Chapter 6
Which of the following is not usually a promising option for competing in a fragmented industry?
Employing a best-cost provider strategy aimed at giving buyers more value for their money and trying to appeal to a broader customer base
Which of the following is not one of the benefits of outsourcing value chain activities presently performed in-house?
Enables a company to gain better access to end users and better market visibility
Which of the following is typically the strategic impetus for forward vertical integration
Gaining better access to end users and better market visibility
Which one of the following is not a strategic pitfall companies can make during the transition from fairly rapid growth to industry maturity?
Going overboard in outsourcing the performance of value chain activities to allies and partners
Which of the following is not one of the factors that affects whether a strategic alliance will be successful and realize its intended benefits?
Minimizing the amount of resources that the partners commit to the alliance
Which one of the following statements does not represent one of the typical fundamental changes in an industry as it approaches maturity
New scale economies develop and overall costs per unit produced and sold drop significantly
Which of the following is not a strategic disadvantage of vertical integration?
Vertical integration reduces the opportunity for achieving greater product differentiation.
Which one of the following is not likely to be a suitable strategy option for companies competing in rapid growth industries?
Vertically integrating forward and backward to enable greater control of the industry value chain
In which of the following instances is being a first-mover not particularly advantageous?
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
In which of the following cases are late-mover advantages (or first-mover disadvantages) not likely to arise
When opportunities exist to invent a new industry or distinctive market segment that creates altogether new demand
Which one of the following is not a strategic choice that a company must make to complement and supplement its choice of one of the five generic competitive strategies?
Whether to employ a market share leadership strategy
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.
Competitive success in fast-changing markets tends to hinge on a company's ability to
improvise, experiment, adapt, reinvent, and regenerate as market and competitive conditions shift rapidly and sometimes unpredictably
In a maturing industry, slackening growth rates tend to alter the competitive environment in such ways as
increased buyer sophistication, more head-to-head competition for market share, increased difficulty in coming up with new product features, and sustaining buyer excitement.
The types of strategic initiatives that seem to offer the best payoff in fast-changing markets include
investing aggressively to stay on the leading edge of technological know-how; launching fresh actions every few months; having quick-response capabilities; and keeping the company's products fresh and exciting enough to stand out in the midst of all the change that is taking place.
Outsourcing strategies
involve farming out value chain activities presently performed in-house to outside specialists and strategic allies
A blue ocean strategy
involves abandoning efforts to beat out competitors in existing markets and, instead, inventing a new industry or new market segment that renders existing competitors largely irrelevant and allows a company to create and capture altogether new demand
strategic alliance
is a formal agreement between two or more companies in which there is strategically relevant collaboration of some sort, joint contribution of resources, shared risk, shared control, and mutual dependence.
Businesses competing in stagnant or declining industries must
make a fundamental strategic choice—whether to remain committed to the industry for the long-term despite the industry's dim prospects or whether to pursue an end-game strategy to withdraw gradually or quickly from the market
The central strategy-making challenge in a turbulent market environment is
managing change
Young companies in fast-growing, emerging markets face such hurdles as
managing rapid expansion, defending against competitors trying to horn in on their success, and building a strong competitive position for the long term.
A company that decides to stick with a stagnant or declining industry
may be able to grow and prosper if market demand decays very slowly and it has the competitive capabilities to take market share away from weaker competitors.
expand a company's geographic coverage or extend its business into new product categories
may offer considerable cost-saving opportunities and can also be beneficial in helping a company try to invent a new industry.
For backward vertical integration into the business of suppliers to be a viable and profitable strategy, a company
must be able to achieve the same scale economies as outside suppliers and match or beat suppliers' production efficiency with no drop-off in quality.
A company competing in a rapid-growth industry
needs a strategy predicated on growing faster than the market average, so that it can boost its market share and improve its competitive standing vis-à-vis rivals
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.
In a maturing market where the rates of growth are on the decline, rival firms can often improve their competitive position in the marketplace by
pruning marginal products and models, improving value chain efficiency, trimming costs, acquiring rival firms at bargain prices, and building new or more flexible competitive capabilities, and expanding internationally.
Potentially promising strategy alternatives for a company that decides to stick with a declining industry, because top management is encouraged by the remaining opportunities and/or sees merit in striving for market share leadership, include
pursuing a focused strategy aimed at the fastest-growing or slowest-decaying market segments and stressing differentiation based on quality improvement and product innovation.
To be successful in emerging industries, companies usually have to fashion a strategy that includes such strategic elements as
pushing hard to perfect the technology, improve product quality, and develop additional attractive performance features.
A turbulent or fast-changing industry environment is characterized by
rapid technological change, short product life cycles, the entry of important new rivals, lots of competitive maneuvering by rivals, and fast-evolving customer requirements and expectations (all occurring in a manner that creates swirling market conditions).
Promising strategic options for companies competing in a fragmented industry include
specializing by product type or by customer type, becoming a low-cost operator, and focusing on a limited geographic area
The typical strategic mistakes companies can make during the transition from fairly rapid growth to industry maturity include
steering a middle course between low-cost, differentiation, and focusing; being slow to respond to stiffening competition; and over expanding in the face of slowing growth.
The two best reasons for investing company resources in vertical integration (either forward or backward) are to
strengthen the company's competitive position and/or boost its profitability.
The two big drivers of outsourcing are
that outsiders can often perform certain activities better or cheaper 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 standout competitive characteristic or feature of a fragmented industry is
the absence of market leaders with king-sized market shares and widespread buyer recognition.
