Strategic Management Test 2

Research shows that about ________ percent of mergers and acquisitions are successful.

A. 20

When a firm is able to produce non standardized (that is, distinctive) products for customers who value differentiated features more than they value low cost, the firm is successfully implementing

A. A differentiation strategy

A cost leadership strategy provides goods or services with features that are ______

A. Acceptable

By examining the _______ of Southwest Airlines, one can identify the strategic themes around which it has developed its business strategy. These themes include limited passenger service, high aircraft utilization, highly productive ground and gate crews, and so forth.

A. Activity Map

The strategy of Citigroup under CEO Sanford Weill was to create a "financial supermarket" where customers shop for a variety of financial services within the same company. This strategy was executed via a series of acquisitions but ultimately failed. This situation was the result of

A. Citigroup's managers focusing too much on acquisitions at the expense of managing their existing businesses.

The use of a differentiation strategy would be expected to be LEAST effective in which of the following markets?

A. Commodity goods

During the recent financial crisis, M&A activity ________ , whereas in 2011, M&A activity _________

A. Declined ; increased

Which of the following is NOT a value-creating activity associated with the differentiation strategy?

A. Developing policies to ensure efficient hiring and retention to keep costs low and implement training to ensure high employee efficiency

The three dimensions of a firm's relationships with customers include all the following except _________

A. Exclusiveness

Chico's is a clothing retailer that targets middle-aged women who want stylish and appealing clothes that are suitable for the mature figure. Chico's has an extensive customer list, a frequent-buyer discount card, and frequent sales promotions to Chico's customers based on their spending levels. Chico's uses a _______ strategy.

A. Focused differentiation based on a buyer group

Reach is an especially critical dimension for which firm?

A. Google

_______ and ________describe the situation in which organizations are direct competitors and are fully aware of the competition.

A. High market commonality ; high resource similarity

A company pursuing vertical integration can gain market power over its competitors through all of the following EXCEPT

A. Improved adjustment to technological changes.

A nationwide chain of pet stores wishes to identify the tradeoffs that its customers are willing to make between low-cost products such as generic pet foods and differentiated features such as pick-up and delivery of pets for grooming. The best technique for this firm to learn this information would be to use

A. Information networks

Starbucks determined that all of the following customer needs were important EXCEPT

A. Low price

_________ relates to the gains or losses a firm will experience if it attacks a rival or responds to an attack by a rival.

A. Motivation

The _________ dimension of relationships with customers is particularly important for social networking sites such as Facebook and MySpace

A. Reach

Specialty Steel, Inc., needs a particular type of brick to line its kilns in order to safely achieve the high temperatures needed for the unusually strong steel it produces. The clay to make this brick is very rare and only two brick plants in the United States make this type of brick. Specialty Steel owns one of these brick plants and buys all of its production. The other brick manufacturer has recently developed an inexpensive new technology whereby ordinary clay can be used to make this fire brick. This significantly reduces the production cost of this type of brick.

A. Specialty Steel has less flexibility now than if it were not vertically integrated.

Xanadu, a U.S. manufacturer of pharmaceuticals, has acquired a firm in the same industry in Ireland. It plans to transfer one of its key managers from its plant in St. Louis to Ireland. What is the major threat to Xanadu's plan to transfer competencies from itself to the Irish firm?

A. The St. Louis manager may quit Xanadu in order to remain in St. Louis.

An interior decorator has moved his business from Los Angeles to St. Paul, Minnesota, because his spouse's company transferred her to St. Paul. The decorator is distressed because the customers in his target market have, in his words, "banal and bourgeois taste." What is the decorator's problem?

A. The decorator does not understand that customer needs are neither right nor wrong, good nor bad

What is the similarity between high-technology firms and service-based firms that makes them risky as restructuring candidates?

A. They are human-resource dependent.

Dragonfly Publishers of children's books has purchased White Rabbit, another publisher of children's books. Both companies' books are sold to the same retail stores and schools. Their content is different, since Dragonfly produces children's literature, whereas White Rabbit focuses on child-level scientific and nature topics. Which of the following statements is probably TRUE about this acquisition?

A. This is a horizontal acquisition.

Which of the following is TRUE of Walmart?

A. Walmart has an unusual amount of flexibility for a large firm.

In the animal food products, food-product needs of owners of companion animals pets (e.g. dogs and cats) differ from the needs for food and health-related products of those owning production animals (e.g. livestock) Which of the following aspects of managing customer relationships does this choice refer to?

A. Who: Determining the Customers to Serve

Wholesome Pet Food has successfully specialized for 20 years in high-quality pet food made from all-natural ingredients and organically raised lamb. This brand has a strong following and is recommended by veterinarians who practice in affluent neighborhoods. Wholesome's main supplier of lamb has announced that the price for lamb will be 15 percent higher next year.

A. Wholesome will probably be able to pass the cost on to its customers because they are less sensitive to price increases than the average buyer

The risks of a focus strategy include _______

A. a competitors ability to use its core competencies to out focus the focuser by serving an even more narrowly defined segment

Which of the following firms would be the most likely to be a successful candidate for acquisition and restructuring?

A. a tire manufacturer established in 1910

An office management firm has developed a system for efficiently organizing small medical and dental practices both through proprietary software and through unique training programs for staff. It has recently acquired a firm specializing in providing management services for veterinary practices. The office management firm is hoping to

A. achieve economies of scope.

Firms with core competencies that can be exploited across international markets are able to

A. achieve synergies and produce high-quality goods at lower costs.

Without effective due diligence the

A. acquiring firm is likely to overpay for an acquisition.

Horizontal, vertical, and related acquisitions to build market power

A. are likely to undergo regulatory review and analysis by financial markets.

Specialty Steel, Inc., needs a particular type of brick to line its kilns in order to safely achieve the high temperatures needed for the unusually strong steel it produces. The clay to make this brick is very rare and only two brick plants in the United States make this type of brick. Specialty Steel has decided to buy one of these brick plants. This is an example of

A. backward integration

In the franchising strategy, the most important competitive advantage for the franchisee is the franchisor's

A. brand name.

Thomas is an upper-middle level manager for a firm that has been actively involved in acquisitions over the last 10 years. The firm has grown much larger as a result. Thomas has been dismayed to find that recently the managerial culture of the firm has been turning more and more to __________ controls.

A. bureaucratic

Competitive rivalry has the most effect on the firm's _______ strategies than the firm's other strategies.

A. business-level

Internal product development is often viewed as

A. carrying a high risk of failure.

Dynamic alliance networks work best in industries

A. characterized by frequent product innovations and short product life cycles.

A global corporate-level strategy differs from a multidomestic corporate-level strategy in that in a global strategy,

A. competitive strategy is dictated by the home office.

Arkadelphia Polymers, Inc., earns 60 percent of its revenue from exports to Europe and Asia. The CEO of the company would be

A. concerned if the value of the dollar strengthened.

A ______ cooperative strategy helps the firm diversify in terms of products offered, markets served, or both.

A. corporate-level

Offshore Oil Exploration Partners (OOEP) has entered into a cooperative strategy with Malay Petroleum. The resulting documents are long, formal, and detailed. They specify detailed responsibilities of each partner and include methods of monitoring accounting and technical procedures. OOEP and Malay Petroleum are using the ______ management approach.

A. cost minimization

The Microsoft/Nokia alliance that had hundreds of pages to specify each partner's responsibilities would be closest to the _______ approach to managing cooperative ventures. In contrast, the Renault/Nissan alliance (Chapter 9 Opening Case) was based on trust, respect, and transparency and is an example of the ________ approach to managing cooperative ventures.

A. cost minimization; opportunity maximization

The two basic approaches to successfully manage cooperative strategic alliances involve ________ and _____

A. cost minimization; opportunity maximization

Business -level strategies are concerned specifically with ________

A. creating differences between the firm's position and its competitors

Historically, women have paid more for dry cleaning than men. Signature Cleaners advertises "equal price" for all customers. Signature Cleaners appeals to women, which is market segmentation by _________ factors.

