MHR chapter 6

Industry-level strategy

"How should we compete in this industry?"

Star

a company with a large share of a fast-growing market

Cash cow

a company with a large share of a slow-growing market

Question mark

a company with a small share of a fast-growing market

Dog

a company with a small share of slow growing market

Portfolio strategy

a corporate-level strategy that minimizes risk by diversifying investment among various businesses or product lines

Strategic dissonance

a discrepancy between a company's intended strategy and the strategic actions managers take when implementing that strategy

Strategic group

a group of companies within an industry against which top managers compare, evaluate, and benchmark strategic threats and opportunities

Threat of new entrants

a measure of the degree to which barriers to entry make it easy or difficult for new companies to get started in an industry

Threat of substitute products or services

a measure of the ease with which customers can find substitutes for an industry's products or services

Bargaining power of buyers

a measure of the influence that customers have on a firm's prices

Bargaining power of suppliers

a measure of the influence that suppliers of parts, materials, and services to firms in an industry have on the prices of these inputs

Character of the rivalry

a measure of the intensity of competitive behavior between companies in an industry

competitive inertia

a reluctance to change strategies or competitive practices that have been successful in the past

Rare resource

a resource that is not controlled or possessed by many competing firms

Cost leadership

a strategy that aims to provide a product or service at as low a price as possible to a broad audience

Retrenchment strategy

a strategy that focuses on turning around very poor company performance by shrinking the size or scope of the business

CLM is a leading cable operator. The company has recently declared bankruptcy and its needs to restructure its processes to attain more flexibility and allow it to raise capital. Since CLM has identified its need for strategic change, what would be CLM's next step in the strategy-making process? a. Conducting a situational analysis b. Refreezing change c. Finding the optimal strategic solution d. Eliminating impediments

a. Conducting a situational analysis

Crossmart Inc. has been trying to protect itself from the negative effects of industry-wide competition by producing products at consistently lower prices than its competitors. However, it has not compromised on the quality of its products and the products are good enough to be sustained in the market. In the context of Porter's positioning strategies, which of the following strategies has been adopted by Crossmart? a. The cost leadership strategy b. The price-fixing strategy c. The differentiation strategy d. The diversification strategy

a. The cost leadership strategy

A sustainable competitive advantage is achieved when: a. a firm's competitors cannot duplicate the value offered by the firm to its customers. b. a firm collaborates with one of its competitors to occupy a larger market share. c. a firm engages in price fixing and agrees to sell goods at the same price as its competitors. d. a firm succeeds in reaching the break-even point in sales.

a. a firm's competitors cannot duplicate the value offered by the firm to its customers.

BallGame manufactures premium golf balls and prices these balls at twice the price of ordinary golf balls. The premium balls sell exceptionally well because customers believe that its patented three-layer construction is capable of increasing the ball's drive. None of the other golf ball manufacturers can produce the same quality. The patent on these golf balls gives BallGame _____. a. a sustainable competitive advantage b. an oligopolistic advantage c. the advantage of competitive inertia d. the advantage of undifferentiated marketing

a. a sustainable competitive advantage

According to Porter's industry forces, _____ is a measure of the influence that suppliers of parts, materials, and services to firms in an industry have on the prices of these inputs. a. bargaining power of suppliers b. threat of new entrants c. threat of substitute products or services d. character of the rivalry between suppliers

a. bargaining power of suppliers

WindWings is a company that manufactures and markets flutes, a product with a steady demand rate. It is so successful at what it does that the company controls 85 percent of the world's flute industry. In terms of adaptive strategies, WindWings would most likely be categorized as a(n) _____. a. defender b. reactor c. analyzer d. prospector

a. defender

spokedWheels Inc. has introduced a specialized mountain bike in the market. Two-thirds of its profits come from the sale of mountain bikes. The company is recognized worldwide for its ability to design and produce superior mountain bikes that are tougher, more durable, and more reliable than its competitors'. This ability of producing superior mountain bikes is the company's _____. a. distinctive competence b. strategic alternative c. competitive resonance d. strategic reference point

a. distinctive competence

Check My Work A(n) _____ is a broad corporate-level strategic plan used to achieve strategic goals and guide the strategic alternatives that managers of individual businesses or subunits may use. a. grand strategy b. regulation strategy c. utilitarian strategy d. industry-level strategy

a. grand strategy

The BCG matrix starts by recommending that while the substantial cash flows from cash cows last, they should be reinvested in stars to: a. help them grow even faster and obtain even more market share. b. increase the number of places in which a company does business. c. acquire companies that share similar products, technology, or cultures. d. turn around poor company performance by shrinking the size or scope of the business.

a. help them grow even faster and obtain even more market share.

