplace. KSFs by their very nature are so important to future competitive success that all firms in the industry must pay close attention to them or risk an eventual exit from the industry.

40) Which of the following is not an example of an external threat to a company's future profitability?

Lack of a distinctive competence

41) Which of the following is not an example of an external threat to a company's future profitability?

Lack of a well-known brand name with which to attract new customers and help retain existing customers

92) What is the analytical value of studying competitors and trying to predict what moves rivals will make next?

Michael E. Porter's four indicators of a rival's likely strategic moves include a rival's current strategy, objectives, capabilities, and assumptions about itself and the industry. A strategic profile of a rival that provides good clues to its behavioral proclivities can be constructed by characterizing the rival along these four dimensions. Unless a company pays attention to the strategies and situations of competitors and has some inkling of what moves these rivals will be making, it ends up flying blind into competitive battle.

62) Which of the following is not an option for remedying a forward channel-related cost disadvantage?

Negotiate more favorable prices with suppliers.

60) Which of the following is not an option for improving supplier-related value chain activities?

Persuade forward channel allies to implement best practices.

28) Which of the following is not an example of a company's dynamic capability?

Petsmart's ability to remain a big-box, bricks and mortar retailer

45) Based on an analysis of the five forces that increase or decrease competitive pressures in an industry, in which of the following industries is profitability likely to be lowest?

Pizza restaurants

9) ________ is the most powerful and widely known tool used to assess the state of competition in an industry.

Porter's five-force model

78) Identify and briefly explain any three factors that lead to weak bargaining power on the part of buyers.

See Figure 3.3. Among these factors are: (1) high cost of buyers switching to competing brands or substitutes; (2) small number of buyers, and a customer is not particularly important to a seller; (3) high level of buyer demand; (4) low degree to which buyers are well informed about competing products and prices; and (5) the degree to which buyers do not pose a credible threat to integrating backward into the business of sellers.

77) Identify and briefly explain any three factors that lead to strong bargaining power on the part of buyers.

See Figure 3.3. Among these factors are: (1) low cost of buyers switching to competing brands or substitutes; (2) large number of buyers, and a single customer or customer group is particularly important to a seller; (3) low level of buyer demand; (4) buyers are well informed about competing products and prices; and (5) the degree to which buyers pose a credible threat to integrating backward into the business of sellers.

80) Identify and briefly explain any two of the factors that influence the strength of competition from substitute products.

See Figure 3.4. Among these factors are: (1) good substitutes are available and are attractively priced, (2) substitutes have comparable or superior performance features, (3) end users have high or low switching costs, and (4) end users adapt to using substitutes.

82) Identify and briefly explain any three factors that lead to weak bargaining power on the part of suppliers.

See Figure 3.5. Among these factors are: (1) item being supplied is a commodity, (2) low seller switching costs to other suppliers, (3) moderate to high threat of backward integration by sellers, (4) good or new substitute inputs exist or are emerging, (5) surges in the availability of supply, and (6) industry incumbents represent a large fraction of supplier sales and continued high-volume purchases are critical to the survivability of suppliers.

81) Identify and briefly explain any three factors that lead to strong bargaining power on the part of suppliers.

See Figure 3.5. Among these factors are: (1) item being supplied is facing shortages, (2) high seller switching costs to other suppliers, (3) zero to low threat of backward integration by sellers, and (4) few substitute inputs exist or are expected to emerge, and those inputs are highly differentiated.

83) Identify and briefly explain any three factors that intensify competitive pressures stemming from the threat that new firms will enter the industry.

See Figure 3.6. Among these factors are: (1) the number of firms poised to enter is large, (2) low entry and exit barriers, (3) existing rivals are enjoying good profits, (4) industry outlook is stable or growing, (5) steady or high growth in buyer demand, (6) unlikely (or incapability of) retaliation from industry incumbents to a new entrant, and (7) incumbents are expanding into geographic or market segments where they do not currently have a presence.

84) Identify and briefly explain any three factors that weaken the competitive pressures stemming from the threat that new firms will enter the industry.

See Figure 3.6. Among these factors are: (1) the number of firms poised to enter is small, (2) high entry and exit barriers, (3) existing rivals are struggling to earn good profits, (4) industry outlook is risky or uncertain, (5) slow growth in buyer demand, and (6) likely retaliation of industry incumbents to a new entrant.

