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MGT 400 EXAM 2

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Learning Curves

"Learn by doing." Steeper curve, more learning. Ex: Aircraft manufacturing Ex: Cardiac surgeons

equity alliances

(one firm, takes partial ownership in the other)

joint ventures

(standalone organization) (highest commitment)

in most cases mergers and acquisitions

-do not create competitive advantage -do not realize anticipated synergies -result in destroyed shareholder value

three main benefits of horizontal integration

1. reduction in competitive intensity 2. lower costs 3. increased differentiation

- perform similar activities differently than rivals - perform different activities than rivals

A business strategy is more likely to lead to competitive advantage if one of these two things happen.

Architectural Innovation

A new product in which known components, based on existing technologies, and reconfigured in a novel way to attack new markets.

What are strategic alliances?

A voluntary arrangement between firms Involves the sharing of: Knowledge Resources Capabilities with the intent of developing: Processes Products Services

In the United States, the time period for the right to exclude others from the use of a patented technology is ________ from the filing date of a patent application. A) 20 years B) 25 months C) 15 months D) 25 years

A) 20 years

A ________ primarily details the goal-directed actions managers take in their quest for competitive advantage when competing in a single product market. A) business-level strategy B) code of ethics C) mission statement D) functional-level strategy

A) business-level strategy

Tangles Costume Jewelry offers slightly lower quality merchandise than competitors at a much lower price. What strategy is Tangles using? A) cost-leadership B) differentiation C) niche marketing D) product diversification

A) cost-leadership

As a research scholar, Denise had built a helicam as part of her project. The helicam could capture aerial images. Realizing the potential use of this product in movie production and military and rescue operations, she started a new venture where she could customize these helicams to fit the specific needs of the buyers and sell them. Denise can be best described as a(n) A) entrepreneur. B) category captain. C) franchisor. D) early adopter.

A) entrepreneur.

What is an invention? A) the transformation of an idea into a new product or process B) a unique idea that has not been thought of before C) the transformation of an idea into a successful product D) a unique idea that has been patented

A) the transformation of an idea into a new product or process

Complements

Add value when consumed in tandem Ex: DVR (i.e., Tivo)

Incremental innovation

An innovation that squarely builds on the firm's established knowledge base, steadily improves the product or service it offers, and targets existing markets by using existing technology.

Although long-standing enemies, Apple and IBM formed an alliance partnership. How did this partnership benefit both Apple and IBM?

Apple's core competency with consumer services and IBM's core competency with business services complemented each other.

Integration Strategy

Business-level strategy that successfully combines differentiation and cost leadership activities

In a focused cost-leadership strategy, a firm A) caters to the segment of the market that is least cost-sensitive. B) provides high-priced products for many different segments of the mass market. C) delivers low-cost products and services to a specific, narrow part of the market. D) focuses on reducing the economic value created to drive down costs.

C) delivers low-cost products and services to a specific, narrow part of the market.

synergy

Competing in multiple markets result in what?

How does availability of complements act as a value driver? A) Complements add value to a product by offering an inferior substitute to it. B) Complements add value to a product by competing with it. C) Complements add value to a product when they imitate it. D) Complements add value to a product when they are consumed in tandem with it.

D) Complements add value to a product when they are consumed in tandem with it.

Which of the following examples uses a focused differentiation strategy? A) a tennis pro shop that sells low-quality racquets priced at 150 dollars per racquet B) a coffee shop that offers mediocre lattes at a price of five dollars for a small latte C) a hotel chain that offers high-quality furnishings and service with room rates of under 75 dollars per night D) a cosmetics brand that offers superior skin lotion for sensitive skin priced at 100 dollars per bottle

D) a cosmetics brand that offers superior skin lotion for sensitive skin priced at 100 dollars per bottle

Which of the following is a firm effect that has an impact on the competitive advantage of a firm? A) the exit barriers within the industry in which the firm operates B) the number of companies operating in the industry in which the firm operates C) the intensity of rivalry among existing companies in the firm's chosen industry D) the value and the cost position of the firm relative to its competitors

D) the value and the cost position of the firm relative to its competitors

Nendry is the owner of the firm that produces sports drinks. Since there are a number of firms in the industry competing on cost , Nendry has decided to pursue a differentiation strategy. In this case she should, A. Concentrate on improving process technologies to achieve economies of scale B. Enforce a strict budget controls at all levels of the organization C. Devote all resources to reducing the value gap D. Focus on adding unique features to her product that customers will value

D. Focus on adding unique features to her product that customers will value

Anita has been named CEO of a popular sports apparel company. As CEO, she is tasked with setting the firm's corporate strategy. Which of the following decisions is Anita most likely to make? A. which customer segment to target B. How to achieve the highest levels of customer satisfaction C. Whether to pursue a differentiation or cost leadership strategy D. What range of products the firm should offer

D. what range of products the firm should offer

Business-level strategy

Details the actions managers take in their quest for competitive advantage when competing in a single product market. It may involve a single product or a group of very similar products that use the same channel.

creative destruction

Entrepreneurs are the change agents for ________?

