MGMT 490 - CH 6

Which statements are true concerning vertical scope?

-It is defined by the range of activities that may extend from initial production to after-sale customer service. -It is the extent to which a firm engages in the activities that make up the industry's entire value chain system.

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

the owner of a poultry farm expanding into food distribution

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

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

A formal agreement, or _________, is between two or more separate companies in which they agree to work cooperatively toward some common objective.

strategic alliance

Which two firms would be the best targets for an offensive strategic attack by a company?

-firms in danger of going out of business -regional firms with limited capabilities

What are reasons that mergers and acquisitions sometimes fail?

-Cost savings are less than anticipated. -Gains in competitive advantage materialize more slowly than was anticipated.

The benefits of forward vertical integration include

-improving a company's market visibility. -giving manufacturers better access to end users. -differentiating a company from its competitors.

What are recommended strategies for companies that manage a large number of strategic alliances?

-to break relationships that no longer serve a useful purpose -to continue to seek promising new alliances -to restructure alliances to optimize collaborative effort

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

25%

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

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

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

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

Which statement about joint ventures is correct?

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

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

narrows

Companies that outsource strategically important operations run the risk of

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

When is outsourcing not beneficial?

when internal control over an activity is deemed essential

You are advising Hoffmann-LaRoche, which has set up Roche Partnering to manage more than 190 alliances in the healthcare industry. What is the greatest risk that might cause those alliances to be unstable or break apart?

One or more of the 190 partners in Roche Partnering could gain access to another company's proprietary knowledge base, technologies, or trade secrets

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

Pursuing disruptive product innovations to create new markets

What value chain segments has Tesla chosen to enter and perform internally?

Tesla has chosen vertical integration both backward and forward in the value chain to achieve multiple strategic goals. From component manufacturing like batteries, all the way through owning the distribution sales and servicing network.

Has vertical integration strengthened its market position?

Yes. Tesla's vertical integration strategy has enabled it to quickly roll out innovative new products and launch the network that is required for widespread vehicle adaption.

A joint venture can be defined as

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

The best reason for investing company resources in vertical integration (either forward or backward) is to

add materially to a company's technological capabilities, strengthen the company's competitive position, and/or boost its profitability.

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

allow partners to keep pace with developments in the market.

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

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

Merger and acquisition strategies

are often driven by such strategic objectives as to expand a company's geographic coverage or extend its business into new product categories.

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

backward vertical integration.

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

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

Offensive strategic moves involve all of the following except

blocking the avenues open to challengers.

Decisions regarding the a company's scope of the firm

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

Combined companies may be able to reduce supply chain costs because

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

Vertical integration does not involve

expanding a firm's range of product and service segments within its product or service market.

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

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

Vertical integration strategies

extend a company's competitive scope within the same industry by expanding its operations across multiple segments or stages of the industry value chain.

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

false

In a winner-take-all type of market,

first-mover advantages can insulate a company from competition.

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

forward vertical integration.

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

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

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

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

Price cutting can be an effective strategy for companies that

have already achieved a cost advantage.

Daimler's 2017 agreement with automotive supplier Robert Bosch GmbH to develop self-driving taxis that customers can hail with a smartphone app is called a

joint venture.

The primary objective of deploying a defensive strategy is to

lower the risk of being attacked, to weaken the impact of any attack that occurs, and to influence challengers to aim their efforts at other rivals.

The best targets for offensive-minded firms to challenge are

market leaders that are vulnerable.

Tinder's first-mover strategic thrust into the online dating industry resulted in a high payoff in all of the following except

market uncertainties made it difficult for Tinder's founding team to ascertain whether or not the dating app would eventually succeed.

Late-mover advantages (or first-mover disadvantages) are not likely to arise when

opportunities exist for a blue-ocean strategy to invent a new industry or distinctive market segment that creates altogether new demand.

A firm with a vertical integration strategy that seeks full integration

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

A vertically integrated firm

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

Compared to vertical integration or horizontal mergers/acquisitions strategies, the principal advantages of joint venture partnerships and alliances include

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

A company that fails to manage its strategic alliance probably has

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

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

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

Cultural differences among companies in a strategic relationship

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

For a backward vertical integration strategy into the business of suppliers to be viable and profitable, a company must possess

the capability to achieve the same scale economies as outside suppliers and also match or beat suppliers' production efficiency with no drop in quality.

A merger can be defined as

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

A company's strategic offensive should be based on

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

Conditions that create first-mover advantages include all of the following except

the costs of pioneering are high relative to the benefits accrued.