85) Identify and briefly describe five common barriers to entering an industry.

See Figure 3.6. The most significant barriers include knowledge, technological capability, access to markets, the level of capital requirements for new entrants related to manufacturing facilities and equipment, the costs of introductory advertising and sales promotion campaigns, the need for working capital to finance inventories and customer credit, and sufficient cash to cover start-up costs.

80) Draw a typical company value chain, and briefly explain the difference between primary activities and support activities.

See Figure 4.1. A company's value chain identifies the primary activities that can create customer value and related support activities. Primary activities include: supply chain management, operations, distribution, sales and marketing, and customer service activities. Support activities that facilitate and enhance the performance of the primary activities can include: product R&D, human resource management, and general administration.

83) Draw a typical value chain for an entire industry. Why are the activities performed by value chain allies strategically relevant?

See Figure 4.2 for an example. A company can improve its cost structure via strategies to reduce costs of suppliers and/or forward channel allies.

60) What are the five generic competitive strategies? Briefly describe each one and identify the type of competitive advantage that each strategy is aimed at achieving.

See Figure 5.1. Low cost (broad or focused), differentiation, (broad or focused), and a hybrid or best-cost provider are the five generic types of competitive strategies.

64) What are the distinctive features of a broad differentiation strategy? Under what circumstances is a broad differentiation strategy appealing?

See Figure 5.3. Aspects of a broad differentiation strategy can include: (1) seeking out high-quality input; (2) striving for innovation and technological advances; (3) creating superior product features, design, and performance; (4) investing in production-related R&D activities; (5) pursuing continuous quality improvement; (6) emphasizing human resource management activities that improve the skills, expertise, and knowledge of company personnel; (7) increasing emphasis on marketing and brand-building activities; and (8) improving customer service or adding additional services. A broad differentiation strategy tends to work best when (1) buyer needs and uses of the product are diverse; (2) there are many ways to differentiate the product or service that have value to buyers; (3) few rival firms are following a similar differentiation approach; and (4) technological change is fast-paced and competition revolves around rapidly evolving product features.

62) Compare and contrast cost drivers and uniqueness drivers in a company's value chain. Explain how these drivers might support a firm's generic strategy.

See Figures 5.2 and 5.3. A cost driver is a factor that has a strong effect on the cost of a company's value chain activities and ability to become a low-cost provider, whereas uniqueness driver is a value chain activity or factor that can have a strong impact on customer value and creating differentiation. Cost drivers include (1) striving to capture all available economies of scale, (2) taking full advantage of experience and learning curve effects, (3) trying to operate facilities at full capacity, (4) substituting lower-cost inputs whenever there's little or no sacrifice in product quality or product performance, (5) employing advanced production technology and process design to improve overall efficiency, (6) using communication systems and information technology to achieve operating efficiencies, (7) using the company's bargaining power vis-à-vis suppliers to gain concessions, (8) being alert to the cost advantages of outsourcing and vertical integration, and (9) pursuing ways to boost labor productivity and lower overall compensation costs. Uniqueness drivers, on the other hand, include such factors as (1) high quality inputs, (2) innovation and technological advances, (3) superior product features, (4) production-related R&D investments, (5) continuous quality improvement, (6) improving skills of personnel, marketing and brand-building, and (7) enhanced customer service.

5) Which of the following is not a factor to consider in identifying an industry's dominant economic features?

Strength of both driving forces and competitive forces

86) Describe some ways that a company can improve (1) its supplier-related value chain activities and (2) the activities of its forward channel allies.

Supplier-related cost disadvantages can be attacked by pressuring suppliers for lower prices, switching to lower-priced substitute inputs, and collaborating closely with suppliers to identify mutual cost-saving opportunities. There are three main ways to combat a cost disadvantage in the forward portion of the industry value chain: (1) pressure dealer-distributors and other forward channel allies to reduce their costs and markups; (2) work closely with forward channel allies to identify win-win opportunities to reduce costs, and (3) change to a more economical distribution strategy, that is, integrate forward into company-owned retail outlets.

62) What are the two types of objectives included in the balanced scorecard? Define and provide five examples of each.