1. Gain access to a larger market 2. Gain access to low-cost input factors 3. Develop new competencies

How do you globalize?

1. Identify core customers 2. Ask customers what do they want

How do you implement blue ocean strategy?

Diseconomies of scale

Increases in cost per unit when output increases. Ex: W.L. Gore and aircraft aeronautics

equity alliances

One partner takes partial ownership in the other

PureSource Pharma Inc. recently acquired BioChem Pharmaceuticals Inc. It now sells its own products along with the products originally sold by BioChem Pharmaceuticals. As a result, PureSource Pharma's sales force will also be marketing the acquired company's products. How will this horizontal integration most likely affect PureSource Pharma?

PureSource Pharma will lower its costs through economies of scale.

main issues in the build borrow buy framework

Relevancy tradability closeness integration

Corporate Governance

Set of mechanisms used to manage the relationships (and conflicting interests) among stakeholders, and to determine and control the strategic direction and performance of organizations (aligning strategic decisions with company values)

strategic trade-offs

Situations that require choosing between a cost or value position, necessary because higher value tends to require higher cost.

corporate level strategy

Specifies actions a firm takes to gain a competitive advantage by selecting and managing a group of different businesses competing in different product markets

Economies of Scope

Starbucks adding hot tea to its menu. This is an example of what kind of value and cost driver of integration

Innovation

The commercialization of any new product, process, or idea, or the modification and recombination of existing ones. To drive growth, innovation also needs to be useful and successfully implemented.

Industry life cycle

The four different stages that occur in the evolution of an industry over time.

Scope of competition. Narrow (focused): Rolex. Broad: Timex

The size - narrow or broad - of the market in which a firm chooses to compete

- Cost leadership - Focused cost leadership - Differentiation - Focused differentiation

What are porter's generic strategies?

• What stages of industry value chain and degrees of vertical integration • What range of products/services and degrees of horizontal integration and diversification Horizontal integration is buying a similar company • Where in the world to compete and global strategy

What are the 3 dimensions of corporate level strategy?

• Reduce competitive intensity • Lower costs • Boost differentiation • Access to new markets and distribution channels

What are the benefits of horizontal integration?

• Securing critical supplies • Lowering costs • Improving quality • Facilitating scheduling and planning • Facilitating investments in specialized assets (ex. HTC started as OEM, then expanded to fully integrated)

What are the benefits of vertical integration?

- input factors - economies of scale - learning-curve effects - experience-curve effects

What are the four cost drivers?

- factor conditions - demand conditions - related and supporting industries/complementors - competitive intensity in focal industry

What are the four factors in the porter's diamond model for competitive advantage?

- Create - Eliminate - Reduce - Raise

What are the four forms of blue ocean strategy?

1. Strengthen competitive position 2. Enter new markets 3. Hedge against uncertainty 4. Access critical complementary assets 5. Learn new capabilities

When should you enter a strategic alliance?

principal-agent problem

Which can occur any time an agent performs activities on behalf of a principal

multinational enterprise (MNE)

a company that deploys resources and capabilities in the procurement, production, and distribution of goods and services in at least two countries

synergy

a concept that collaborating or working with another company (or companies) will have a value & performance that is greater than working alone - Commonly used in reference to mergers and acquisitions

economies of scale

average per-unit cost decreases as its output increases; reduces risk

Buy

buying from the market; focuses on transaction

Quality

can increase perceived value & lower cost. This is an example of what kind of value and cost driver of integration

merger

combining two companies

transaction cost

cost associated with economic exchange; "make or buy" decision

Make

create activities within the business; perform activities in-house

internal developing

expanding core competency as a small company

question marks

ideally, executives want to invest in question marks to increase their relative market share so they turn into stars. If market conditions change, or the overall market growth slows down, then a question mark is likely to turn into a dog. In this case, harvest the cash flow or divest the SBU.