A. demographic

Mercedes mass produces luxury vehicles at a premium price. It uses a(n) _______ strategy.

A. differentiation

The value of the assets of a firm using a diversification strategy to create both operational and corporate relatedness tend to be

A. discounted by investors

Failing to _________ appropriately will result in too many employees doing the same work and prevent the new firm from realizing the cost synergies it anticipated.

A. downsize

Researchers have found that shareholders of acquired firms often

A. earn above average returns

Internationally diversified firms

A. earn greater returns on their innovations through larger or more numerous markets.

In making a decision to diversify, managers should use value-creating reasons or face the risk that their firms will be acquired and they could lose their jobs. Which of the following is a value-creating reason to diversify?

A. economies of scope

The three main luxury hotels in a major tourist destination keep very close track of their competitors' room pricing, restaurant offerings, tour packages, and special services, such as airport transportation and spa privileges. When one hotel makes adjustments in prices or offerings, the other hotels follow suit. It is possible that these hotels are

A. engaging in tacit collusion.

A strategic alliance in which the partners own different percentages of the new company they have formed is called a(n)

A. equity strategic alliance.

Japan, due to a lack of undeveloped land, would be an unusual choice of location for a U.S. cattle company to set up local grazing operations. This limiting factor would be identified in what part of Porter's determinants of national advantage?

A. factors of production

Successful unrelated diversification through restructuring is typically accomplished by

A. focusing on mature, low-technology businesses.

The chief disadvantage of being a first mover is the

A. high degree of risk

The integration of a cost leadership and a differentiation strategy

A. it is challenging because it increases the number of value-chain activities and support functions in which the firm must be competent.

When a firm simultaneously practices operational relatedness and corporate relatedness,

A. it is difficult for investors to observe the value created by the firm.

A fundamental reason for a country's development of advanced and specialized factors of production is often its

A. lack of basic resources.

Firms able to standarize the processes used to produce, sell, distribute, and service their products across country borders enhance their ability to

A. learn how to continuously reduce costs while increase the value of their products.

U.S. cola companies entered the global market because of

A. limited growth opportunities in their domestic market.

Free cash flows are

A. liquid financial assets for which investments in current businesses are no longer economically viable.

Quality is

A. meeting or exceeding customer expectations in the goods and/or services offered.

A cost leadership strategy targets the industry's ________ customers

A. most typical

JC Penney attempted the strategy _________. But it couldn't out __________ Walmart, nor could it _________ Macy's and Target.

A. of integrated cost leadership; price; compete with

A noted professional art academy has founded an "artists and friends" travel company specializing in tours for artists to scenic locales, using its faculty as traveling teachers. In addition, the art academy has purchased a framing company to both make frames for academy art works, but also to sell museum-quality framing services to the public. The art academy is engaging in diversification based on ________ relatedness.

A. operational

Goods or services in standard-cycle markets reflect

A. organizations that serve a mass market.

According to the Chapter 7 Strategic Focus, research suggests that emerging market firms tend to ________ than other firms and that government of those firms leads to ___________

A. pay a higher premium; overpayment

The products or services that are differentiated from others have qualities that are

A. perceived by the customer to add value for which they will pay a premium

Ever-improving levels of efficiency enhance profit margins for a cost-leader. This effects which of the five forces of industry structure most directly?

A. potential entrants

Which of the following is NOT a disadvantage associated with exporting?

A. potential loss of proprietary technologies

Reduction of competition can be accomplished through all of the following EXCEPT

A. predatory alliances

Backward integration occurs when a company

A. produces its own outputs

All of the following are considered generic business-level strategies EXCEPT

A. product diversification

Which of the following is NOT one of the three main restructuring strategies?

A. realigning

Terrorism creates an economic risk for firms, which

A. reduces the amount of investment foreign companies will make in a country perceived to be terror-prone.

Procter & Gamble (P&G) has a paper towel and baby diaper business, both of which use paper products. The firm's paper production plant produces inputs for both businesses. P&G most likely uses the _____________ diversification strategy to create ________________

A. related constrained; operational relatedness.

The Publicis Groupe uses the digital technology from its digital business to enhance the advertising products in its advertising group. This sharing of activities is characteristic of the __________ diversification strategy.

A. related constraint

Although a(n) ____________ firm, GE (discussed in Chapter 6 Opening Case) has done an exceptional job of ____________ its four major strategic business units.

A. related linked ; allocating capital across

Research has shown that the more _______, the greater is the probability that an acquisition will be successful.

A. related the acquired and acquiring firms are

Typically, in a failed acquisition, the organization will

A. restructure

After a leveraged buyout, _________ typically occur(s).

A. selling of assets

Sustained competitive advantage is most achievable in a _______ market.

A. slow-cycle

Which pair of firms has the LEAST resource similarity?

A. small, family-owned Italian restaurant; Olive Garden

More choices and easily accessible information about the functionality of firms' products are creating increasingly ______ customers.

A. sophisticated and knowledgable

In a cross-border alliance, the local partner is often a useful source of information about

A. sources of capital.

The competitive actions and responses in _________ markets are designed to seek large market shares, to gain customer loyalty through brand names, and to carefully control the firm's operations in order to consistently provide the same positive experience for customers.

A. standard-cycle

The flat-panel television market where prices have come down and competition has become more stable is best characterized as

A. standard-cycle

The cooperation between Fiat and Chrysler to produce a Fiat-designed car in Chrysler's Illinois factory is a(n) _______ alliance because it allows the firms to share resources and capabilities across multiple functions.

A. synergistic

All of the following are business-level cooperative strategic alliances EXCEPT

A. synergistic strategic alliances.

A manager in your company is proposing the acquisition of Taylor Company, which has developed a new, innovative product instead of a strategy of developing new products in-house. All of the following arguments are correct EXCEPT

A. the acquisition of Taylor should be primarily for defensive rather than strategic reasons.

A firm is likely to respond to an attack by a competitor in all of the following situations EXCEPT when

A. the attack is by a price predator

One of the primary reasons for failure of cross-border strategic alliances is

A. the incompatibility of the partners.

The benefit of a flexible manufacturing system is that

A. the lot size needed to manufacture a firm's product efficiently is reduced

Blind taste-tests have shown that the test of premium-priced vodkas and inexpensive vodkas are indistinguishable even to regular drinkers of vodka. But the sales of premium vodkas are thriving. This is an example of

A. the perception of perceived prestige and status as a means of differentiating a product

International corporate-level strategy focuses on

A. the scope of operations through both product and geographic diversification.

A large domestic market can provide the country's industries a chance at dominating the world market because

A. they have been able to develop economies of scale at home.

An ability to efficiently allocate capital through an internal market may help the firm protect the competitive advantages it develops

A. through reduced disclosure to outside parties.

Legitimately, a firm may pursue an international strategic alliance for all of the following reasons EXCEPT

A. to enhance the compensation packages of top managers.

In China, Starbucks is standardizing its operations while simultaneously decentralizing some decision-making responsibility to local levels to meet customers tastes. Starbucks is following the

A. transnational

The term "conglomerates" refers to firms using the ______ diversification strategy.

A. unrelated

Sales of watches among teenagers and twenty-somethings are declining rapidly as this age group uses cellphones, iPods, and other devices to tell time. A company that specializes in selling inexpensive watches to this age group may wish to consider _________ in order to develop new products other than watches.

A. unrelated diversification

The acquisition of Sun Microsystems (a computer hardware producer) by Oracle Corporation (a software firm) is an example of a(n)

A. vertical acquisition.

The two types of complementary strategic alliances are

A. vertical and horizontal.

A manufacturer of specialty jams and jellies has decided to ally itself with an orchard and vineyard growing rare strains of fruit. This is a(n) _______ strategy.