The difference between a merger and an acquisition relates to

the details of ownership, management control, and the financial arrangements.

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

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

The extent to which a firm engages in the various value chain activities, from initial activities all the way to after-sales activities, is called

vertical scope.

Which statements concerning strategic alliances are accurate?

-Strategic alliances are used by some companies as a way of managing outsourcing. -Strategic alliances are used by some companies to extend their scope of operations internationally.

Which statements about strategic alliances are generally true?

-The alliances involve mutual dependence and shared risk. -All parties of the alliance contribute resources. -Financial responsibility is shared among all parties of the alliance.

Contract-based outsourcing can introduce problems because

-a company may have a difficult time monitoring the work of the outside company. -the outside company may lack incentive to meet the needs of the outsourcing company. -issues arising from delays and budget overruns may be difficult to resolve.

The drawbacks of strategic alliances include the possibility that a company will

-become too dependent on a partner. -accidentally reveal knowledge that allows a partner to match core strengths. -overestimate the potential for sustaining a positive relationship.

First-movers are likely to experience significant advantages when

-being first in a new market builds strong brand loyalty and enhances a firm's reputation. -switching costs discourage a first mover's customers from seeking a different vendor.

Good partners for a strategic alliance should

-bring complementary strengths to the relationship. -hold compatible views about how the alliance should be managed. -share the same goals for the relationship.

What are examples of ways that a firm can pursue vertical integration?

-building positions in selected stages of the value chain and avoiding participation in others -acquiring a company that performs activities further along the value chain, closer to the end user

Outsourcing is a recommended strategy when an activity

-can be performed more efficiently by outside specialists. -is not crucial to the company's ability to sustain its competitive advantage.

Guerrilla warfare tactics in business competition include which of the following?

-launching special campaigns to weaken a rival that is undergoing a period of internal discord -catching rivals off guard with intense burst of promotional activity

What are examples of ways that companies signal would-be challengers that retaliation is likely?

-maintaining cash reserves and marketable securities to fund countermeasures -publicly announcing a commitment to maintaining market share

What can lead to victory in a standard war among early movers?

-making use of fast-cycle product development capabilities -gaining the support of key customers and suppliers -employing penetration pricing

How has vertical integration aided the organization in building competitive advantage?

All of these choices are correct.

What is an example of a strategically sound outsourcing relationship?

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

Which companies have used disruptive product innovations to create new markets?

Apple Music Amazon

As general manager of a local restaurant chain, you have been asked to develop defensive moves to protect your company's market position and restrict any challenger's options for initiating a competitive attack. You would present all but ONE of the following strategic options to your executive team.

Challenge struggling runner-up restaurants that are on the verge of going under.

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

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

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

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

The following are good examples of outsourcing some value chain activities that were formerly performed in-house except

Nordstrom retails certain products for Coach Inc.

Which statement concerning mergers and acquisitions is accurate?

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

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

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

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

false

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

false

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

Market conditions and factors that tend not to favor first movers include

growth in demand that depends on the development of complementary products or services that are not currently available and new-industry infrastructure that is needed before buyer demand can surge.

Samsung Group's ecosystem of over 1,300 partnerships that enable productive activities, from global procurement to local marketing to collaborative R&D, is considered to have been

successful in creating strategic alliances.

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

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

The introduction of disruptive product innovations

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

When buyer preferences shift, a vertically integrated company

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

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

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

Outsourcing strategies can offer such advantages as

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

A business guerrilla offensive is best suited for

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

To fend off a competitive attack, defensive-minded companies

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

What are common objectives of merger and acquisition strategies?

-expanding geographic coverage -extending business into new product categories -gaining quick access to new technologies

Companies in successful business alliances understand that collaborative arrangements should be

-flexible enough to keep pace with changing customer requirements. -capable of responding to shifting market changes.

When there are improvements in technology at the supply stage of the value chain, a vertically integrated company

-may be required to incur high costs for abandoning old technologies in an effort to keep pace with suppliers. -may need to continue producing suboptimal products rather than upgrading its technology.

What are examples of preemptive strikes?

-obtaining the best retail location in a mall -entering into exclusive, long-term contracts with the best suppliers

What are typical obstacles that a company might create to deter the strategic offensive of a would-be challenger?

-offering lower prices by maintaining a line-up of economy-based products -introducing new features and adding new models -lengthening warranties and offering free support services

Strategic alliances are more likely to succeed if partners

-protect themselves with safeguards. -make mutual commitments. -establish trust.

In industries in which technological developments occur at a fast pace, a strategic alliance can benefit a company by

-speeding up the company's cycles of learning. -granting the company quick access to the latest technological know-how.