Network Ties

intermediary that aims to develop relationships and networks with/among/between producers and users (Firm B)

o Knowledge broker

intermediary that aims to develop relationships and networks with/among/between producers and users (Firm B)

vertical integration

is when a company want to have power over the supply chain (supplying and distribution process)

dog

low performing businesses; strategic recommendations to divest(sell) or harvest it(stop investing in the business and squeeze out as much cash flow as possible before shutting it down or selling it)

Input Factors

lower-cost materials, money, or labor Ex: De Beers - diamonds, Alcoa - beauxtie, GE Capital

The main reason behind Google's decision to acquire the Israeli start-up company Waze for $1 billion was to

preempt its competitors from buying wase

network nodes

the organizations

acquisitions

purchase or takeover of a company; 80 percent of them fail

star

recommendation is to invest sufficient resources to hold the star's position or even increase investments for future growth

Operational relatedness

sharing activities between businesses

cash cows

strategic recommendation is to invest enough into cash cows to hold their current position, and to avoid having them turn into dogs(as indicated by the arrow)

merger

the joining of 2 independent companies to form a combined entity • Tend to be friendly; the target firm would like be acquired

merger

the joining of two independent companies to form a combined entity

Horizontal Integration

the process of merging with competitors, leading to industry consolidation occurs at the same stage of the value chain

acquisition

the purchase of a company by another company

corporate relatedness

transferring core competencies into businesses

strategic alliances

voluntary arrangements between firms that involve the sharing of knowledge/resources/capabilities with the intent of developing processes/products/services • An alliance qualifies as strategic only if it has the potential to affect a firm's competitive advantage • Contractual agreements for non-equity alliances (based on contracts)

Product diversification

what is the primary form of corporate-level strategy?

o Network centrality

when network nodes are in the middle of network ties (Firm A)

Considers market, industry, and product lines decisions

What type of decisions do corporate level strategies consider?

Value-Creating

- Adds value to the company through cost saving and restructuring acquired assets - Purpose is to gain market power over competitors - Operational relatedness - Corporate relatedness

Structure, Culture, & Routines

- Ambidextrous organization - explore and exploit - Intel current and future products and services. This is an example of what kind of value and cost driver of integration

Experience curves

- Combine economy of scale & learning curves - Scale comes down a given learning curve - Technology allows movement to steeper curve - Combination can leapfrog in competitive advantage Ex: Walmart high volumes & technology leadership

Introduction stage

- Early adopters will pay a premium - Only a few innovators in the market - differentiated - Strategy here — market acceptance & seeds for growth *Network effects helpful - Positive effects ONE user has for other users

Growth Stage

- Early majority buyers increase growth rapidly - Dominant design is set * IBM PC: Wintel * Government influence - GSM standard for mobile phones * QWERTY keyboards - Core competencies move to manufacturing & marketing Ex: Women's shapeware industry. Spanx started in 1998 and now there is Maidenform, Body Wrap, & Miraclesuit are competitors.

Value-Reducing

- Greed - Management teams make decisions based on their personal desires and not for the shareholders' benefit

Value-Neutral

- Has nothing to do with the firm, but it is about being in compliance with the law - About preventing monopolies - Antitrust Regulation and Tax Laws - To reach synergy and to reduce firm's risk - Done when uncertain about future cash flows

Economies of Scale

- Increased output decreased cost per unit - Spread fixed costs - Cube-Square rule Ex: Boeing Aircraft Ex: Carrefour retailer

Maturity

- Late majority buyers & more limited market growth * Increased competitive rivalry - Cost leadership firms tend to drive industry * Weaker firms will exit - Oligopoly is dominant industry structure in this stage

Product features

- Most important & clearest drivers - Unique product features,higher price: BMW M3

Customization

- Tailoring for specific customers - "Mass customization" Ex: Threadless T-shirts

Why do firms acquire other firms?

-to access new markets and distribution channels -to access new capabilities or competencies -to preempt rivals

joint venture

A stand-alone organization created and jointly owned by two or more parent companies.

While Fun Frames incurs a cost of $12 for a pair of eyeglasses, Highwire, its competitor, manufactures a pair of glasses at $10. Both the companies are able to sell their glasses for a maximum of $30 per pair. Which of the following statements is true in this scenario? A) Fun Frames and Highwire have achieved differentiation parity. B) Fun Frames is a cost-leader when compared to Highwire. C) Fun Frames has created a greater economic value than Highwire. D) Highwire has a higher opportunity cost than Fun Frames.

A) Fun Frames and Highwire have achieved differentiation parity.

Bargain Styles Inc. is an apparel company that caters to the highly price-conscious customers. Through its simple apparel designs, acceptable quality levels, and minimal customer service, the company has been able to sell its merchandise at the lowest prices in the industry. Which of the following generic business strategies is Bargain Styles applying? A) cost-leadership B) differentiation C) niche marketing D) product diversification

A) cost-leadership

Value drivers contribute to a firm's competitive advantage only if A) the increase in value creation exceeds the increase in costs. B) they can shrink the firm's value gap. C) they can restrict the firm from claiming a premium price for its products. D) the decrease in perceived value leads to an increase in costs.

A) the increase in value creation exceeds the increase in costs.