A. vertical complementary

Wm. Wrigley Jr. Company once made only chewing gum. When Wrigley bought Life Savers (a line of candy mints) and Altoids (a line of breath mints) from Kraft, chewing gum then constituted less than 95 percent of revenues. Thus, Wrigley

A. was moving away from its traditional single-business strategy toward a dominant strategy

All of the following complicate the implementation of an international diversification strategy EXCEPT

A. widespread multilingualism.

The factors that lead to poor long-term performance by acquisitions include all of the following EXCEPT firms

A. with insufficient diversification

Usually a company is classified as a single business firm when revenues generated by the dominant business are greater than ________ percent.

B. 95

Which of the following statements is TRUE?

B. As many as 50 percent of cooperative strategies fail.

A firm's core strategy is its _______ strategy.

B. Business

Which of the following is TRUE?

B. Customer loyalty has a positive relationship with firm probability

Reverse engineering is characteristic of

B. Fast-cycle markets

The new generation of lunch trucks serving high-end fare in cities such as New York, San Francisco, and Los Angeles share which of the following a business strategies?

B. Focused differentiation

Suppose another firm found a way to offer IKEA's customers (young buyers interested in stylish furniture at low cost) additional sources of differentiation while charging the same price or to provide the same service with the same sources of differentiation at a lower price. What category of competitive risk to a focus strategy would this be?

B. Focusing on a more narrowly defined segment and "out focusing" the focuser

Which company below committed significant resources to enter the information services market and, given its success, was imitated by other competitors?

B. IBM

Walmart went against business-level strategy and made changes to attract upscale customers. These changes had which of the following results?

B. It made Walmart vulnerable to Dollar Store and Amazon

Which of the following is NOT a result of over-diversification?

B. Managers emphasize strategic controls rather than financial controls.

The _________ dimension of relationships with customers is concerned with the firm's access and connection to customers.

B. Reach

Amazon has built capabilities around Internet technology and e-commerce to facilitate information exchanges with its customers in a cost effective manner. This represents which of the three service dimension?

B. Richness

Skaredykat Inc. is considering initial expansion beyond its home market. The firm has decided not to enter markets that differ greatly from its home market, instead expanding within the twelve-nation region that includes its home country.

B. The firm is using a regional approach to international expansion.

Hyundai allows customers to return their cars if they lose their job within 12 months of purchase. Which of the following aspects of managing customer relationships is Hyundai engaged in?

B. What: Determining which customer needs to satisfy

New Balance Athletic Shoes target Baby Boomers' needs for well-fitting shoes. The company is unique in that it offers a very broad range of shoe widths. A realistic potential risk New Balance runs in this focused differentiation strategy includes the possibility that:

B. a competitor may be able to better use flexible manufacturing systems to make shoes with an individualized fit.

A flexible manufacturing system is ______

B. a computer-controlled process that is used to produce a variety of products in moderate, flexible quantities with minimal human intervention.

All of the following were results of Citigroup's acquisition strategy EXCEPT (Chapter 7 Strategic Focus)

B. a much smaller, though global, business financial service firm.

Mutual forbearance is

B. a type of competition-reducing strategy.

A primary reason for a firm to pursue an acquisition is to

B. achieve greater market power.

A(n) ________ occurs when one firm buys a controlling, or 100 percent interest, in another firm.

B. acquisition

SpeakEasy, a U.S. software company that specializes in voice-recognition software, wishes to rapidly enter the growing technical translation software market. This market is dominated by firms making highly differentiated products. To enter this market, SpeakEasy would be best served if it considers a(an)

B. acquisition of a highly related firm in the technical translation market.

The term "leverage" in leveraged buyouts refers to the

B. amount of new debt incurred in buying the firm.

The use of high levels of debt in acquisitions has contributed to

B. an increased risk of bankruptcy for acquiring firms.

Stable alliance networks will most often

B. appear in mature industries where demand is relatively constant and predictable.

Moving into international markets is a particularly attractive strategy to firms whose domestic markets

B. are limited in opportunities for growth.

A second mover

B. attempts to provide a product with greater customer value than the first mover's product.

When managers become overly focused on making acquisitions, it is

B. because of the thrill of selecting, chasing, and seizing a target.

Large diversified businesses often face what is known as the "conglomerate discount." This discount means that investors

B. believe that the value of conglomerates is less than the value of the sum of their parts.

When a firm is overly dependent on one or more products or markets, and the intensity of rivalry in that market is intense, the firm may wish to _______ by making an acquisition.

B. broaden its competitive scope

All competitive advantages do not accrue to large-sized firms. A major advantage of smaller firms is that they

B. can launch competitive actions more quickly

_________ strategic alliances have stronger focus on value creation than do ________ alliances.

B. complementary; competition reducing

The more sharing of resources and activities among businesses, the more ______ is the relatedness of the diversification.

B. constrained

Currently, the rationale for making an acquisition includes each of the following EXCEPT

B. decrease taxes paid by shareholders.

When a firm INITIALLY becomes internationally diversified, its returns

B. decrease.

As the threat of corporate failure increases due to relatedness between a firm's business units, firms may decide to

B. diversify into less risky environments

Revenues for United Parcel Service (UPS) come from the following business segments: 60 percent from U.S. package delivery operations, 22 percent from international package delivery, and 18 percent from non-packaging operations. Which best describes the corporate level strategy of UPS?

B. dominant business

The lowest level of diversification is the ______ level.

B. dominant business

Compared with downsizing, ___________ has (have) a more positive effect on firm performance.

B. downscoping

An investor is analyzing two firms in the same industry. She is looking for long-term performance from her investment. Both firms are basically identical except one firm is involved in substantial downsizing and the other firm is undertaking aggressive downscoping. The investor should invest in the

B. downscoping firm because of reduced debt costs and the emphasis on strategic controls derived from focusing on the firm's core businesses.

A global corporate-level strategy emphasizes

B. economies of scale

A state-wide alliance of independent hospitals has formed in order to do group purchasing of medical supplies. Group purchasing allows the hospital alliance to negotiate lower prices with suppliers because of the large quantity of materials ordered. This is an example of the advantage of __________ resulting from an alliance.

B. economies of scale

Firms that have selected a related diversification corporate-level strategy seek to exploit

B. economies of scope between business units

Firms entering into synergistic strategic alliances expect to attain

B. economies of scope.

Which of the following is a value-reducing reason for diversification?

B. expanding the business portfolio in order to diversify managerial employment risk

An international diversification strategy is one in which a firm

B. expands into a potentially large number of geographic locations and markets.

A U.S. manufacturer of adaptive devices for persons with disabilities is considering expanding internationally. It is a fairly small company, but it is looking for growth opportunities. This company should primarily consider the option of

B. exporting

_________ markets are often described as volatile and innovative.

B. fast-cycle

Ikea offers young customers a selection of home furnishings featuring good design, function, and acceptable quality at low prices. Ikea is using which business-level strategy?

B. focused cost leadership

The Monteleone Company pays large fees to a highly recognizable, prestigious individual to be the spokesperson for the company's products, luxury private jets. Monteleone is probably following the

B. focused differentiation strategy.

A businessperson in Atlanta who wishes to develop a luxury pet kennel approaches the owner of the highly successful Pet Resort and Day Spa in Houston to see if the owner is interesting in franchising the Pet Resort brand. The Atlanta businessperson's goal is to

B. gain access to Pet Resort's tacit knowledge.

During the 1990s top executives of Titanic, Inc., followed a pattern of aggressive acquisitions and diversification. Now, Titanic is performing poorly and earning below average returns. Lusitania, a large conglomerate firm, is in the final stages of purchasing Titanic. Lusitania has announced that it will fire Titanic's current top executives. The Titanic executives may not be worried about their impending job loss if they

B. have golden parachutes.

The March 2011 announcement that AT&T was acquiring T-Mobile USA from Deutsche Telekom is a __________ acquisition and is intended to _______

B. horizontal ; increase market power.

Within the Renault Nissan alliance (Chapter 9 Opening Case), both Renault and Nissan have each formed _________ strategic alliances at the business-unit level with other companies.