The balanced scorecard is a widely used method for combining the use of both strategic and financial objectives, tracking their achievement, and giving management a more complete and balanced view of how well an organization is performing. The two types of objectives included in the balanced scorecard are strategic (e.g., market share, customer retention, customer satisfaction, customer acquisition, new product introduction, reduction of product development cycles, etc.) and financial (e.g., annual percent increases in sales and earnings per share, returns on capital employed, increases in internal cash flows for investment, and improved credit ratings).

5) Which one of the following is not a reliable measure of how well a company's current strategy is working?

The company's development of human capital, organizational capital, and information capital

95) Can an industry be attractive to one company and unattractive to another company? Why or why not?

The degree to which an industry is attractive or unattractive is not the same for all industry participants and potential new entrants. The attractiveness of an industry depends on the degree of fit between a company's competitive capabilities and industry key success factors.

72) Identify at least five indicators of whether a company's present strategy is working well.

The eight indicators of how well a company's strategy is working include: (1) whether the company is recording gains in financial strength and profitability and (2) whether the company's competitive strength and market standing are improving. Other indicators include (3) trends in the company's sales and earnings growth, (4) trends in the company's stock price, (5) trends in customer retention rates, (6) rate of new customer acquisition, (7) changes in company image and reputation, and (8) evidence of improvement in internal processes such as defect rate, order fulfillment, delivery times, days of inventory, and employee productivity.

45) List five elements of an enterprise's business strategy.

The five elements of an enterprise's business strategy include: (1) creating products and services that attract and please customers; (2) acting to position the company in its industry; (3) developing and deploying resources to build valuable competitive capabilities; (4) acting to ensure how important functions (R&D, supply chain activities, production, sales and marketing, distribution, finance, and human resources) will be operated; and (5) acting to achieve the company's performance targets.

56) What are the five stages of the strategy-making, strategy-executing process and what does each one involve?

The five stages are provided in the feedback.

11) Which of the following is not one of the five typical sources of competitive pressures?

The power and influence of industry-driving forces

65) A single-business company has three levels of strategy. Name and describe each level.

The three levels of strategy are provided in Feedback.

56) What are the three questions that managers can use to distinguish a winning strategy from a so-so or flawed strategy? Briefly explain why each question is important.

The three questions to distinguish a winning strategy from a so-so or flawed strategy are: (1) How well does the strategy fit the company's situation? (2) Is the strategy helping the company to achieve a sustainable competitive advantage? (3) Is the strategy producing good company performance? Regarding its fit with a company's internal and external situation, a strategy has to be well matched and must fit competitive conditions in the industry and other aspects of the enterprise's external environment. At the same time, it should be tailored to the company's collection of competitively important resources and capabilities. Regarding strategy and the achievement of sustainable competitive advantage, strategies that fail to achieve a durable competitive advantage over rivals are unlikely to produce superior performance for more than a brief period of time; the bigger and more durable the competitive edge that the strategy helps build, the more powerful it is. Regarding strategy and performance, the mark of a winning strategy is a strong company performance; the caliber of a company's strategy can be measured by (1) gains in profitability and financial strength and (2) advances in the company's competitive strength and market standing.

90) Assume a firm is at a cost disadvantage with its rivals because of higher distributor-dealer costs than its rivals. Identify two strategic moves that it can make to restore cost parity.

There are three main ways to combat a cost disadvantage in the forward portion (distributor-dealer) segment of the industry value chain: (1) pressure dealer-distributors and other forward channel allies to reduce their costs and markups, (2) work closely with forward channel allies to identify win-win opportunities to reduce costs, and (3) change to a more economical distribution strategy, that is, integrate forward into company-owned retail outlets.

39) Which of the following best describes the market opportunities that tend to be most relevant to a particular company?

Those that match up well with the firm's financial resources and competitive capabilities, offer the best growth and profitability, and present the most potential for competitive advantage

29) Which one of the following is not a reason industry members are often motivated to enter into collaborative partnerships with key suppliers?

To reduce the costs of switching suppliers

68) One of the big pitfalls in crafting a competitive strategy is that managers, who are torn about the pros and cons of the various generic strategies, will opt for "stuck-in-the-middle" strategies that represent compromises between lower costs and greater differentiation, and between broad and narrow market appeal. True or false? Explain your answer.