Gold Leaf Computers sources the components for its laptops from various suppliers on the market. Gold Leaf should A. Vertically integrate B. Exit the laptop industry C. Continue to outsource production D. Diversity its activities

A. Vertically integrate

The typical four-step innovation process begins with A) the modification and recombination of an existing product or process. B) the presentation of an idea as findings derived from basic research. C) the commercialization of an invention by entrepreneurs. D) a competitor's attempt to imitate an innovation.

B) the presentation of an idea as findings derived from basic research.

Due to its large sales volume and low cost structure, Quick Serve mini-Marts enjoys a cost leadership position. Which of the following scenarios might threaten Quick Serve's competitive advantage? A. A new competitor is perceived to provide similar value B. Industry suppliers raise their prices C. Existing competitors in the mini-mart industry lower their prices to match those of Quick serve D. Competitors engage in all out price war

A. A new competitor is perceived to provide similar value

Backyard BBQ is a chain of casual restaurants that promises affordable barbecue using top-quality local ingredients. However, the company has struggled to achieve a competitive advantage because of its high overhead costs. Which of the following scenarios is most likely to result in a competitive advantage? A. Eliminating brick and mortar locations and offering delivery from central kitchens B. Marketing itself as a high-end restaurant and competing with more refined restaurants in the area C. Lowering the quality of ingredients below what customers expect to control costs D. Raising prices without improving quality

A. Eliminate brick and mortar

Incline Electronics relied on a large chain of consumer electronics stores to sell its tablet computers..... Incline Electronics decided to set up its own tech support department, and it also began to investigate opening its own brand-based retail stores. What does this best illustrate A. forward vertical integration B. Conglomerate diversification C. Crowdsourcing D. New product development

A. Forward vertical integration

A microchip company wants a computer company to produce more powerful tablets and therefore use more of its chips. That same computer company wants the microchip maker to create chips with faster processing power. What approach could these companies take so that both can serve stockholders well? A. The two companies should enter a strategic alliance to bring about a win-win situation for them and to limit their rivals power B. Whichever company is largest should acquire the smaller on and impose its management system on the acquired team C. For data security reasons, both companies should remain separate and refrain from sharing information D. Both companies should reduce prices to force out competitors and make market less appealing

A. The two companies should enter a strategic alliance to bring about a win-win situation for them and to limit their rivals' power

Garrett is an executive vice president at Samm Hardware. He researches a proposal by a larger company, Maximum Hardware, to combine the two companies. By analyzing past performance, conducting focus groups, and interviewing Maximum employees, Garrett concludes that Maximum has poor profit margins, sells shoddy merchandise, and treats customers poorly. What actions should Garrett and Samm Hardware take? A. turn down the acquisition offer and prepare to resist a hostile takeover B. Welcome the acquisition and use knowledge transfer to impart Sam Hardware's management practices C. Do nothing; the two companies cannot combine without Samm Hardware's explicit consent D. Attempt a friendly merger and use managerial hubris to improve results at Maxiumum

A. Turn down the acquisition offer and prepare to resist a hostile takeover.

Radical innovation

An innovation that draws on novel methods or materials, is derived from either an entirely different knowledge base or from the recombination of the firm's existing knowledge base with a new stream of knowledge, or targets new markets by using new technologies.

Disruptive innovation

An innovation that leverages new technologies to attack existing markets from the bottom up.

Beach Grub is a chain of "fast casual" restaurants that sells its menu items at higher prices than its competitors. Yet, the restaurant has a large customer base due to its wide product portfolio and superior customer service. Which of the following generic business strategies has Beach Grub adopted in this scenario? A) cost-leadership B) differentiation C) market penetration D) product diversification

B) differentiation

When a differentiator charges a similar price as its competitors in the same strategic group but offers more perceived value, it A) loses its competitive advantage. B) gains market share from other firms. C) lowers the economic value created. D) results in diseconomies of scale.

B) gains market share from other firms.

When ReGen Pharmaceuticals released a new drug to treat insomnia, its chemical composition was disclosed at the back of the drug's cover. However, any attempts by competitors to copy the chemical composition would result in infringement of ReGen Pharmaceuticals intellectual property rights. Thus, the drug is protected by a A) promissory bill. B) patent. C) franchise. D) royalty.

B) patent.

When a firm makes choices between a cost or value position to achieve competitive advantage, it is primarily involved in A) collective bargaining. B) strategic trade-offs. C) arbitration. D) mediation.

B) strategic trade-offs.

Red Sapphire is a wristwatch company known for its luxury watches and that follows a differentiation strategy. In this scenario, Red Sapphire should ideally compare its strategic position with a A) watch retailer that sells pre-owned watches. B) watch maker that sells high-end, premium watches. C) watch maker that manufactures low-priced watches. D) watch maker that follows a differentiation strategy.

B) watch maker that sells high-end, premium watches.