B. horizontal complementary

Consumers in the United States are known for their _____

B. impatience

The increased pressures for global integration of operations have been driven mostly by

B. increasing demand for similar products.

By linking companies with their suppliers, distributors, and customers, ______ provide a company with flexibility.

B. information networks

Quality affects competitive rivalry because a competitor whose products suffer from poor quality likely will _____________ until

B. initiate fewer competitive actions; the quality problems are corrected.

Entering new markets through acquisitions of companies with new products is not risk-free, especially if acquisition becomes a substitute for

B. innovation.

TQM is most helpful to firms following the _____ business strategy.

B. integrated cost leadership / differentiation

A cooperative strategy

B. is a strategy in which firms work together to achieve a shared objective.

The fastest and easiest way for a firm to diversity its portfolio of businesses is through acquisition because

B. it is difficult and time intensive for companies to develop products that differ from their current product line.

Moon Flower cosmetics company executives are aware that their Asian customer base is interested in advanced skin care treatments beyond Moon Flower's traditional herbal and organic compounds. Moon Flower and a large American chemical company are in discussions to create a 50-50 partnership in a new firm, which would create skin care treatments based on innovative chemical formulations that would be marketed both in Asia and in the United States. Beyond being a cross-border alliance, this partnership can be called a(n)

B. joint venture

Which type of strategic alliance is best at passing tacit knowledge between firms?

B. joint ventures

Because of the tax laws of the 1960s and 1970s, when dividends were taxed more heavily than capital gains, shareholders preferred that corporations

B. keep free cash flows for investment in acquisitions.

Without quality, the firm's products

B. lack credibility among customers

Most firms enter international markets sequentially, introducing their ________ first.

B. largest and strongest lines of business

Research suggests that a firm with greater multimarket contact is ______ likely to initiate and attack, and _____ likely to respond aggressively when attacked.

B. less ; more

In general, compared with firms which compete in only one market, among firms which face one another in multiple markets there is

B. less competitive rivalry

The positive results associated with increasing international diversification have been shown to

B. level off and become negative as diversification increases past some point.

In the United States, cooperative strategies to reduce competition may result in _______ if they are explicit.

B. litigation

A multidomestic corporate-level strategy has _____ need for global integration and _________ need for local government responsiveness.

B. low ; high

The drawbacks to transferring competencies by moving key people into new management positions include all EXCEPT

B. managerial competencies are not easily transferable to different organizational cultures

Both ______ and _______ affect the awareness and motivation of a firm to undertake actions and responses.

B. market commonality ; resource similarity

Compared to internal product development, acquisitions allow

B. more accurate prediction of return on investment.

Compared with diversification based on intangible resources, diversification based on financial resources is

B. more imitable and less likely to create value on a long-term basis.

The presence of barriers to entry in a particular market will generally make acquisitions _________ as an entry strategy.

B. more likely

As the television industry has changed in the last few decades from just three major networks to a multiplicity of networks, one of the major aspects of business strategy for the newer networks is ________ than the traditional networks

B. natter target market

According to the Chapter 7 Opening Case, the difference between Facebook's acquisition approach and the approaches of Microsoft and Google is that

B. none of Facebook's acquisitions have survived as independent companies, whereas those of Microsoft and Google have continued to operate as subsidiaries.

For the purpose of diversification, a corporate-level cooperative strategy may be preferable to a merger or acquisition for all the following reasons EXCEPT

B. opportunistic behaviors are less likely.

An entrepreneur is investigating starting a company that provides tax advice to small companies. In order to position his company differently from the existing competitors, the entrepreneur must ____________

B. provide tax advice either in a different manner or provide a different kind of tax service than competitors

Which of the following reasons for diversification is most likely to increase the firm's value?

B. reducing costs through business restructuring

Acquisitions to increase market power require that the firm have a(n) ____________ diversification strategy.

B. related

In France, fine dressmaking and tailoring have been a tradition predating Queen Marie Antoinette. Cloth manufacturers, design schools, craft apprenticeship programs, modeling agencies, and so forth, all exist to supply the clothing industry. This is an example of the _______ in Porter's model.

B. related and supporting industries

A firm that earns less than 70 percent of revenue from its dominant business and has direct connections between its businesses is engaging in __________ diversification.

B. related constraint

The Publicis Groupe has three major groups of business (advertising, media, and digital) that share resources and capabilities. Publicis Groupe is using a __________ diversification strategy.

B. related constraint

The Cherrywood Fine Furniture Company finds itself with excess capacity in its plant and equipment for furniture manufacturing. This excess capacity will be useful in

B. related diversification projects.

GE (Chapter 6 Opening Case) was diversified and manages businesses that have only a few links between them. This corporate-level strategy is best described as _________ diversification.

B. related linked

Walt Disney Company has successfully used related diversification to create value by

B. sharing activities and transferring core competencies.

Market power is derived primarily from the

B. size of a firm and its resources and capabilities.

Walmart initially used a focused cost-leadership strategy to compete only in small communities by using sophisticated logistics systems and efficient purchasing practices to gain a competitive advantage. The response of local competitors was ________ because they

B. slow ; lacked the ability to marshal resources

The larger the resources of a firm taking a competitive action compared with the resources of the other firms in the industry, the ______ the response will be of these other firms.

B. slower

Stage in the family cycle is a ________ factor.

B. socioeconomic

Claude holds a large number of shares of Bayou Beauty, a regional brewing company that is considered a likely takeover target by a major international brewer. It would probably be in Claude's financial interest if Bayou Beauty's owners

B. sold the company to the larger brewer.

Firms in _____ markets cooperate to pool resources and gain market power.

B. standard-cycle

Competition between candy makers (e.g., Hershey, Mars, Cadbury, Nestle, and Godiva) where firms package design (including package downsizing) and ease of availability is characteristic of a(n)

B. standard-cycle market

Because Coca-Cola, Nestle, and PepsiCo all sell a product (bottled water) that is essentially the same and all three giant companies are engaged in battles for market share using incremental changes in their products and seeking loyalty to brand names, it is most likely that the bottled water market is a(n)

B. standard-cycle market.

Consumer goods producers are innovating in terms of healthy products. This type of incremental innovation is typical of

B. standard-cycle markets.

International strategy refers to a(n)

B. strategy through which the firm sells products in markets outside the firm's domestic market.

The Renault Nissan alliance discussed in the Opening Case is an example of a ______ in that the firms seek to create economies of scope by sharing their resources and capabilities to develop manufacturing platforms that can be used to produce cars that will be either a Renault or a Nissan.

B. synergistic alliance

A ______ is a strategy in which firms share some of their resources and capabilities to create economies of scope and is similar to the business-level horizontal complementary alliance.

B. synergistic strategic alliance

Which of the following resources are more likely to create value in the diversification process?

B. tacit knowledge

On the whole there are more competitive responses to

B. tactical actions than to strategic actions

The curvilinear relationship of corporate performance and diversification indicates that

B. the highest performing business strategy is related constrained diversification.

The main difference between the related constrained level of diversification and the related linked level of diversification is

B. the level of resources and activities shared among the business

The effectiveness of any of the generic business-level strategies is contingent upon

B. the match between the opportunities and threats in its external market and the strengths of its internal environment

To increase the likelihood of success between partners assuming that trust exists, _________ approach(es) should be used to manage cooperative strategies.

B. the opportunity maximization

Companies in fast-cycle markets need to profit quickly from an innovative product for all of the following reasons EXCEPT

B. the prices of component parts tends to rise rapidly

All of the following describe strategies EXCEPT

B. they cannabalize the old strategy

A firm successfully implementing a differentiation strategy would expect

B. to charge premium prices

As noted in the Chapter 6 Opening Case, GE is now a major player in the "clean energy" industry such as wind turbines and solar power. A major reason GE moved in this direction was

B. to overcome and correct its record in environmental issues.

One method of facilitating the transfer of competencies between firms is to

B. transfer key people into new management positions

Increasingly, customers worldwide are demanding emphasis on local requirements and companies are needing efficiency as global competition increases. This has triggered an increase in the number of firms using the strategy.