True. A company's biggest vulnerability in employing a best-cost provider strategy is not having the requisite core competencies and efficiencies in managing value chain activities to support the addition of differentiating features without significantly increasing costs. A company with a modest degree of differentiation and no real cost advantage will most likely find itself squeezed (or trapped in the middle) between the firms using low-cost strategies and those using differentiation strategies. Thus, a successful best-cost provider must offer buyers significantly better product attributes to justify a price above what low-cost leaders are charging. Likewise, it has to achieve significantly lower costs in providing upscale features so that it can outcompete high-end differentiators on the basis of a significantly lower price.

74) A distinctive competence represents competitively superior resource strength. True or false? Explain your answer.

True. A distinctive competence is a competitively important activity that a company performs better than its rivals—it thus represents a competitively superior internal strength. It can enable a company to deliver standout value to customers (in the form of lower prices, better product performance, or superior service).

79) A company lacking stand-alone resource strength should focus on bundling several resource strengths into a core competence. True or false? Explain and support your answer.

True. Cross-functional capabilities draw on a number of different kinds of resources and are multidimensional in nature—they spring from the effective collaboration among people with different types of expertise working in different organizational units. A resource bundle is a linked and closely integrated set of competitive assets centered around one or more cross-functional capabilities. Resource bundles can sometimes pass the VRIN tests of a resource's competitive power even when the individual components of the resource bundle cannot. They fulfill an important strategic objective as it imparts a potential for attractive and long-lived profitability.

95) In determining the various strategic issues that a company needs to address, managers need to consider both the results of its analysis of the company's external environment and the results of its evaluation of the company's competitive position, customer value proposition, and cost structure. True or false? Explain and defend your answer.

True. The most important analytical step is to zero in on exactly what strategic issues company managers need to address. This step involves drawing on the results of both industry and competitive analysis and the evaluations of the company's internal situation. The task here is to get a clear fix on exactly what industry and competitive challenges confront the company, which of the company's internal weaknesses need fixing, and what specific problems merit front-burner attention by company managers.

42) Which of the following is not one of the pitfalls of pursuing a differentiation strategy?

Trying to strongly differentiate the company's product from those of rivals rather than be content with weak product differentiation

51) Which of the following is not generally a driving force capable of producing fundamental changes in industry and competitive conditions?

Ups and downs in the economy and interest rates

22) Which of the following is not one of the pitfalls of a low-cost provider strategy?

Using a cost-based advantage to improve the company's bargaining position with high-volume buyers

30) Which of the following is not a value driver of a broad differentiation strategy?

Utilizing just-in-time inventories and made-to-order products when customer demand rises

18) The four tests of a resource's competitive power are often referred to as the

VRIN test, which asks if a resource is valuable, rare, inimitable, and nonsubstitutable.

12) ________ is a powerful tool for sizing up the company's competitive assets and determining whether they can provide the foundation necessary for competitive success in the marketplace.

VRIN tests

85) Assume a firm is at a cost disadvantage with its rivals because its internal costs are higher than those of its rivals. Identify several strategic moves that it can make to restore cost parity.

Ways to reduce costs of internally performed activities and improve cost competitiveness include: (1) implementing best practices, (2) revamping the value chain, (3) relocating high-cost activities, (4) outsourcing, (5) investing in productivity improvements, (6) finding ways to detour around the activities or items, (7) product redesign, and (8) reducing costs at the supplier or distributor level.

27) In which one of the following instances is suppliers' bargaining power and leverage not weakened?

When the items purchased from suppliers are in short supply

66) Which one of the following is not something that can be learned from doing a competitive strength assessment?

Whether a company should correct its weaknesses by adopting best practices and/or revamping the makeup of its value chain

28) Which one of the following is not a factor that affects the strength of suppliers' bargaining power?

Whether industry members are struggling to make good profits because of slow-growing market demand

71) Evaluating whether an industry presents a sufficiently attractive business opportunity usually does not involve a consideration of which of the following factors?

Whether the industry's product is strongly or weakly differentiated

64) Angela and Jeff are co-owners of five specialty cupcake and dessert bakeries in their region. Which of the following questions would not help them to predict the next strategic moves and countermoves of their rivals?

Which mode of transport does the rival's supplier use?

46) Explain the difference between a company's business model and a company's strategy.

While the company's strategy sets forth an approach to offering superior value, a company's business model is management's blueprint for delivering a valuable product or service to customers in a manner that will yield an attractive profit, incorporating its customer value proposition and its profit formula.