As the inventor of hypertension medication, OneSure Inc was able to reap the benefits of economies of scale due to a large consumer demand for the drug. Even when competitors later developed similar drugs, regular users did not switch bc they were scared of side effects. this is called A. Social benefits B. First mover advantages C. Fringe benefits D. Network externalities

B. First mover advantages

Swan song is a spa that caters to the needs of small percentage of highly health conscious consumers. It offers state-of-the-art treatments in a luxurious setting Customers willing to pay a premium bc for its products and services A. Broad differentiation strategy B. Focused on differentiation strategy C. Product diversification strategy D. Liquidation strategy

B. Focused differentiation strategy

Ayesha is a strategist for the firm, Optiks Inc., which produces high-quality HD movie cameras. This company needs a specific material for a new camera they are developing, which is manufactured in large quantities by a competitor called Expert Technology. However, this material is difficult to trade for. Because of this, which of the following is most likely the best strategy for Ayesha to suggest? A. Optiks should enter into a co-opetition with Expert Technology B. Optiks should acquire Expert Technology C. Optiks should form a short-term agreement with Expert Tech D. Optiks should form a long-term agreement with Expert Technology

B. Optiks should acquire Expert Technology

.. Started a luxury brand for a designer apparel. Soon, company expanding own line of premium perfumes... This expansion allowed the business under the company to share a few of the common competencies in products.. Which of the following corporate strategies is Noctural pursing in this scenario?

B. Related-linked strategy

Thomas is the owner of a landscaping company that caters to a very wealthy clientele. His company has struggled to differentiate itself from the other high-end landscapers in the area, but because he has hired several expensive but highly-qualified team members, Thomas is unable to shift to a cost leadership strategy. Which strategy is most likely to achieve a competitive advantage? A) Offer similar services as competitors but raise prices to increase profits. B) Lower prices but continue employing high-paid expert gardeners. C) Narrow the scope of competition and focus on unique features such as the use of organic materials. D) Maintain prices but replace all the expert employees with less-skilled workers to control costs.

C) Narrow the scope of competition and focus on unique features such as the use of organic materials.

Both Bison Autos and Sparrow Inc. incur a cost of $9,000 to manufacture a vehicle. However, the economic value created by Sparrow Inc. is more than that created by Bison Autos. What does this indicate? A) Bison Autos has a competitive advantage over Sparrow Inc. B) Both Bison Autos and Sparrow Inc. have achieved competitive parity. C) Sparrow Inc. can charge a premium price on its automobiles. D) Bison Autos has created a higher value gap than Sparrow Inc.

C) Sparrow Inc. can charge a premium price on its automobiles.

Airbase is a consumer electronics company known for its affordable mobile devices that follows a cost-leadership strategy. In this scenario, Airbase should ideally compare its strategic position with A) a company that sells small kitchen appliances at affordable prices. B) a consumer electronics company that sells high-end devices. C) a consumer electronics company popular among price-conscious customers. D) an online company that sells customized electronics accessories.

C) a consumer electronics company popular among price-conscious customers.

Body Sync Inc. is a chain of gyms. It offers a fitness package that allows its members to use the gym facilities for 12 months by paying only for 10 months. Included in the package are two health checkups and a gym kit. These add-ons by themselves are not very valuable, but as a package they can enhance the perceived value of the service offerings. In this case, Body Sync's primary value driver is A) economies of scale. B) learning-curve effects. C) availability of complements. D) experience-curve effects.

C) availability of complements.

Whole Foods differentiates itself from competitors by offering top-quality foods obtained through sustainable agriculture. This business strategy implies that Whole Foods focuses on A) decreasing the existing value gap by providing luxury goods to customers. B) maintaining a less steeper learning curve as compared to its competitors. C) increasing the perceived value created for customers, which allows it to charge a premium price. D) lowering its costs compared to its competitors,' while offering adequate value for its products and services.

C) increasing the perceived value created for customers, which allows it to charge a premium price.

A. G. Lafley at Procter & Gamble (P&G) had implemented an open-innovation model, which had greatly benefitted the company. In the light of this information, we can conclude that A. G. Lafley is a(n) A) venture capitalist. B) category captain. C) intrapreneur. D) early adopter.

C) intrapreneur.

A firm's business strategy can lead to a competitive advantage if it allows the firm to A) execute the same activities performed by the rivals in a similar manner. B) reduce the value gap. C) perform different activities than its rivals. D) position itself below the productivity frontier.

C) perform different activities than its rivals.