B. transnational

In a merger

B. two firms agree to integrate their operations on a relatively coequal basis.

A nonequity strategic alliance exists when

B. two or more firms have a contractual relationship to share resources and capabilities.

All of the following are international corporate-level strategies EXCEPT the strategy.

B. universal

Of the various business-level strategic alliances, _________ alliances have the most probability of creating sustainable competitive advantage, and _______ have the lowest.

B. vertical complementary; competition reducing

PorkPride Foods produces hams and other meat products. It owns hog raising operations. This is an example of a ___________ business.

B. vertically integrated

Corporate-level strategy is concerned with __________ and how to manage these businesses.

B. what product markets and businesses the firm should be in

Before the firm decides what products to offer and what benefits and features they will have, the firm must decide all the following questions EXCEPT _______

B. when the customer's needs should be satisfied

Managers perceive internal product development as a high-risk activity and tend to choose acquisitions because approximately _________ percent of innovations are imitated within 4 years after patents are obtained.

C. 60

Hilliard Pharmaceuticals and Ahrens Vitamins, Inc., have high market commonality, both geographically and in the market segments in which they compete. Hilliard, the number two firm in the industry, has undertaken a major strategic attack upon Ahrens, the market leader. Which of the following statements is most likely to be TRUE?

C. Ahrens will respond aggressively because of the high multi market contact between Hilliard and Ahrens

BPM Corp. is a manufacturer of radar systems for regional-sized jet aircraft. The company has announced plans to enter into a joint venture with J3 Composites, a producer of advanced composite materials. The announced venture will produce a new, combined product consisting of the radar unit and protective composite cover. Which of the following ownership arrangements would be most typical for a joint venture?

C. BPM and J3 will both own 50 percent of the venture and a new company will be formed.

Bubble-Up, Inc., is a small manufacturer of educational toys for children under age 10. It has co-existed with three other competitors in the educational toy industry for over 20 years, each of them maintaining a stable market share. There is a wide-spread rumor that Mega-Toy, Inc., the market leader in the broad children's toy market, has decided to target educational toys. Which of these statements is most likely TRUE?

C. Bubble-Up's smaller size may make it more flexible in introducing innovations than Mega-Toy

Which of the following are central to implementing value-creating strategies and thereby satisfying customers' needs?

C. Core competencies

A company pursuing the differentiation or focused differentiation strategy would tend to ________

C. Develop flexible systems that allow rapid response to customers' changing needs

Which of the following statements is FALSE?

C. First movers have lower survival rates than second and late movers.

A firm using a(n) _______ strategy generally needs to operate "below the radar" of larger and more resource rich firms that serve the broader market.

C. Focused

All of the following are examples of differentiated products except _________

C. Great Value brand at Walmart

Firms with _______ market commonality and _________ resource similarity are direct and mutually acknowledged competitors.

C. High ; high

The analysis of the activity map of a successful company such as southwest airlines emphasizes how

C. It is hard for rivals to match a configuration of integrated activities that to imitate a single activity

____________ is the set of costs associated with unfamiliar operating environments; economic, administrative and cultural differences; and the challenges of coordination over distances.

C. Liability of foreignness

Research suggests that having a competitive advantage in ______ creates more value in the cost leadership strategy than it does in the differentiation strategy

C. Logistics

Which of the following is an example of a tactical action?

C. Netflix beginning to offer music DVD's in addition to movies

Strategic fit among many activities (in an activity map) is fundamental to ________

C. Sustainability of a firm's competitive advantage

If intellectual property rights in an emerging economy are not well-protected, the number of firms in the industry is rapidly growing, and the need for global integration is high, ______ is the preferred entry mode.

C. a joint venture or wholly owned subsidiary

A leveraged buyout refers to

C. a restructuring action whereby a party buys all of the assets of a business, financed largely with debt, and takes the firm private.

If conflict in a strategic alliance or joint venture is not manageable, a(n) _______ may be a better option.

C. acquisition

A licensing agreement

C. allows a foreign firm to purchase the rights to manufacture and sell a firm's products within a host country.

Certain regulatory changes (such as antitrust regulation and tax laws) create incentives or disincentives for diversification that

C. are value-neutral

The CEO of the Wholesome Food retail grocery chain, which specializes in organic and natural produce and meat, has stated, "The key to success is to find your niche and focus on it, regardless of what anyone else does." The CEO

C. believes he has placed his firm in a slow-cycle industry where concerns about protecting unique competencies dominate concerns about market share.

The ultimate test of the value of a corporate-level strategy is whether the

C. businesses in the portfolio are worth more under the management of the company in question than they would be under any other ownership

Firms in a standard-cycle market may form alliances in order to

C. capture economies of scale.

Which industry can be LEAST described as a slow-cycle market?

C. cell phone provider

Among the value-neutral incentives to diversify, some come from the firm's external environment while others are internal to the firm. External incentives to diversify include

C. changes in antitrust regulations and tax laws.

U.S. companies moving into the international market need to be sensitive to the need for local country or regional responsiveness because of

C. consumer needs, political and legal structures, and social norms vary by country

The collaboration between Volvo Aero (a subsidiary of Sweden's AB Volvo) and U.S.-based Pratt & Whitney to produce a new jet engine would be characterized as a(n)

C. cross-border strategic alliance.

The differentiation strategy can be effective in controlling the power of rivalry with existing competitors in an industry because

C. customers are loyal to brands that are differentiated in meaningful ways

Intensified rivalry within an industry results in ___________

C. decreased average profitability across the industry

Firms with few competitive resources are more likely to

C. delay responding to competitive actions

Multipoint competition occurs when

C. diversified firms compete against each other in several markets

_____________ may be necessary because acquisitions create a situation in which the newly formed form has duplicate organizational functions such as sales, manufacturing, distribution, and human resource management.

C. downsizing

All of the following are ways that a good or service can be differentiated EXCEPT

C. economies of scale and efficient operations

Which of the following is an example of a strategic action?

C. entry into the European market by Home Depot

Japanese telecom NTT DoCoMo Inc. and Chinese Internet search operator Baidu Inc. established an alliance to distribute games and other mobile-phone content. Baidu will own 80 percent of this collaboration with DoCoMo holding the remaining 20 percent. This collaborative arrangement is an example of a(n) _______

C. equity strategic alliance.

Evidence suggests that firms using acquisitions as a substitute for internally developed innovations

C. eventually encounter performance problems.

Recently, the only type of car available for Anthony to rent on a business trip was a compact, fuel-efficient Japanese import. Anthony was surprised at the comfort and performance of the car. He is in the market for a new car and had previously considered only buying another luxury SUV. Now, he is thinking about the significant cost savings he would have if he bought the compact vehicle rather than a new SUV. This is an example of the competitive risk that

C. experience can narrow a customer's perceptions of the value of a product's differentiated features

Raymond Vernon states that the classic rationale for international diversification is to

C. extend the product's life cycle.

Focus strategies are _____

C. faced with additional types of risks than are industry-wide strategies.

A friendly acquisition

C. facilitates the integration of the acquired and acquiring firms.

First movers are

C. firms that take an initial competitive action.

The focused differentiation strategy differs from the differentiation strategy in that

C. focused differentiators target a narrower consumer market

___________ typically result(s) in the acquiring firm being able to prevent valuable human resources in the acquired firm from leaving.

C. friendly acquisition

A transnational corporate-level strategy seeks to achieve

C. global efficiency and local responsiveness.

In addition to the four basic dimensions of Porter's "diamond" model _________ may also contribute to the success or failure of firms.