22) A company's mission statement typically addresses which of the following questions?

Who are we, what do we do, and why are we here?

49) Should a company's strategy be tightly connected to its quest for competitive advantage? Why or why not? What difference does it makes whether a company has a sustainable competitive advantage or not?

Yes, because a sustainable competitive advantage can allow a company to attract sufficiently large numbers of buyers who have a lasting preference for its products or services over those offered by its rivals, despite the efforts of competitors to offset that appeal and overcome that company's advantage. As to whether or not a sustainable competitive advantage makes a difference, the larger and more durable the competitive advantage, the better a company's prospects for winning in the marketplace and earning superior long-term profits relative to its rivals.

5) A company's strategy has a chance of succeeding only when it is predicated on

actions, business approaches, and competitive moves aimed at appealing to buyers and setting the company apart from rivals.

49) A company's direction, objectives, and strategy

are never final, as managing strategy is an on-going, dynamic process.

42) The most important payoff of doing a thorough SWOT analysis is

assisting strategy makers in drawing conclusions about the company's overall situation and crafting a strategy that is well-matched to the company's resources and capabilities, its market opportunities, and the external threats to its future well-being.

7) A resource-based strategy

attempts to exploit resources in a manner that offers value to customers in ways rivals are unable to match.

14) For a particular company resource to have meaningful competitive power and perhaps qualify as a basis for competitive advantage, it should

be competitively important, hard for competitors to copy or imitate, rare and something rivals lack, and not be easily trumped by the substitute resources/capabilities of rivals.

4) A company's competitive strategy should

be well matched to its internal situation and be predicated on leveraging its collection of competitively valuable resources and competencies.

1) The objective of competitive strategy is to

build a competitive advantage in the marketplace by giving buyers superior value relative to the offerings of rival sellers.

13) Using the five-forces model of competition to determine the character and strength of the competitive forces within a given industry involves

building the picture of competition in three steps: (1) identify the different parties involved, along with specific factors that bring about competitive pressures; (2) evaluate how strong the pressures stemming from each of the five forces are (strong, moderate or weak); and (3) determining whether the collective impact of the five competitive forces is conducive to earning attractive profits in the industry.

15) A company that lacks a stand-alone resource that is competitively powerful may attempt to develop a competitive advantage through

bundled resources that enable superior performance of cross-functional capabilities that can be leveraged to support its business model and strategy.

25) Successful differentiation allows a firm to

command a premium price for its product and/or increase unit sales and/or gain buyer loyalty to its brand.

56) Increasing globalization can be a driving force in an industry because

companies need to spread their operating reach into more and more country markets to meet consumer demand and take advantage of available operating activities.

50) Benchmarking involves

comparing how different companies perform various value chain activities and then making cross-company comparisons of the costs of these activities.

19) When a company is good at performing a particular internal activity, it is said to have a

competence.

67) In identifying an industry's key success factors, strategists should

consider on what basis customers choose between competing brands, what resources and competitive capabilities firms need to be competitively successful, and what shortcomings are almost certain to put a company at a significant competitive disadvantage.

48) A company's value chain

consists of two broad categories of activities: the primary activities that create customer value and the requisite support activities that facilitate and enhance the performance of the primary activities.

48) Management is obligated to monitor new external developments, evaluate the company's progress, and make corrective adjustments in order to

decide whether to continue or change the company's strategic vision, objectives, strategy and/or strategy execution methods.

22) Every organization has many resources, capabilities, and routines; however, those few things the company does really well and performs with a very high proficiency are termed

distinct capabilities.

32) The most important parts of conducting a SWOT analysis are

drawing conclusions about the company's overall business situation and translating these conclusions into strategic actions.

27) When a company has become proficient in modifying, upgrading, or deepening the company's resources and capabilities in response to its changing environment and market opportunities, it is called a

dynamic capability.

12) The major avenues for achieving a cost advantage over its rivals include

eliminating or curbing nonessential cost-producing activities and performing essential value chain activities more cost-effectively than its rivals.

10) The strategy formulation, strategy execution process

embraces the tasks of developing a strategic vision, setting objectives, crafting a strategy, implementing and executing the strategy, and then monitoring developments and initiating corrective adjustments in light of experience, changing conditions, and new opportunities.

