Strategic Management Chapter 6

What is an example of a strategically sound outsourcing relationship?

An industry-leading shoe company outsources its IT operations to a leading technology firm.

What statement about winning standard wars among early movers is true?

Establishing relationships with other participants in the sector can help a firm win a standard war.

The best example of forward vertical integration is

Harley-Davidson and Ducati's own-branded stores that sell motorcycles and related memorabilia.

_____________ is the range of product and service segments that the firm serves within its market.

Horizontal scope

What might be considered to be a major drawback of employing an outsourcing strategy?

It can hollow out a firm's own capabilities and cause it to lose touch with activities and expertise that contribute fundamentally to the firm's competitiveness and market success.

Which statement about joint ventures is correct?

Joint ventures are more durable but involve more risk than many other types of collaborative business arrangements.

Which statement about strategic alliances in industries experiencing rapid technological advances is true?

Many companies find strategic alliances an essential way to keep pace with technological change.

Which statement concerning mergers and acquisitions is accurate?

The difference between a merger and an acquisition relates primarily to management control and financial arrangements.

What is a sign that a leading firm may be vulnerable to an offensive strategic attack?

The firm's use of aging technology and outdated equipment.

_________ is the extent to which a firm's internal activities encompass one, some, many, or all of the activities that make up an industry's entire value chain system.

Vertical scope

An example of a company that does not use blue-ocean market strategy is

Walmart's logistics and distribution in the retail industry.

A joint venture can be defined as

a new corporate entity that is jointly owned by two or more companies that agree to share in the revenues, expenses, and control of the new company.

In a strategic alliance between companies, the decision-making process should

allow partners to keep pace with developments in the market.

If new infrastructure is required before buyer demand can surge, a company should

be careful about allocating too many resources into being first in the market.

In a winner-take-all type of market,

first-mover advantages can insulate a company from competition.

Price cutting can be an effective strategy for companies that

have already achieved a cost advantage.

The five generic competitive strategies are not characterized by a_________ strategy.

high-cost

A blue-ocean strategy is a strategy that seeks to gain a competitive advantage by

inventing a new segment of the market that makes existing competitors no longer relevant.

A primary reason why mergers and acquisitions sometimes fail is due to the

misinterpretation of the cultural differences, like employee disenchantment and low morale, differences in management styles and operating procedures, and operations integration decision mistakes.

The objective of a competitive strategy is to

provide buyers superior value relative to the offerings of rival sellers in order to attain a competitive advantage.

A signal that would not warn challengers that strong retaliation is likely is

publicly announcing strong quarterly earnings potential to financial analysts.

Companies like Amazon, Apple, Facebook, and Google employ all but ONE of the following offensive actions to complement and supplement the choice of one of the five generic competitive strategies. Which is not an example of an offensive move?

pursuing a market share leadership strategy

Bumble, a digital dating site where women make the first move, specifically uses which strategic weapon in its offensive arsenal?

pursuing disruptive product innovations to create new markets

Relying on outsiders to perform certain value chain activities offers such strategic advantages as

reducing the company's risk exposure to changing technology and/or changing buyer preferences.

A merger can be defined as

the combining of two or more companies into a single corporate entity.

A company's strategic offensive should be based on

the company's strengths as well as its rival's strengths and weaknesses.

A strategy of vertical integration can have substantial drawbacks, including

the environmental costs of coordinating operations across vertical chain activities.

First-mover disadvantages (or late-mover advantages) rarely arise when

the market response is strong and the pioneer gains a monopoly position that enables it to recover its investment.

If the race to market leadership in a particular industry is a marathon,

there may be enough time for fast followers and late movers to catch up.

The defensive approach that companies use most frequently to defend their market position is

to block avenues that competitors might use to launch a strategic offensive.

To fend off a competitive attack, defensive-minded companies

use innovation and intellectual property protection to obtain product line exclusivity to force competitors to use other distributors.

Companies that outsource strategically important operations run the risk of

weakening their ability to sustain their competitive advantage in areas vital to the company's success.

Being a first mover is not particularly advantageous under which circumstance?

when markets are slow to accept the innovative product offering of a first mover, and fast followers possess sufficient resources and marketing muscle to overtake a first mover

On average, the number of strategic alliances increases by what percentage annually?

25%

Which statement about establishing the technical standard in an industry is true?

Establishing a technical standard is an experience-based advantage that can grow over time.

True or False: A company's strategic offensive is usually based on brand-name recognition.

False

True or False: Interpersonal relationships are irrelevant to the success of strategic alliances.

False

True or false: For a company making a strategic move, being a fast follower or a late mover is always better in the long run than being a first mover.

False

True or false: Strategic alliances are preferable to horizontal mergers and acquisitions in a fast-paced market with evolving technologies.

True

A good example of blue-ocean type of offensive strategy is

a company like Australian winemaker Casella Wines that created a Yellow Tail brand designed to appeal to a wider market, one that also includes consumers of other alcoholic beverages.

The term "blue ocean" refers to a market space in which

an industry does not yet exist and the market space is untainted by competition.

A vertical integration strategy can expand the firm's range of activities

backward into sources of supply and/or forward toward end users.

The new owners of a long-established clothing retailer have experience in garment manufacturing and as a result they decide to expand into that business. This type of business growth is called

backward vertical integration.

The Achilles' heel (or biggest disadvantage/pitfall) of relying heavily on alliances and cooperative strategies is

becoming dependent on other companies for essential expertise and capabilities.