C. government policy

Isidore Crocker, CEO of Gotham Engines, is strongly in favor of acquiring Carolina Textiles, a firm in an unrelated industry. Some members of the board of directors are questioning Crocker's motives for the acquisition. They argue that it is not uncommon for CEOs to push for acquisitions because

C. higher CEO pay is related to larger organization size.

Smith Commercial Lighting, Inc., which sells lighting for factories and businesses, has entered into an alliance with Revelation Lighting, Inc., a retailer of home decor lighting, in order to expand into the trend of using industrial-type lighting in non-traditional style homes. Smith has invested 40 percent and Revelation has invested 60 percent into the new operation. This is an example of a(n)

C. horizontal complementary strategic alliance.

Which of the following is NOT a risk for firms engaged in cooperative strategies?

C. insufficient variation in firms' core competencies

Zara has pioneered "cheap chic" in clothing apparel. Zara offers current and desirable fashion goods at relatively low prices. To implement the strategy, Zara uses sophisticated designers and effective means of managing costs. These are all characteristics of which business level strategy?

C. integrated cost leadership / differentiation

Private synergy __________

C. is not easy for competitors to understand and imitate.

GE (Chapter 6 Opening Case) is unusual in that it

C. is one of the few large diversified large firms that have been successful over time

In a(n) ______, two or more firms create a legally independent company to share some of their resources and capabilities to develop a competitive advantage.

C. joint venture

Caterpillar's payment of a 32 percent premium for the acquisition of Bucyrus in 2011 and subsequent need to issue more stock illustrates the acquisition problem of

C. large or extraordinary debt.

The choices that a firm has for entering the international market include all of the following EXCEPT

C. leasing

A companying a nation target market in its business strategy is

C. limiting the group of customer segments served

The Mars acquisition of the Wrigley assets was part of its related constrained diversification and added market share to the Mars/Wrigley integrated firm. It allowed Mars to gain ____________ because it could sell its products above the market level or reduce its costs below the market level.

C. market power

Firms use the integrated cost leadership/differentiation strategy because

C. most consumers want to pay a low price for products with somewhat highly differentiated features

When diversification results in two companies, such as UPS and FedEx, simultaneously competing in the same product areas or geographic markets, this is called _________ competition.

C. multipoint

Working in multiple international markets can provide firms with _______ perhaps even in terms of

C. new learning opportunities; research and development activities.

Burgess Corp. manufactures a line of heavy construction equipment. The company has announced a contractual relationship with FS Electronics whereby FS will supply Burgess with advanced GPS navigation and guidance systems. These systems will be an option on all bulldozers, dump trucks, and road graders Burgess produces. What type of alliance is this?

C. nonequity strategic alliance

DDD Partners, a U.S. business consulting firm is considering a cooperative alliance with an Indian business consulting firm that has a wide practice in the Middle East and Asia. DDD has some European clients, but it sees the Middle East and Asia as growth opportunities. It hopes to learn how to navigate the different cultures and business practices in this part of the world from its alliance with the Indian firm. DDD's greatest risk here is that the Indian firm will

C. not fully share its intangible resources.

There are few true mergers because

C. one firm usually dominates in terms of market share, size, or value of assets.

The four aspects of Porter's model of international competitive advantage include all of the following EXCEPT

C. political and economic institutions.

The ________ phase is probably the single most important determinant of shareholder value creation in mergers and acquisitions.

C. post-acquisition integration

Walt Disney's focus on _____ is typical of a slow-cycle market.

C. proprietary rights

The book The Dyslexic Advantage appeals to a market of educators, people with dyslexia, their friends, family, and coworkers. This is customer segmentation by _________ factors.

C. psychological

Associations such as the European Union, Organization of American States, and the North American Free Trade Association, encourage

C. regional strategies

Virgin Group successfully transfers its marketing core competence across airlines, cosmetics, music, drinks, mobile phones, health clubs, and a number of other businesses. Virgin follows a(n) __________ diversification corporate strategy.

C. related link

The ___________ diversification strategy creates value in two ways. First, since the core competence has already been developed in one business, the firm does not have to allocate resources to develop it. Second, since the resource is intangible, competitors cannot easily imitate it.

C. related linked

Lobelia's Nursery and Garden Resource Center has long provided high-quality, typical types of seasonal bedding plants to customers in the Mobile, Alabama, metropolitan area. It has traditionally competed with the other plant nurseries within a 50-mile radius of Mobile. Recently, Lobelia has opened a branch in Fairfax, Virginia. Lobelia's research shows that most Fairfax nurseries have only one location. Lobelia can expect the local Fairfax nurseries to

C. respond aggressively because of high market dependence

Magma, Inc., acquired Vulcan, Inc., 3 years ago. Effective integration of the two companies' culture was never achieved, and the two firms' assets were not complementary. It is very likely that Magma will

C. restructure.

Some research findings have shown that acquisitions typically ________ for shareholders in the acquiring firm.

C. result in returns near zero

Customer ratings of products they bought online is an example of _______

C. richness

U.S. Steel and Nucor (the two remaining major players in the U.S. steel industry) have been forming alliances as a means to enter markets in Europe and Asia. The steel industry is an example of a ________ market in which firms typically use alliances to gain market access.

C. slow-cycle

A firm may narrow its focus to a specific region of the world

C. so that it can better understand the cultures, legal and social norms, and other factors that are important for effective competition in those markets.

One disadvantage of developing effective monitoring systems to manage a strategic alliance is that

C. spontaneous opportunities are minimized.

Of the value-neutral incentives to diversify, all of the following are internal firm incentives EXCEPT

C. stricter interpretation of antitrust laws.

All of the following are correct about what managers should know about firms based in a country with a national competitive advantage EXCEPT

C. success is guaranteed as the firm implements its chosen international business-level strategy.

Which of the following is NOT a governance mechanism that may limit managerial tendencies to over-diversify?

C. surveillance technologies

The fact that the prices consumers pay for branded breakfast cereals are above the prices that would exist if there were true competition suggests that the cereal manufacturers are engaging in

C. tacit collusion.

When the target firm does not solicit the acquiring firm's bid, it is referred to as a(n)

C. takeover or unfriendly acquisition.

A river barge company can offer cheaper, although slower, per pound transportation of products to companies when compared with transportation by air, truck, or rail. The river barge company should first target customers whose companies use

C. the cost leadership strategy

A firm practicing unrelated diversification can make better capital allocations to its subsidiary businesses than the external capital market can for all the following reasons EXCEPT

C. the firm can acquire other firms with innovative products instead of allocating capital to research and development.

A multidomestic corporate-level strategy is one in which

C. the firm customizes the product for each country in which it competes.

Which of the following is an advantage associated with greenfield ventures?

C. the level of control over the firm's operations

Due diligence includes all of the following activities EXCEPT assessing

C. the level of private synergy between the two firms.

Disney suffered lawsuits in France at Disneyland Paris as a result of the lack of fit between its transferred personnel policies and the French employees charged to enact them. This is an example of

C. the liability of foreignness.

All of the following statements are correct EXCEPT

C. the majority of acquisitions increase long-term value for the acquiring firm.

The more "constrained" the relatedness of diversification,

C. the more links there are among the businesses owned by an organization.

The basic types of operational economies through which firms seek value from economies of scope are

C. the sharing of value chain activities and support functions.

The decision of what entry mode to use is primarily based on all of the following factors EXCEPT

C. the worldwide economic situation.

Which of the following is NOT an incentive for firms to become multinational?

C. to avoid high domestic taxation on corporate income

Competitive dynamics refers to the ___________

C. total set of actions and responses taken by all firms competing within a market.

The expenses incurred by firms trying to create synergy through acquisition are called ________ costs.

C. transaction

The primary responsibility of the franchisor, such as McDonald's or Hilton International is to

C. transfer to the franchisee knowledge and skills needed to compete at the local level.

In managing cooperative strategies, research indicates that ________ can be a capability that is valuable, rare, imperfectly imitable, and often nonsubstitutable giving these firms a competitive advantage.

C. trustworthiness

Which type of diversification is most likely to create value through financial economies?

C. unrelated

Lawsuits over patent and copyright infringements are more common and intense in

C.slow-cycle markets, because of the ability to shelter the company from imitation of its competitive advantage.