40) Corporate strategy

ensures consistency in strategic approach among businesses of a diversified, multibusiness corporation.

5) The strategic management process is shaped by

external factors such as the industry's economic and competitive conditions and internal factors such as the company's collection of resources and capabilities.

7) The strategic management process is shaped by

external factors such as the industry's economic and competitive conditions and internal factors such as the company's collection of resources and capabilities.

26) A company's values relate to such things as

fair treatment, integrity, ethical behavior, innovativeness, teamwork, top-notch quality, superior customer service, social responsibility, and community citizenship.

33) The competitive threat that outsiders will enter a market is weaker when

financially strong industry members send strong signals that they will launch strategic initiatives to combat the entry of newcomers.

55) An industry's driving forces

generally act in ways that will strengthen or weaken market demand, make competition more or less intense, and lead to higher or lower industry profitability.

62) Having good competitive intelligence about rivals' strategies, latest actions and announcements, resource strengths and weaknesses, and moves to improve their situation is important because it

helps a company to anticipate what moves rivals are likely to make next and to craft its own strategic moves.

49) Steps involved in driving forces analysis include

identifying the driving forces, assessing whether their impact will make the industry more or less attractive, and determining what strategy changes are needed to prepare for the impact of the driving forces.

35) A company's resource weaknesses can relate to

inability to achieve a leading market share.

53) The aim of the best-cost provider strategy is to create a competitive advantage by

incorporating attractive or upscale product attributes at a lower cost than rivals.

34) A route to take in developing a differentiation advantage includes

incorporating tangible features that add functionality, increase customer satisfaction with the product specifications, functions, and styling.

40) Rivalry among competing sellers is generally more intense when

industry conditions tempt competitors to use price cuts or other competitive weapons to boost unit volume.

60) Not all positions on a strategic group map are equally attractive because

industry driving forces and competitive pressures favor some companies or groups and hurt others, and the profit potential of different strategic groups varies because of strengths and weaknesses in each strategic group's position.

39) Rivalry among competing sellers tends to be less intense when

industry rivals are not particularly aggressive in drawing sales and market share away from rivals.

50) Proficient strategy execution

is always the product of much organizational learning.

69) Activity-based costing

is an accounting system that assigns a company's expenses to whichever activity in a company's value chain is responsible for creating the cost.

43) A competitive environment in which 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

is competitively unattractive from the standpoint of earning good profits.

42) A competitive environment in which there is weak to moderate rivalry among sellers, high entry barriers, weak competition from substitute products, and little bargaining leverage on the part of both suppliers and customers

is conducive to industry members earning attractive profits.

34) A company resource weakness or competitive deficiency

is something a company lacks or does poorly (in comparison to rivals) or a condition that puts it at a disadvantage in the marketplace.

7) The generic types of competitive strategies include

low-cost provider, broad differentiation, focused low-cost, focused differentiation, and best-cost provider strategies.

44) The collective impact of the five competitive forces on competitive pressures tends to

lower the combined profitability of industry members.

3) A company's competitive strategy deals with

management's game plan for securing a competitive advantage relative to rivals.

17) A company that is at a disadvantage in the marketplace because it lacks competitively valuable resources possessed by rivals

may be able to develop substitute resources that accomplish the same objective as the competitively valuable resource possessed by rivals.

32) A differentiation-based competitive advantage

often hinges on incorporating features that: (1) raise the performance of the product, (2) lower the buyer's overall costs of using the company's product, (3) enhance buyer satisfaction in intangible or noneconomic ways, or (4) deliver value to customers by exploiting competitive capabilities that rivals cannot match.

53) The obligations of an investor-owned company's board of directors in the strategy-making, strategy-executing process include

overseeing the company's financial accounting and financial reporting practices and evaluating the caliber of senior executives' strategy-making, strategy-executing skills.

52) The primary roles/obligations of a company's board of directors in the strategy-making, strategy-executing process include

overseeing the company's financial accounting and reporting practices, evaluating the caliber of senior executives' strategy-making and strategy-executing skills, and instituting a compensation plan that rewards top executives for results that serve shareholder interests.

14) Achieving a cost advantage over its rivals entails

performing value chain activities more cost-effectively than its rivals and finding ways to eliminate or bypass some cost-producing activities.