Experience indicates that strategic alliances

can suffer culture clash and integration problems due to different management styles and business practices.

Decisions regarding the a company's scope of the firm

concern choices about which operations a company will conduct internally and which it will not.

Backward vertical integration can produce a

differentiation-based competitive advantage when activities enhance the performance of the final product.

Combined companies may be able to reduce supply chain costs because

expanded operating capacity may increase the company's bargaining power with suppliers.

In the face of strong competition from Amazon, Walmart's 2016 acquisition of Jet. com was driven by a strategic objective, such as

expanding its geographic coverage or extending its business into new product categories.

Strategic offensives should, as a general rule, be based on

exploiting a company's strongest competitive assets—its most valuable resources and capabilities.

Expanding along the value chain into products and services that are closer to the end user is called

forward vertical integration.

Mergers and acquisitions

frequently do not produce the hoped-for outcomes.

The strategic impetus for forward vertical integration is to

gain better access to end users and better market visibility.

The strategic impetus for Tesla's forward vertical integration into dealerships and charging stations is

gaining better access to Tesla's end users and better market visibility.

In order to be successful, a preemptive strike by a company needs to

give the company a prime position in the market that rivals cannot easily bypass.

A company racing to seize opportunities on the frontiers of advancing technology often utilizes strategic alliances and collaborative partnerships to

help master new technologies and build new expertise and competencies, establish a stronger beachhead for participating in the target industry, and open up broader opportunities in the target industry.

The introduction of disruptive product innovations

is a risky business strategy that has the potential to earn a company a majority of the market share.

When buyer preferences shift, a vertically integrated company

may have difficulty adjusting its product lines to meet new demand.

Merger and acquisition strategies

may offer considerable cost-saving opportunities and can also be beneficial in helping a company try to invent a new industry.

Carlos, the CEO of a local HR recruiting and staffing company, is considering a strategic alliance with a local payroll company. What would not likely be a consideration for Carlos with respect to whether the proposed alliance could become successful and realize its intended benefits?

minimizing the amount of resources that the partners commit to the alliance

Outsourcing typically ______ the scope of a business's operations.

narrows

Outsourcing strategies can offer such advantages as

obtaining higher quality and/or cheaper components or services, improving a company's ability to innovate, and reducing its risk exposure.

A firm with a vertical integration strategy that seeks full integration

participates in all stages of the industry value-chain system.

A vertically integrated firm

participates in multiple stages of an industry's value chain system.

A company that fails to manage its strategic alliance probably has

refrained from making commitments to its partners and ensured they do the same.

Bypassing regular wholesale/retail channels in favor of direct sales and Internet retailing can have appeal if it

reinforces the brand, enhances consumer satisfaction, and results in lower prices to end users.

The principal advantages of strategic alliances over vertical integration or horizontal mergers/acquisitions are

resource pooling and risk sharing, more adaptive response capabilities, and greater speed of deployment.

The two big drivers of outsourcing are

that outsiders can often perform certain activities better or more cheaply, and outsourcing allows a firm to focus its entire energies on those activities that are at the center of its expertise (its core competencies).

The race among rivals for industry leadership is more likely to be a marathon rather than a sprint when

the market depends on the development of complementary products or services that are currently not available, buyers have high switching costs, and influential rivals are in position to derail the efforts of a first mover.

What would be an example of a firm pursuing vertical integration?

the owner of a poultry farm expanding into food distribution

A strategic alliance can be defined as a formal agreement between two or more separate companies in which

the parties agree to work collaboratively toward one strategically relevant objective.

When companies pursue operations that require new capabilities,

they may find that the new operations require skills that the company lacks.

A company that aggressively pursues an online sales strategy risks

threatening crucial relationships with distribution allies.

What is the soundest approach for timing a company's offensive or defensive strategic moves?

to be aware of first-mover advantages and disadvantages

Because the timing of a strategic move can be just as important as the choice of move to make, a company's best option with respect to timing of an action is

to carefully weigh the first-mover advantages against the first-mover disadvantages and act accordingly.

A strategic disadvantage of vertical integration is

to impair a company's flexibility in accommodating shifting buyer preferences.

Approximately what percentage of strategic business alliances fail each year?

60% to 70%

Which statement about entering the supply stage of the value chain as part of a vertical integration strategy is true?

Matching a supplier's production efficiency often requires significant investment in research and development.

In a strategic alliance, a company's proprietary knowledge and trade secrets are most vulnerable when the partnership involves

collaborative research and development.

Outsourcing is a strategy that involves

contracting out certain value chain activities that are normally performed in-house to outside vendors.

In some cases, backward vertical integration can increase efficiency by

coordinating production flows and preventing bottlenecks.

Companies racing against rivals for global market leadership need strategic alliances and collaborative partnerships with companies in foreign countries to

get into critical country markets quickly, gain inside knowledge about unfamiliar markets and cultures, and access valuable skills and competencies that are concentrated in particular geographic locations.

Once a company has decided to employ a particular generic competitive strategy, then it must make the following additional strategic choices, except whether to

pay special attention to buyer segments that a rival is already serving.

Adept followers have an opportunity to meet the achievement of industry pioneers at far lower costs when

second movers can produce equal or better products than pioneers while avoiding the pioneer's costly mistakes.

Cultural differences among companies in a strategic relationship

should be respected and treated sensitively if the partners hope to have a productive relationship.

A business guerrilla offensive is best suited for

small companies that lack the capacity to launch a full strategic offensive against better established rivals.