Ambrose is a scientist working for a pharmaceutical company. His company was acquired by a rival pharmaceutical company, and now it is involved in downsizing and downscoping. Ambrose is concerned about his job security, since he is actively involved in amateur sports in his community and does not wish to disrupt his current lifestyle. Ambrose's job will be most likely to be secure if

D. Ambrose is a key employee in the firm's primary business.

Durable Ceramics, Inc., provides inexpensive ceramic tile to builders of institutional buildings such as schools, prisons, and public administration buildings. It has always competed on a cost leadership basis. Most of its products are purchased by a few commercial construction firms, so it is fairly dependent on these construction firms for selling its product. Durable Ceramic's next most-efficient competitor, Cost-Less Ceramics, Inc., earns average returns, whereas Durable earns above-average returns. The commercial construction firms are putting pressure on Durable to reduce its prices. If Durable reduces its prices below those of Cost-Less's prices, it is likely that

D. Cost-Less will go out of business, and Durable will gain higher power over its customers

The ability of Disney to maintain its competitive advantage through proprietary rights to its characters would be severely weakened if

D. Disney's cartoon characters became widely perceived as old-fashioned and unappealing.

Meredith Inc. is a manufacturer of art supplies. The company has announced plans to enter into an equity strategic alliance with JaZz Paper to develop a line of specialty papers for use with a line of specialty paints Meredith manufactures. Which of the following would be the accurate interpretation of this announcement?

D. Either Meredith or JaZz will own a majority equity stake, but we do not know which one based on the announcement.

Which of the following is the most strategic action by Walmart?

D. Entering a new foreign market

Which of the following statements is FALSE?

D. Franchising agreements require more trust between firms than do other cooperative strategies.

When firms use core competencies to implement value-creating strategies they are answering the "_______" question.

D. How

Which of the following is NOT an attribute of a successful acquisition?

D. Investments in advertising and image building are made quickly.

Which of the following is NOT a disadvantage of international acquisitions?

D. It is the slowest way to enter a new market.

_________ are unsecured obligations that are not tied to specific assets for collateral.

D. Junk bonds

The typical risks of a cost leadership strategy include ____

D. Loss of customer loyalty

Pappelbon Enterprises recently acquired a chain of convenience stores offering both fuel and food. Pappelbon is now surprised and dismayed to find that the gas pumps have been poorly maintained and will need to be replaced at considerable expense. Each of the following statements accurately reflect this EXCEPT

D. Pappelbon's management was overly focused on acquisitions.

Which of the following is TRUE?

D. Related constrained firms share more tangible resources and activities between businesses than do related linked firms.

Bunyan Heavy Equipment, a U.S. firm, is investigating expanding into Russia using a greenfield venture. The committee researching this project has delivered a negative report. The MAIN concern of the committee is probably

D. Russia's recent actions to gain state control of private firms' assets.

If Southwest Airlines employees lost their high enthusiasm and commitment to the company, ________

D. Southwest would have lost one of its competitive advantages and its performance would be threatened

Which of the following is TRUE of Southwest Airlines?

D. Southwest's advantage lies in its ability to "think small."

The typical risks of a differentiation strategy do NOT include which of the following?

D. Suppliers of raw materials erode the firm's profit margin with price increases

Hewlett-Packard licenses some of its intellectual property through strategic alliances. Which of the following is correct about this relationship?

D. This is a nonequity strategic alliance with Hewlett-Packard leveraging its unique capabilities.

___________ are LEAST likely to involve potential or current competitors.

D. Vertical complementary strategic alliances

Walmart's same store sales have been declining and those rivals Family Dollar and Amazon have been increasing. What could explain the recent change?

D. Walmart changed its strategy to attract more upscale customers

Greentech, Inc., is a bioengineering firm specializing in food crops. It is considering a cooperative alliance with an Asian agribusiness firm, AsiaFoods, to jointly produce improved crops for the Asian market. The risks that Greentech should consider before entering this alliance include all of the following EXCEPT:

D. Will Greentech be able to use a cost-minimization management strategy in the AsiaFoods alliance?

Which organization has the highest market dependence?

D. a company that specializes in making replacement tiles for the space shuttle

In Porter's model, if a country has both and _______ production factors, it is likely to serve an ___________industry well by spawning strong home-country competitors that can also be successful global competitors.

D. advanced ; specialized

Viewing the world through the customer's eyes and constantly seeking ways to create more value for the company enhances _______

D. affiliation with the customer

The global airline industry is one in which

D. alliance versus alliance competition dominates firm versus firm competition.

Which acquisition would be considered the LEAST related?

D. an upscale "white-tablecloth" restaurant chain acquires a travel agency

Research has shown that horizontal acquisitions

D. are able to use activity sharing to successfully create economies of scope.

Rapid-Built Homes specializes in low-cost prefabricated, modular homes that can be erected in a matter of days anywhere in the country. Rapid-Built focuses on entire subdivisions of homes developed by real estate speculators. ModernModular Homes (ModMod) specializes in modular homes designed by architects, which can be built anywhere in the country. The buyers usually build the home themselves from kits on their own lots. ModMod sells fewer than 100 house kits per year. ModMod is run by two professors of architecture as a sideline business. According to the "Framework of Competitive Analysis," we can say that Rapid-Built and ModMod

D. are probably not engaged in intense competitive rivalry

Which of the following is NOT a factor pressuring companies for local responsiveness?

D. availability of low labor costs

Multimarket competition occurs when firms ______

D. compete against each other in several geographic or product markets.

In general, firms are more aware of competitors who have similar resources and who

D. compete against the firm in multiple markets

The risk for firms that follow the unrelated diversification strategy in developed economies is that

D. competitors can imitate financial economies more easily than they imitate economies of scope.

Large diversified businesses often face a _____________, which results from analysts not knowing how to value a vast array of large businesses with complex financial reports.

D. conglomerate discount

A strategy in which firms work together to achieve a shared objective is a

D. cooperative strategy.

Chelsea Milling Company makes Jiffy packaged baking mixes. It was established in 1930. It has never spent one cent on advertising, which is one reason it is able to pursue a(n) _________ strategy.

D. cost leadership

A manufacturer of jewelry imitates the style of a popular and expensive brand using manufactured stones rather than real gemstones and lesser grade metals rather than silver and gold. The manufacturer packages the jewelry in boxes of the same color imprinted with an almost identical logo. About 85 percent of the company's sales are through Internet sales. This example illustrates the competitive risk of ____ that threatens companies that use the differentiation strategy.

D. counterfeiting

When using cooperative strategies, firms most frequently develop strategic alliances that

D. create a competitive advantage.

A differentiation strategy can be effective in controlling the power of substitutes in an industry because

D. customers develop brand loyalty

Firms seek to create value from economies of scope through all of the following EXCEPT

D. de-integration

___________ refers to a divestiture, spin-off, or some other means of eliminating businesses that are unrelated to a firm's core business.

D. downscoping

______________ is often used when the acquiring firm paid too high a premium to acquire the target firm.

D. downsizing

The location advantages associated with locating facilities in other countries can include all of the following EXCEPT

D. evasion of host country governmental regulations.

A relatively young firm has developed a method of transferring photographic images of surface textures onto any type of hard surface. This potentially has a huge market in the home-decorating field as well as any hard surface that is typically painted, such as car bodies. The type of alliance partner this firm would be searching for would be one with

D. excess resources for investing.

Problems associated with acquisitions include all of the following EXCEPT

D. excessive time spent on the due diligence process.

A company in a ______ industry is LEAST likely to make heavy use of patents and copyrights.

D. fast-cycle

An organization's loyalty to its own product is a competitive disadvantage in a(n) _______ market.

D. fast-cycle

The alliance between Nokia and Microsoft calls for Nokia to transition its smartphone portfolio to Microsoft's Windows phone platform. This is an example of using an alliance in a _________ to speed up development of new products and services

D. fast-cycle market

The benefits of expanding into international markets include each of the following opportunities EXCEPT

D. favorable tax concessions and economic incentives by home-country governments.

Three sources of flexibility in completing primary and support activities are particularly useful for firms using the integrated strategy. These are

D. flexible Manufacturing Systems, Total Quality Management, and Information Networks

McDonald's, Hilton International, and Subway all heavily rely on the _______ strategy.