According to strategic reference point theory, the _____ aims to protect an existing competitive advantage. a. risk-avoiding strategy b. divesting strategy c. risk-seeking strategy d. deskilling strategy

a. risk-avoiding strategy

valuable resource

allows companies to improve efficiency and effectiveness

situational annalists

an assessment of the strengths and weaknesses in an organization's internal environment and the opportunities and threats in its external environment

Widget Corp. has five strategic business units (SBUs)—informatics, shipping, third-party logistics, structural materials, and oil exploration. The third-party logistics unit is quite profitable in spite of operating in a slow-growing market. It provides funds for the operation of the other business units as well. In the context of the BCG matrix, which of the following categories of SBUs best describes the third-party logistics unit? a. Stars b. Cash cows c. Question marks d. Dogs

b. Cash cows

refers to a reluctance to change strategies or competitive practices that have been successful in the past. a. Competitive resonance b. Competitive inertia c. Strategic uncertainty d. Strategic dissonance

b. Competitive inertia

Amanda Industries has five strategic business units (SBUs)—online retail, shipping, third-party logistics, structural materials, and oil exploration. The oil exploration unit is costing the company a huge amount of money. It is neither making any profit at present nor will it make any profit in the future as the oil fields are diminishing and the company has a small share in this market. In the context of the BCG matrix, which of the following categories of SBUs best describes the oil exploration unit? a. Cash cows b. Dogs c. Question marks d. Stars

b. Dogs

Gemini Inc. has decided to decrease its product prices to respond to its competitor's strategy. To achieve this, the company needed to lower its manufacturing costs. However, the managers at Gemini have been buying expensive raw materials and hiring many employees. Which of the following best illustrates the situation at Gemini? a. Job deskilling b. Strategic dissonance c. Price fixing d. Competitive inertia

b. Strategic dissonance

The _____ is a corporate-level strategy that minimizes risk by diversifying investment among various businesses or product lines. a. grand strategy b. portfolio strategy c. divesting strategy d. growth strategy

b. portfolio strategy

In the context of sustainable competitive advantage, _____ are those resources that are not controlled or possessed by many competing firms. a. substitutable resources b. rare resources c. tangible resources d. intangible resources

b. rare resources

The main purpose of a retrenchment strategy is to: a. minimize risk by diversifying investment among various business or product lines. b. turn around very poor company performance by shrinking the size or scope of the business. c. continue doing what a company has been doing, just doing it better. d. increase revenues, market share, or the number of places in which a company operates

b. turn around very poor company performance by shrinking the size or scope of the business.

are the central companies in a strategic group. a. Primary firms b. Elite firms c. Core firms d. Transient firms

c. Core firms

are companies that do not follow a consistent adaptive strategy but instead respond to changes in the external environment after they occur. a. Analyzers b. Prospectors c. Reactors d. Defender

c. Reactors

Recovery

consists of the strategic actions that a company takes to return to a growth strategy

Stability strategy

continue doing what the company has been doing, just doing it better

Unrelated diversification

creating or acquiring companies in completely unrelated businesses

Check My Work Funk Booster, a company that manufactures vehicle boosters, launched a new product, NOS3. This launch was aimed at occupying the shares held by Funk Booster's competitor, Fly-Wagon's, product, NOS-A. To prevent Funk Booster from occupying their shares, Fly-Wagon launched a new product, NOS-X, which was an advanced version of NOS-A. Which of the following strategies was used by Fly-Wagon to defend its market share? a. An attack strategy b. A recovery strategy c. An acquisition strategy d. A response strategy

