Test 2
Delta Air Lines used to advertise its high-quality air travel service by saying it flew "anywhere, anytime." What generic business-level strategy is represented by this advertisement?
Broad differentiation strategy
Which generic business-level strategy is based on the intent to lower costs so that a company can lower prices and still make a profit?
Broad low-cost strategy
In the wireless telecommunications industry, different technical standards are found in different parts of the world. A technical standard known as GSM is common in Europe, and an alternative standard, CDMA, is more common in the United States and parts of Asia. Equipment designed for GSM will not work on a CDMA network and vice versa. Which of the following pressures for local responsiveness does this represent?
Differences in infrastructure
Yankee Candle Company offers customers candles that burn for 50-60 hours, much longer than most department store candle brands. Therefore, customers are willing to pay a higher price for these candles. Which of the following strategies is Yankee Candle Company following?
Differentiation strategy
__________ refers to a common set of features or design characteristics.
Dominant design
Which of the following is an advantage of franchising? a) It ensures tight control over quality. b) It enables companies to engage in global strategic coordination. c) It involves low development costs and risks. d) It enables the company to collect all the profits made by the franchisees. e) It frees companies from the task of monitoring and assisting operations at franchisees.
It involves low development costs and risks.
Lilly's Beauty Company sells haircare products such as shampoo, conditioner, and hairspray. The company does not sell new or customized products in order to meet the specific needs of certain groups of people. Which of the following approaches is illustrated in this scenario?
Standardization strategy
Consider a cost curve with production volume on the horizontal axis and marginal costs on the vertical axis. What shape would the marginal cost curve most resemble in a high-tech industry?
Straight and flat
With reference to high-technology industries, which of the following statements is true about technical standards?
They emerge because there are economic benefits associated with them.
What disadvantage of first movers?
They run the risk of building the wrong resources and capabilities.
Focus strategy can be defined as the strategy:
a company uses when it decides to serve a limited number of segments, or just one segment of the market.
A fragmented industry is one composed of:
a large number of small- and medium-sized firms.
A company uses __________ when it focuses on pockets of demand that are declining more slowly than the industry as a whole to maintain profitability.
a niche strategy
Mature industries are generally characterized by:
a small number of large firms.
Most embryonic industries emerge from:
a technological innovation.
In a bid to expand its business and gain cost advantages, Omega Inc. has established several merchandising outlets in different locations. All the outlets share a good network and are interconnected by information technology. The entire network of outlets operates in the industry as one large company. Which of the following strategies has Omega Inc. most likely used? a) Chaining b) Franchising c) Horizontal merger d) Niche strategy e) Divestment strategy
a) Chaining
Which of the following statements about differentiation and cost structure is true? a) Differentiation and cost structure decisions affect one another. b) Differentiation and cost structure decisions do not affect one another. c) Companies that focus on the higher-value end of the market tend to have a lower cost structure. d) Differentiation decisions do not affect a company's profitability. e) Cost structure decisions do not affect a company's profitability.
a) Differentiation and cost structure decisions affect one another.
Which of the following is NOT true of high-technology industries? a) First movers have an advantage because their customers avoid switching costs. b) First movers have higher pioneering costs than later entrants. c) Later entrants can avoid the mistakes made by first movers. d) First movers that create a revolutionary product are in a monopoly position. e) First movers run the risk of building the wrong resources and capabilities.
a) First movers have an advantage because their customers avoid switching costs.
Which of the following factors of a particular product tends to accelerate customer demand for it? a) High observability b) Minimum relative advantage c) High complexity d) Minimal value e) Low trialability
a) High observability
Which of the following allows a company to lower cost through functional strategy and organization? a) Implementing just-in-time inventory control systems b) Customizing the product offering and marketing mix to different market segments c) Focusing marketing efforts on brand building and perceived differentiation from rivals d) Designing strategies to ensure that employees act in a manner that is consistent with the image that the company is trying to project to the world e) Adopting rigid manufacturing technologies
a) Implementing just-in-time inventory control systems
Which of the following factors in an industry is most likely to cause excess capacity? a) Technologically outdated production units b) High customer demand c) A company's investments in newer production technology d) Lack of competition from new entrants e) Limited number of outlets in certain locations
c) A company's investments in newer production technology
Switching costs, in the context of technology industries, refer to the costs that:
customers need to bear to abandon an established standard and adopt a new standard.
A segmentation strategy requires that a company:
customize its products.
Which of the following will NOT help an established company in addressing the potential challenge of a disruptive technology? a) Access to knowledge about how disruptive technologies can revolutionize markets b) Investing in newly emerging technologies that may ultimately become disruptive technologies c) Separating out the disruptive technology and creating an autonomous operating division solely for this new technology d) Asking customers if they are interested in the new technology e) Understanding that a disruptive technology will require a radically different value chain with a different cost structure
d) Asking customers if they are interested in the new technology
Which of the following is NOT a factor of production? a) Land b) Labor c) Raw materials d) Competitive forces e) Managerial sophistication
d) Competitive forces
Which of the following is NOT a basic strategy for a first mover? a) Develop and market the innovation itself b) Develop and market the innovation jointly with other companies through a strategic alliance or joint venture c) License the innovation to others d) Discourage development of complementary assets e) Increase height of imitation barriers
d) Discourage development of complementary assets
Which of the following is NOT a risk of exporting? a) Tariff barriers b) Transportation costs c) Location diseconomies d) High manufacturing costs e) Delegation of marketing activities to a local agent
d) High manufacturing costs
Which of the following is NOT a generic business-level strategy? a) Broad differentiation strategy b) Broad low-cost strategy c) Focus low-cost strategy d) Focus differentiation strategy e) Focus innovation strategy
e) Focus innovation strategy
Which of the following statements is true in the context of globalization of production and markets? a) Globalization of production has significantly increased the costs for many industries. b) The globalization of markets and production has failed to threaten companies' home markets. c) Consolidated oligopolies continue to be dominated by a small number of companies despite globalization. d) The shift from national to global markets has curbed competitive rivalry in many industries. e) Globalization has significantly increased the threat of entry.
e) Globalization has significantly increased the threat of entry.