D. franchising cooperative

The means of entry into international markets that offers the greatest control is

D. greenfield ventures

The problems associated with exporting include

D. high transportation costs and the expense of tariffs.

Which pair of industries would NOT be considered as "related and supporting" under Porter's diamond model?

D. highway systems and the supply of debt capital

The purchasing of firms in the same industry is called

D. horizontal acquisition

Cross-border acquisitions are critical to U.S. firms competing internationally

D. if they wish to overcome entry barriers to international markets.

Which of the following is NOT a limitation directly relating to vertical integration?

D. imitation of core technology by potential competitors

A company selling diapers knows the market is for people with young children. However, within that segment they can further divide the market by a demographic factor like

D. income

Which of the following is NOT a typical disadvantage of licensing?

D. incompatibility of the licensing partners

Managerial motives to seek diversification include a desire to

D. increase their compensation.

Whole-firm LBOs tend to result in all the following negative outcomes EXCEPT

D. inefficient operations.

A nation's competitiveness depends on the capacity of its industries to _______ and thereby maintain its competitive advantage.

D. innovate

Target's brand promise "Expect More. Pay Less" and appeal to higher-income, fashion-conscious discount shoppers illustrates the ________ strategy.

D. integrated cost leadership / differentiation

FrameCo, a maker of commercial greenhouses, has just extricated itself from a failing cooperative alliance with another firm. The expected synergies never were achieved, and FrameCo lost most of its investment. The top management of FrameCo should

D. internalize the knowledge about the successes and failures of this alliance so FrameCo can learn from the experience.

The use of strategic alliances

D. is more frequent than other types of cooperative strategies.

According to the Chapter 7 Strategic Focus, China's recent approach to acquisitions has been to focus on hard assets (e.g., mineral deposits or R&D facilities) instead of established branded products because

D. it did not always have the managerial capability to realize successful performance of branded products.

The transnational strategy is becoming increasingly necessary to compete in international markets for all the following reasons EXCEPT

D. it is easy to use

A global strategy

D. lacks responsiveness to local markets.

A firm that is LEAST likely to launch competitive actions is one that has

D. large size

The two important environmental trends that influence a firm's choice and use of international corporate-level strategies are _________ and ________

D. liability of foreignness; regionalization.

Akamai Technologies is a dominant player in the content delivery network (CDN) market. Akamai is not very diversified (i.e., is dependent on the CDN market). If rival CDN providers such as Limelight Networks and Level 3 Communications lower their basic CDN service prices, what would be Akamai's likely response?

D. lower its prices

Transaction costs include all of the following EXCEPT

D. managers' time spent planning the diversification strategy of the firm.

Competitors are more likely to respond to competitive actions that are taken by

D. market leaders

When the costs of supplies increase in an industry, the low-cost leader ____

D. may be the only firm able to pay the higher prices and continue to earn average or above-average returns

The term "stuck in the middle" ______

D. means that the firm's cost structure is not low enough to allow it to attractively price its products and that its products are not sufficiently differentiated to create value for its target customer.

A global corporate-level strategy assumes

D. more standardization of products across country markets.

The risks of being accused of collusion are MOST likely under what type of alliance?

D. nonequity-based horizontal complementary alliance

Acquisitions can become a time sink for top level managers for all the following reasons EXCEPT

D. only top managers can perform the required due diligence.

Amylin Pharmaceuticals has an alliance with Eli Lilly & Co. to produce diabetes drugs. Lilly, however, recently signed an alliance agreement with another company to also produce diabetes drugs. As a result, Amylin sued Lilly for breech of the alliance agreement. Which of the following risks of cooperative strategies discussed in the chapter is most likely occurring here?

D. opportunistic behavior

Cross-border acquisitions are primarily made to

D. overcome barriers to entry in another country.

Each of the following is a rationale for acquisitions EXCEPT

D. positioning the firm for a tactical competitive move.

Religious beliefs are an example of customer segmentation by _______ factors.

D. psychological

In order to compete effectively, standard-cycle firms need all of the following EXCEPT

D. rapid and continuous product introductions.

A competitive advantage that is developed through a cooperative strategy is called a collaborative or a(n) __________ advantage.

D. relational

Firms participate in strategic alliances for all the following reasons EXCEPT to

D. retain tight control over intangible core competencies.

When implementing a focus strategy, the firm seeks to

D. serve the specialized needs of a market segment

Traditionally, the music industry signed multi-year contracts with artists and sold copyright protected music through established distribution channels. A shift to the digital format and the rise of Internet technology has resulted in the sharing of music over peer-to-peer networks, a practice the industry called "piracy." In recent years, the music industry has seen a rapid decline in the number of CDs sold. At the same time, the ownership of the distribution rights of musical content under copyright laws remains clear. Attempts at innovation by individual record labels to offer music as direct downloads to consumer are quickly copied by other labels. Based on these factors, the best assessment is that the music industry has shifted from a _____ to a _______ cycle market.

D. standard ; fast

In some countries, the only legal way for foreign firms to invest in the country is through

D. strategic alliance with a local firm.

All of the following are reasons why firms use international strategic alliances EXCEPT

D. strategic alliances are easy to manage.

Factors of production in Porter's model of international competitive advantage include all of the following EXCEPT

D. technology

The opportunity maximization approach is more difficult to establish in international relationships than in domestic relationships because of differences in all EXCEPT

D. technology

The downside of synergy in a diversified firm is

D. the loss of flexibility.

In practice, the cost minimization strategy can be more expensive than the opportunity maximization strategy. Which of the following is a way in which the cost minimization strategy is less expensive than the opportunity minimization strategy?

D. the prevention of opportunistic behavior by the partner(s)

Synergy exists when

D. the value created by business units working together exceeds the value the units create when working independently.

Effectively implementing the ________ international corporate-level strategy often produces higher performance than does implementing either the _______ or _________ strategies.

D. transnational ; multi domestic ; global

Hutchison Whampoa Limited (HWL) has businesses in ports and related services, telecommunications, property and hotels, retail and manufacturing, and energy and infrastructure. HWL makes no efforts to share activities or transfer core competencies among the businesses. HWL is following a strategy of ___________ diversification.

D. unrelated

Research suggests that _______ has decreased while ________ has increased possibly due to the restructuring that took place in the 1990s and early twenty-first century.

D. unrelated diversification; related diversification

One problem with becoming too large is that large firms

D. usually increase bureaucratic controls.

Firms use corporate-level diversification strategies for all the following reasons EXCEPT

D. value-diversifying

Manny Inc. recently completed the purchase of its primary supplier. Manny intends to begin expanding the market to which the suppliers' products are sold. This purchase is a(n)

D. vertical acquisition

Baby Doe's, a designer and manufacturer of children's clothing, has decided to purchase a retail chain specializing in children's clothing. This purchase is a(n)

D. vertical acquisition.

When a firm acquires its supplier, it is engaging in a(n)

D. vertical acquisition.

When selecting a business level strategy, the firm must determine all of the following EXCEPT _________

D. why should these customers' needs be satisfied

In Porter's model, a specialized factor of production would include

D. workers with advanced engineering skills.

Which of the following statements is FALSE?

Private synergy is easy for competitors to understand and imitate.

Operational relatedness is created by _________ of _______________

Sharing ; activities

Why are alliances in the airline industry unstable?

The alliances require cooperation among firms that must also compete with one another.

Fujitsu Siemens Computers is a legally independent company of which Fujitsu and Siemens each own 50 percent. This collaboration is an example of a _________, which is effective at transferring __________

joint venture; tacit knowledge.

Late movers are those firms that

respond to a competitive action a significant amount of time after the first mover's action and the second mover's response

A competitive action can be one of two types, either _______ or _________.

strategic ; capital