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
An industry is said to be fragmented when
the supply side of the market is populated by hundreds, perhaps thousands of sellers, no one of which has a substantial share of total industry sales.
Because when to make a strategic move can be just as important as what move to make, a company's best option with respect to timing is
to carefully weigh the first-mover advantages against the first-mover disadvantages and act accordingly.
In trying to deal with a turbulent, fast-changing market, a company's three strategic options are
to react to change, to anticipate change, and/or to try to lead change.
In a turbulent, fast-changing industry environment, a company's approach to coping with rapid change should, ideally,
try to lead change with proactive strategic moves while at the same time trying to anticipate and prepare for upcoming changes and being quick to react to unexpected developments.
The transition to a slower-growth, maturing industry environment tends to result in
growing buyer sophistication and more head-to-head competition for market share.
Experience indicates that strategic alliances
have a high "divorce rate."
The big risk of employing an outsourcing strategy is
. hollowing out a firm's own capabilities and losing touch with activities and expertise that contribute fundamentally to the firm's competitiveness and market success.
Which of the following does not generally account for why the supply side of an industry may be fragmented and contain thousands of companies?
A condition where most all competitors have, for one reason or another, chosen to pursue focus and market niche strategies
Commonly encountered market conditions that must be considered when choosing among strategic options include:
All of the above
Relying on outsiders to perform certain value chain activities offers such strategic advantages as
All of the above
Which of the following is usually a promising strategic option for competing in a fragmented industry?
All of the above can be promising options
Being first to initiate a particular strategic move can have a high payoff when
All of these
First-mover disadvantages (or late-mover advantage) arise when
All of these
Outsourcing the performance of value chain activities presently performed in-house to outside vendors and suppliers makes strategic sense when
All of these
The strategic moves and initiatives that seem to offer the best payoff in turbulent, fast-changing markets include
All of these
Which one of the following is not one of the strategy elements that companies in emerging industries are likely to consider incorporating into their strategy?
Being aggressive in cutting prices below key rivals and establishing a reputation of being the low-price leader
Which of the following are commonly encountered types of market conditions that must be considered by strategy-makers?
Emerging markets, mature markets, fragmented markets, and turbulent markets.
Which of the following is not a typical reason that many alliances prove unstable or break apart?
Disagreement over how to divide the profits gained from joint collaboration
Which of the following is not a typical feature of an emerging industry or a challenge that companies in emerging industries have to contend with and try to overcome?
How to raise sufficient capital to fund an R&D effort that will enable the company to win the race against rivals to patent the industry's technology
Companies competing in rapid growth industries are not well-advised to consider which one of the following strategy elements in crafting their strategy
Pushing hard to develop a distinctive competence in new technology R&D
Which of the following is not a potential advantage of backward vertical integration?
Reduced business risk because of controlling a bigger portion of the overall industry value chain
Which one of the following strategic actions is not well-matched to dealing with the transition from rapid growth to industry maturity?
Steering a middle course between low cost, differentiation, and focusing
Which of the following is not usually a characteristic of competing in an emerging industry?
Technological know-how is freely shared and exchanged among the early participants, with no competitive advantage attached to patents and proprietary technology.
Which of the following is not a factor that makes an alliance "strategic" as opposed to just a convenient business arrangement?
The alliance helps the company obtain additional financing on better credit terms.
Which one of the following is not a strategically beneficial reason why a company may enter into strategic partnerships or cooperative arrangements with key suppliers, distributors, or makers of complementary products?
To enable greater opportunities for employee advancement
Which of the following is not a typical strategic objective or benefit that drives mergers and acquisitions?
To facilitate a company's shift from a broad differentiation strategy to a focused differentiation strateg
A good example of vertical integration is
a crude oil refiner purchasing a firm engaged in drilling and exploring for oil
A slow-exit type of end-game strategy involves
a gradual phasing down of operations coupled with an objective of generating the greatest possible harvest of cash from the business for as long as possible.
The difference between a merger and an acquisition is that
a merger is a pooling of equals whereas an acquisition involves one company, the acquirer, purchasing and absorbing the operations of another company, the acquired.
Once a company has decided to employ a particular generic competitive strategy, then it must make such additional strategic choices as
all of the above
Strategic alliances
are collaborative arrangements where two or more companies join forces to achieve mutually beneficial strategic outcomes.
The best strategic alliances
are highly selective, focusing on particular value chain activities and on obtaining a particular competitive benefit.
Mergers and acquisitions
frequently do not produce the hoped-for outcomes.
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.
The strategic impetus for forward vertical integration is to
gain better access to end users and better market visibility.
In trying to deal with turbulent and rapid changes in the marketplace, a company
can react to change, anticipate change, and/or try to lead change.
Entering into strategic alliances and collaborative partnerships can be competitively valuable because
cooperative arrangements with other companies are very helpful in racing against rivals to build a strong global presence and/or racing to seize opportunities on the frontiers of advancing technology.
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.
An end-game strategy in a stagnant or declining industry usually involves
either a fast-exit/sell-out quickly strategy or a slow exit strategy that involves a gradual phasing down of operations coupled with an objective of getting the most cash flow from the business.
Mergers and acquisitions are often driven by such strategic objectives as to
expand a company's geographic coverage or extend its business into new product categories
Vertical integration strategies
extend a company's competitive scope within the same industry by expanding its operations across more parts of the industry value chain.