The benefits of defensive strategies include which of the following?

-strengthening a firm's position in the market -protecting a firm's resources

The best strategic offensives for companies involve which of the following?

-striving to convert a competitive advantage into a sustainable advantage -overwhelming rivals with swift and decisive action

Some companies have adopted forward vertical integration strategies to

-supplement to their core product line with iconography and memorabilia. -facilitate the sale of overstocked and slow-moving items. -decrease dependence on sales agents, wholesalers, and retailers.

Lowering prices can be a successful competitive strategy for a company if

-the company convinces buyers that its products are as good as its competitors' products. -its competitors maintain product prices at higher levels.

Vertically integrated companies may face challenges realizing economies of scale because

-the company is too small. -their production levels often fall below the minimum efficient scale.

The concept of blue-ocean strategies does not refer to

pursuing offensive strategies that involve a preemptive strike to secure an advantageous position in a mature market segment.

Horizontal scope refers to the

range of product and service segments that a firm can serve within its focal market.

When companies pursue operations that require new capabilities,

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

When a company considers whether to pursue an emerging market opportunity aggressively or cautiously, the company needs

-to bear in mind that any first-mover advantages can be fleeting. -to determine whether the race to market leadership will be a marathon or a sprint.

What are reasons for a company to favor Internet retailing?

-to lower distribution costs -to increase brand recognition -to lower costs for end users

What are some reasons that companies adopt defensive strategies?

-to minimize the impact of any competitive attack that occurs -to lower the risk of being attacked by competitors

Strategic alliances can be a viable alternative to

-traditional price-oriented contracts. -horizontal mergers and acquisitions. -vertical integration strategies.

What are some of the negative effects that mergers and acquisitions can have on personnel?

-Difficulty coping with new management may lead to lower morale. -Managers may make mistakes when deciding which systems to integrate. -Employees may resist efforts to mesh the cultures of the two companies.

Which statements are true concerning horizontal scope?

-It can be expanded through company mergers and acquisitions. -It is the range of product and service segments that a firm serves within its product and service market.

In many cases, strategic alliances are preferable to vertical integration strategies, as well as horizontal mergers and acquisitions, because strategic alliances

-can lower investment costs by requiring partners to pool resources. -can be deployed more rapidly in attempt to gain first-mover advantages. -are more flexible and allow for swifter responses to changing market conditions.

What are examples of company decisions concerned with scope of the firm?

-choosing to focus solely on sales rather than designing and marketing -choosing to remove leather goods from a line of product offerings

A company that acquires another company in the same industry may be able to cut costs by

-combining and downsizing administrative activities. -closing inefficient plants.

A company can achieve which of the following by signaling would-be business challengers that retaliation is likely in the event of any strategic attack?

-dissuading challengers from attacking altogether -diverting challengers to less threatening competition

A company that expands its geographic coverage typically

-enhances its name recognition and brand awareness. -increases its bargaining power with suppliers and buyers.

In industries with changing boundaries, a company may pursue an acquisition strategy in order to

-expand into new geographic regions. -become more flexible in its capacity to respond to buyers' changing needs. -be prepared to respond to the various directions the industry might take.

In which situations do adept followers have an advantage over first movers?

-when imitators can achieve the same benefits as pioneers with lower costs -when the first-mover's products do not perform well -when market uncertainties make it difficult to predict which products will succeed

When should a company undertake a strategic offensive?

-when the company has no option other than to try to lessen a strong rival's competitive advantage -when the company identifies a chance to improve its market share at a competitor's expense

Under which of the following circumstances might backward vertical integration lower costs?

-when there are few suppliers in the market -when the item being supplied is a major component of the final product

Approximately what percentage of strategic business alliances fail each year?

60% to 70%

Strategic alliances are more likely to be long-lasting when they involve

collaboration with suppliers or distribution allies, or when both parties conclude that continued collaboration is in their mutual interests.

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

collaborative research and development.

Outsourcing is a strategy that involves

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

In some cases, backward vertical integration can increase efficiency by

coordinating production flows and preventing bottlenecks.

All the following are signals to would-be challengers that retaliation is likely except

creating collaborative relationships with other industry leaders to block new entrants.

A company that aggressively pursues an online sales strategy risks

threatening crucial relationships with distribution allies.

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

to be aware of first-mover advantages and disadvantages

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

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

A strategic objective that is highly UNLIKELY to drive a mergers and acquisition strategy is

to facilitate a company's shift from a broad differentiation strategy to a focused differentiation strategy.

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

true