Fleet Foot Shoes has been successful at differentiating itself from competitors by claiming a premium price for its athletic footwear based on superior design and high-quality materials. In this scenario, which of the following is the key value driver? A) economies of scale B) low-cost input factors C) product features D) premium prices

C) product features

Which of the following best describes a strategic trade-off? A) the tension between innovation and keeping manufacturing costs down B) the tension between maintaining both high-quality products and service C) the tension between value creation and the pressure to keep costs in check D) the tension between raising prices and keeping a loyal clientele

C) the tension between value creation and the pressure to keep costs in check

Midas Touch, a venture capital firm, has the opportunity to invest in one of two firms that are in the process of globalizing. Coolco, an air-conditioner manufacturer, faces intense pressure from its home market. Barker, a dog-toy manufacturer, has encountered little competition in its country of origin. In which company should Midas Touch invest? A. Barker, because dog toys cost less to ship than air conditioners do B. Barker, because firms that face little or no competition at home tend to do better abroad C. Coolco, because firms that face stiff competition at home tend to do better abroad D. Coolco, because air conditions cost more to ship than dog toys do

C. Coolco, because firms that face stiff competition at home tend to do better abroad

DiscountHaven Inc. is a large chain of hypermarkets. It has cost benefits due to its extensive operation. The company's marketing and sales, logistics, administrative, and other such related costs get divided between a large number of product units stocked in its stores. This makes it difficult for smaller retail stores and supermarkets to compete against DiscountHaven's low prices. Thus, DiscountHaven has a competitive advantage due to its A. Time compression economies B. Superior Customer service C. Economies of Scale D. Learning- curve effects

C. Economies of scale

Potomac industries is a manufacturer of high-definition televisions. The industry has gone through a period of rapid growth and expansion, and has started to experience a decline in the rate of growth. Several smaller firms have been bought out by larger competitors, and competition for market share is intensifying. Which of the following strategies is most likely to give Potomac a competitive advantage? A. Introduce product innovations that differentiation Potomac televisions from competition B. Increase spending on marketing and attempt to acquire a high-profile celebrity spokesperson C. Implement process innovations that lower per-unit costs D. Imitate the features of the highest selling television on the market

C. Implement process innovations that lower per unit costs

Best Burger is a major fast food chain. Its managers are motivated to grow the firm in order to increase their market power and change the industry structure in their favor. Which of the following strategies is the most associated with their motive for growth? A. purchasing competitors B. increasing executive salaries C. implementing automated burger making machinery D. Employing celebrity spokespeople

C. Implementing automated burger-making machinery

Elemental Pharma Inc. recently acquired Crick Pharmaceuticals Inc. It now sells its own products along with the products originally sold by Crick Pharmaceuticals. As a result, Elemental Pharma's sales force will also be marketing the acquired company's products. How will this horizontal integration most likely affect Elemental Pharma? A. It will diminish economic value creation B. Elemental Pharma will reduce the size of its product line C. It will lower its costs through economies of sale D. Elemental Pharma will increase its cost of distribution

C. It will lower its costs through economies of scale.

Dominic is the founder of an innovative "impromptu catering" business that provides elegant, healthy, party food and decorations on less than 24 hours notice. The company has grown over 150 percent in the last year. Dominic credits some of the company's success to studying the strategies of prominent social entrepreneurs, such as Wikipedia. What can Dominic do to exemplify A. Seek investments from venture capitalists B. Buy out his closest competitors to ensure a competitive advantage C. Provide free weekly catered meals for the homeless D. Launch a social media platform for food lovers

C. Provide free weekly catered meals for the homeless.

Amber is a strategist for a furniture manufacturer that has a large presence in the United States and Canada. By checking economic and political reports, she knows that trade and investment barriers are falling among wealthy nations. She also knows that the price of oil has dropped 50 percent in the previous two years. Based on this information, what action should Amber and her company take? A. Amber and her employee need to prepare for the cost of doing business to increase B. Amber and her employer should wait out this period of uncertainty C. They should seriously consider globalization bc of failing trade of the falling trade and investment barriers D. They should anticipate market corrections bc investment barriers and the price of oil inevitably

C. They should seriously consider globalization bc of failing trade of the falling trade and investment barriers

global standardization strategy

a. Economies of scale and location economies b. Pursuing a global division of labor based on best-of-class capabilities reside at the lowest cost i. Ex: Lenovo's R&D in Beijing, Shanghai, and Raleigh; production center in Mexico, India, and China

When wireless service providers offer free or discounted mobile phones for subscriptions to their wireless voice and data service, the perceived value of the service offering increases. In this case, the value driver would be A) economies of scale. B) learning-curve effects. C) experience-curve effects. D) availability of complements.

D) availability of complements.

Which of the following is primarily a value driver? A) cost of input factors B) economies of scope C) experience-curve effects D) complements

D) complements

Swan Song is a spa that caters to the needs of a small percentage of highly health-conscious consumers. It offers state-of-the-art treatments in a luxurious setting. Since there are very few spas that offer the same unique services, customers are willing to pay a premium price for its products and services. In this scenario, Swan Song is following a A) product diversification strategy. B) liquidation strategy. C) broad differentiation strategy. D) focused differentiation strategy.