d. A response strategy

Companies are more likely to adopt a(n) _____ when market commonality is large, and companies have overlapping products, services, or customers in multiple markets? a. retrenchment strategy b. response strategy c. differentiation strategy d. attack strategy

d. A response strategy

According to Porter's industry forces, which of the following is likely to occur when new companies can enter an industry easily? a. Profitability is likely to increase b. Prices of commodities are likely to increase c. Competition among companies in the industry is likely to decrease d. Industry attractiveness is likely to decrease

d. Industry attractiveness is likely to decrease

In the context of corporate-level strategies, which of the following exemplifies diversification? a. Producing products sufficiently different from competitors' offerings b. Producing specialized products for a specially targeted group c. Letting employees own the stocks of a company d. Owning stocks in a variety of companies in different industries

d. Owning stocks in a variety of companies in different industries

According to Michael Porter, which of the following industry forces determines industries' overall attractiveness and potential for long-term profitability? a. The degree of decentralization b. The market share of an organization c. The span of management d. The bargaining power of suppliers

d. The bargaining power of suppliers

Which of the following is an important condition that a firm must meet in order to gain a sustainable competitive advantage? a. The firm's overhead cost must be high. b. The firms should have more employees than its competitors. c. The firm's organization must be highly centralized. d. The firm's resources must be imperfectly imitable

d. The firm's resources must be imperfectly imitable

GlycoAll, a company that produces energy drinks, has started manufacturing and selling energy bars for the American market. The products turn out to be a huge success. Inspired by GlycoAll's success, Keith & Sons, a producer of energy drinks in the U.K., starts to sell energy bars for the European market. In the context of adaptive strategies, Keith & Sons would most likely be categorized as a(n) _____. a. reactor b. prospector c. defender d. analyzer

d. analyzer

A _____ is an assessment of the strengths and weaknesses in an organization's internal environment and the opportunities and threats in its external environment. a. differentiation analysis b. situational analysis c. cause and effect analysis d. break-even analysis

d. break-even analysis

In any organization, _____ are the less visible, internal decision-making routines, problem-solving processes, and organizational cultures that determine how efficiently inputs can be turned into outputs. a. strategic alliances b. strategic reference points c. distinctive competencies d. core capabilities

d. core capabilities

Related diversification

different business units share similar products, manufacturing, marketing, technology, or cultures

Aquisation

look for other companies to buy

diffrentiation

means making your product or service sufficiently different from competitors' offerings that customers are willing to pay a premium price for the extra value or performance that it provides.

Non Substitutable resource

no other resources can replace them and produce similar value or competitive advantage

Diversification

owning stocks in a variety of companies in different industries

BCG Matrix

portfolio strategy that managers use to categorize their corporation's businesses by growth rate and relative market share, which helps them decide how to invest corporate funds.

Ace Glue is a global innovation company. It manufactures a number of imaginative products which ranges from health care to office products. Its products are being sold in more than 100 countries and it continuously keeps searching for new market opportunities. It has also doubled its investment to market its products. In the context of adaptive strategies, Ace Glue is most likely to be categorized as a(n) _____. a. analyzer b. reactor c. prospector d. cost leader

prospector

imperfectly imitable resource

resources that are impossible or extremely costly or difficult for other firms to duplicate

Defenders

seek moderate, steady growth by offering a limited range of products and services to a well-defined set of customers

Distinctive competence

something that a company can make, do, or perform better than its competitors

resources

the assets, capabilities, processes, employee time, information, and knowledge that an organization uses to improve its effectiveness and efficiency and create and sustain competitive advantage

core capabilities

the internal decision-making routines, problem-solving processes, and organizational cultures that determine how efficiently inputs can be turned into outputs

corporate level strategy

the overall organizational strategy that addresses the question "What business or businesses are we in or should we be in?"

Focus strategy

the positioning strategy of using cost leadership or differentiation to produce a specialized product or service for a limited, specially targeted group of customers in a particular geographic region or market segment

competive advantage

using resource to provide a greater value for customers than competitors can

Sustainable competitive advantage

when other companies cannot duplicate the value a firm is providing to customers