61) The payoff of good scouting reports on rivals is improved ability to

predict what strategic moves rivals are likely to make next, thereby allowing a company to prepare defensive countermoves and develop strategies to exploit rivals' missteps.

61) The options for remedying a cost disadvantage associated with activities performed by forward channel allies include

pressuring forward channel allies to reduce their costs and markups.

17) A competitive strategy of striving to be the low-cost provider is particularly attractive when

price competition is especially vigorous, buyers have low switching costs, and the majority of industry sales are made to a few large-volume buyers.

64) Doing a competitive strength assessment entails

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.

37) Factors that cause the rivalry among competing sellers to be weak include

rapid growth in buyer demand and high buyer-switching costs.

53) Determining whether a company's prices and costs are competitive

requires looking at the costs of a company's internally performed activities and the costs of its suppliers and forward channel allies (distributors/dealers).

28) A company is unlikely to develop an emergent strategy due to

rivals' value chain deficiencies.

44) The advantages of focusing a company's entire competitive effort on a single market niche allows for

scaling operations to serve the customer market segment.

40) In evaluating proposed or existing strategies, managers should

scrutinize the company's existing strategies on a regular basis to ensure they offer a good strategic fit, create a competitive advantage, and result in above-average performance.

45) A focused low-cost strategy seeks to achieve competitive advantage by

serving buyers in the target market niche at a lower cost and lower price than rivals.

50) Focusing provides the ability to secure a competitive edge, but it also carries some risks that will be detrimental to the focused firm, such as

the potential for the preferences and needs of niche members to shift over time toward mainstream provider product attributes.

46) A company's value chain identifies

the primary activities that create value for customers and related support activities.

45) Operating strategies concern

the relatively narrow strategic initiatives and approaches for managing key operating units within a business and for performing strategically significant operating tasks.

46) The chief difference between a low-cost leader strategy and a focused low-cost strategy is

the size of the buyer group that a company is trying to appeal to.

43) What sets focused (or market niche) strategies apart from low-cost leadership and broad differentiation strategies is

their concentrated attention on a narrow piece of the overall market.

35) Broad differentiation strategies are well-suited for market conditions where

there are many ways to differentiate the product or service and many buyers perceive these differences as having value.

10) The nature and strength of the competitive forces that prevail in an industry is generally a joint product of all of the following except

those associated with environmental forces such as climate change or water shortages.

35) The best test of whether potential entry is a strong or weak competitive force is

to ask if the industry's growth and profit prospects are strongly attractive to potential entry candidates.

41) A pitfall to avoid in pursuing a differentiation strategy is

trying to differentiate on the basis of attributes or features that are easily copied.

59) The options for remedying a supplier-related cost disadvantage include

trying to negotiate more favorable prices with suppliers and switching to lower priced substitute inputs.

6) A resource-based strategy

uses a company's valuable and rare resources and competitive capabilities to deliver value to customers that rivals have difficulty matching.

11) A low-cost leader can translate its low-cost advantage over its rivals into superior profit performance by

using its low-cost edge to underprice competitors and attract price-sensitive buyers in large enough numbers to increase total profits or refraining from price cutting and using the low-cost advantage to earn a higher profit margin on each unit sold.

9) The greatest and most important differences among the competitive strategies of different companies are essentially

whether a company's market target is broad or narrow and whether the company is pursuing a competitive advantage linked to low cost or differentiation.

22) Just how strong the competitive pressures are from substitute products depends on

whether attractively priced substitutes are readily available and the ease with which buyers can switch to substitutes.

15) Whether buyers' bargaining power poses a strong or weak source of competitive pressure on industry members depends in part on

whether buyer demand is strong or declining.

13) The competitive power of a company resource or competitive capability hinges on

whether it is rare and, therefore, something rivals lack.

44) One of the most telling signs of whether a company's market position is strong or precarious is

whether its prices and costs are competitive with those of key rivals.

20) The value to a company of pursuing a low-cost provider strategy is contingent upon

whether or not it is easy or inexpensive for rivals to copy the low-cost leader's methods or otherwise match its low costs.

11) The competitive power of a company resource depends on

whether the resource is really competitively valuable, if it is rare and something competitors lack, how hard it is to copy or imitate, and how easily it can be trumped by the substitute resource strengths and competitive capabilities of rivals.