D) focused differentiation strategy

Product features, customer service, and complements are all examples of important A) cost curves. B) cost drivers. C) value curves. D) value drivers.

D) value drivers.

Which of the following business models in the landscaping industry is likely to scale most efficiently? A. A company that offers three different bundles of services at a low, medium, and high price point depending on the level of care required by customers B. A company that charges the same hourly rate for landscaping services no matter what the situation requires C. A company that deploys a team of both skilled and unskilled landscapers to each customer's location D. A company that allows users of its website to schedule appointments with landscapers who specialize in the exact service required

D. A company that allows users of its website to schedule appointments with landscapers who specialize in the exact service required

Which of the following business is most likely to disrupt an existing industry? A. Mega Tech reconfigured the components used in its touchscreen tablets to create a new type of wearable device for use in restaurants and other service industries B. Particle inc. developed a teleportation technology that can transport physical materials across great distances C. Altrea added advanced camera technology to its premium line of smartphones so they could take the highest quality photos of all phones in the market D. Closer Connex developed an earphone that receives emails and txt messages and converts them to voice messages. Rapidly improved over time

D. Closer connex

At the time when Ellen decided to purchase a tablet computer, the product has just become accessible at the mass market. She did not purchase the tablet until after she was convinced that the benefits it would offer. Also waited for friends A. Technology enthusiasts B. Laggards C. Early adopters D. Early majority

D. Early majority

Carpatia and Novenica are neighboring countries with strong economic disparities. However, both the countries share a common national language and the same political ideologies. The relationship between these two countries will most likely affect the trade of: A. Movies and tv shows produced in carpatia B. food processed in novenia C. Iron ore extracted in Novencia D. Luxury iterms manufactured in Carpatia

D. Luxury item manufactured in Carpatia

Blush Bashful Cosmetric operates in 20 countries around the globe. The company clearly understands that the skin and hair type of customers caries from one country to another... This strategy helps the company behave as a local firm in a foreign market. A. Multidomestic strategy B. A transnational strategy C. A local-as-global strategy D. A sole provider strategy

D. Multidomestic strategy

A software firm is interested in acquiring an app development company that is small but highly profitable. The app developed also has a widely admired management structure and much lower attrition rates than are common in the industry. Which of these problems should the software firm anticipate? A. Because most acquisitions are profitable, there is little to worry about in this scenario B. A rival software firm may imitate this approach by acquiring a similar app developer C. The software firm may underpay for the app developer, cheating the developer's shareholders of profit D. The software firm may overpay for the app developer, poorly serving the softwares firm shareholders

D. The software firm may overpay for the app developer, poorly serving the softwares firm shareholders

international strategy

a. Leveraging home-based core competencies b. Selling the same products or services in both domestic and foreign markets i. Ex: Harley-Davidson in Poland

localization strategy

a. Maximize local responsiveness b. Consumers will perceive them to be domestic companies i. Ex: Nestlé's customized product offerings

Decline

Laggards are buyers and market size shrinks

Customer Service

ID unmet customer needs & satisfy them - Zappos online retailer - Toyota Lexus brand

Innovation

IKEA - stylist furniture in flat pack delivery. This is an example of what kind of value and cost driver of integration

2. Gain access to low-cost input factors

Labor, natural resources, technology, logistics

Strategic Entrepreneurship

The pursuit of innovation using the tools and concepts available in strategic management

"Who, What, Why and How" - Who: which customer segments to serve - What needs, wishes, desires will we satisfy? - Why do we want to satisfy them? - How will we satisfy customers' needs?

To formulate an appropriate business-level strategy, managers must answer the ________ questions of competition.

Value Gap

Value creation - costs =?

- international strategy - localization (multidomestic) strategy - global-standardization strategy - transnational (glocalization) strategy

What are the four options of how to compete globally?

- Introduction - Growth - Maturity - Decline

What are the four stages of the industry life cycle?

- Exit - Harvest - Maintain Consolidate

What are the four strategic options for the decline stage?

- product features - customer service - customization - complements

What are the four value drivers?

1. Identify the elements customers want 2. Be different (How can you eliminate old features/raise some standards)

What are the requirements of blue ocean strategy?

• Increasing costs Supplying internally result in loss of incentives to compete • Reduction in quality Can occur in products, service, experience, etc. • Reduction in flexibility Response to changes in technology and demand is slow • Increase in the potential for legal repercussions Ex. Federal Trade Commission carefully reviewed Pepsi's plans to buy bottlers

What are the risks of vertical integration?

- Value-Creating - Value-Neutral - Value-Reducing

What are the three reasons for diversification?

- Value (V) - Cost (C)

What are the two primary competitive business-level strategies?

- Quality - Economies of Scope - Innovation - Structure, Culture, & Routines

What are the value and cost drivers of integration?

- Industry value chain • The degree of vertical integration - Products and services • Explains why one should choose the products/services over competitors' - Geography

What concerns the scope of the firm? (3 dimensions)

Consolidate

What decline strategy involves buying rivals, near monopoly?

Exit

What decline strategy involves getting out of the industry?

Maintain

What decline strategy involves staying and continuing marketing?

Harvest

What decline strategy involves staying with limited investments?

relative market share

What dimension is on the horizontal axis?

speed of market growth

What dimension is on the vertical axis?

Disruptive innovation

What innovation technique is affiliated with the "stealth" attack? This captures current customers typically with initially lower cost & performance, protection against it..."disrupt yourself."

Incremental innovation

What innovation technique is often from incumbent firms? They have a stronger position for incumbents which means higher entry barriers. They have organizational inertia and reinforce supplier/buyer networks.

Radical innovation

What innovation technique is often from new firms?

transaction costs

What is one of the most important theories explaining nature of firms?

- Value Creation - Cost

What is strategic position based on?

- Porter's Generic Strategy: based on competition/ strategic positioning - Blue Ocean Strategy: maybe there is a different way in how you compete (innovation)

What is the difference between Porter's generic strategy and Blue Ocean Strategy?

- Red Ocean: people compete and kill each other - Blue Ocean: create an untapped market and make competition irrelevant * EX: Cirque Du Soleil

What is the difference between a red ocean and a blue ocean?

The greater (V-C). When value is greater than the cost.

What is the formula for competitive advantage?

- Learning Curve - Experience Curve

What two curves are affiliated with Cost Drivers?

globalization

a process of closer integration/exchange between different countries/people worldwide, made possible by falling trade and investment barriers, tremendous advances in telecommunications, and drastic reductions in transportation costs

transnational strategy

a. Combination of localization strategy (high responsiveness) with global standardization strategy (lowest cost position attainable) b. Glocalization i. Ex: German multimedia conglomerate Bertelsmann

When North Autos Inc. wanted to sell its cars in the country of Balvia, it lacked access to distribution channels and marketing expertise in the country. Thus, North Autos had to enter into a strategic alliance with a local automobile company to get access to the foreign partner's well-established distribution channels. Which of the following reasons for entering into a strategic alliance is best illustrated in this scenario?

accessing critical complementary assets

In Eli Lilly's Office of Alliance Management, who is responsible for providing the technical expertise and knowledge needed for the specific technical area and the day-to-day management of the alliance?

alliance leader

The Mansion Hotel Group purchased Red Brick Hotels for an estimated value of $120 billion. All the hotels previously owned by Red Brick Hotels are now managed by the Mansion Hotel Group and are known as Mansion hotels. What does this scenario best illustrate?

an acquisition

When a firm does not have the resource required for pursuing a growth strategy, and if the resource in question is not easily tradable, the implication for the strategist is most likely to

consider an outright acquisition

A candy company called SweetThings Inc. forms an agreement with another candy company called Reverie Inc. Through this agreement, SweetThings owns 30 percent of Reverie. However, Reverie does not own any part of SweetThings. This type of agreement is called a(n)

equity alliance

dominant business

firm generates 70-95% of total sales revenue within a single business area (Ex. Microsoft)

backward integration

form of vertical integration that involves the purchase of suppliers or upstream industries. Companies use backward integration when it reaches efficiency and cost savings. Backward integration usually cut costs, improves profit costs, and makes a company more competitive. Ex. A bakery buying a wheat processing company and a wheat farm Includes raw materials, components/intermediate goods, final assembly and marketing

forward integration

form of vertical integration that involves the purchase or control of distributors or downstream industries. Activities are expanded to include control of the direct distribution of a company's products/services. Ex. A farmer sells his or her crops at a local market rather than to a distribution center. Includes marketing, sales, after-sales service, and support

Boston Consulting Group growth share matrix

is a tool to guide corporate portfolio planning by helping corporate-level executives restructure the portfolio of their firm's businesses. locates the firm's individual SBUs in two dimensions: relative market share and speed of market growth

EveningStar Inc. and The Luxur Group have together established The Luxur Star Group of hotels. EveningStar owns 49 percent and The Luxur Group has a 51 percent share in The Luxur Star Group of hotels. However, the management of The Luxur Star Group of hotels is separate from its parent companies. What alliance type does this scenario best illustrate?

joint venture

related constrained

less than 70% of revenue comes from the dominant business; direct links between the firm's business (Ex. ExxonMobil); high operational relatedness, low corporate relatedness)

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