Which of the following strategies requires a company to limit or decrease its investment in a business and to extract, or "milk," the proceeds of its investment as much as it can? a) Market concentration strategy b) Share-increasing strategy c) Cost-leadership strategy d) Hold-and-maintain strategy e) Harvest strategy
e) Harvest strategy
When a first mover does not have complementary assets, barriers to imitation are high, and there are several capable competitors, the first mover should:
enter into a joint venture to protect the product.
Most manufacturing companies begin their global expansion by:
exporting
In a declining industry, a company may utilize a harvest strategy and:
extract maximum profits from its investments.
A company that follows the __________ strategy differentiates its product in some way, such as by recognizing different segments or offering different products to each segment.
focus differentiation
When a company targets a certain segment or niche, and customizes its offering to the needs of that particular segment through the addition of features and functions, the company is pursuing a __________ strategy.
focus differentiation
The real estate industry is comprised of different firms in several locations. Some are independent and popular locally, whereas others are affiliated to national chains. The real estate industry is most likely to be a(n):
fragmented industry.
When standards are part of the public domain, they can be used:
freely by any company.
Aggressive marketing in the context of format wars:
helps a company jump-start demand.
Differences in tastes and preferences:
increase pressures for local responsiveness.
Host government demands generally:
increase pressures for local responsiveness.
Info Tech, Inc. makes complex telecommunications products, such as cellular telephones. Since this company has a distinctive competency in research and development, it should try to differentiate its product through:
innovation
Armando, a technology enthusiast, is often willing to pay premium prices to always have the newest tech gadgets. Armando most likely belongs to the __________ group of customers.
innovator
The first group of customers to enter the market for a new product are called:
innovators
An embryonic industry is one that:
is just beginning to develop and customer demand is initially limited.
A disadvantage of pursuing a low-cost strategy is that:
it makes it difficult for the firm to customize its product offerings.
Mathematica 1.0 was one of the most distinctive applications for the short-lived NeXT Computer. It still sets the standard for symbolic math and visualization on Windows, Mac, Linux, and Unix. Mathematica 1.0 can be described as a(n) __________ application.
killer
A__________ strategy aims to help a company grow in a declining industry by picking up the market share of companies that are leaving the industry.
leadership
Aries Travels is a company that offers holiday and travel packages. The company realizes that customer preferences vary and thus extensively customizes its packages. As there are not many competitors in the market in which Aries Travels operates, there are minimal pressures to reduce costs. Aries Travels is most likely to have adopted a(n) __________ strategy.
localization
Nutrimax, a sports foods manufacturer, has recently expanded its operations to different countries. The company has realized that customers in different countries have different tastes and preferences. So, the company customizes its products based on the country where it's selling. In this scenario, Nutrimax is most likely to be using a(n) __________ strategy.
localization
When a company performs a value creation activity in a region that is optimal for that activity, wherever in the world that might be, it is trying to capitalize on:
location economies.
When a company offers a wide variety of products at lower prices than its rivals, it is most likely pursuing a(n) __________ strategy.
low-cost
The globalization of production has caused firms to:
lower their cost structure.
The various strategies that companies should adopt to win format wars revolve around:
making network effects work in their favor and against their competitors.
The production of more product variety without a large cost penalty is known as:
mass customization.
An adequate supply of complements to a product results in:
more customers opting for the product.
Black and Decker, Capitol One, Gillette, and Unilever are all companies that conduct business in two or more national markets. These companies are known as:
multinational companies.
A firm may pursue a chaining strategy to:
obtain the advantages of economies of scale.
An industry moves from the embryonic to the growth stage when:
ongoing technological progress makes its product easier to use.
A differentiation strategy allows a company to charge a(n) __________ price for its product, if it chooses to do so.
premium
A company that focuses on a lower-income market segment:
produces a basic offering to reduce cost structures.
Marginal cost refers to the costs of:
producing one extra unit of product.
An app development firm is working on a new product to identify and consolidate a smartphone user's favorite and most-used apps into one place on the phone. If the new product will be sold to existing customers, the firm is pursuing a strategy of:
product development.
Technical standards in high-technology industries are:
specifications that producers adhere to when making a product or a component of it.
Global economies of scale can be realized by:
spreading the fixed costs associated with developing a product.
There is a set of fixed specifications for turbine blades for jet engines. The specifications include the material that needs to be used to manufacture the blades and also the specific dimensions that they need to have; the same specifications are used by all manufacturers. In this scenario, the specifications for jet blades can be referred to as:
technical standards.
Cell phone technology is replacing traditional wired phone technology. This is an example of a(n):
technological paradigm shift.
The strategy in a mature industry to invest in infrastructure that would be cost-prohibitive for new entrants to deter new competition from entering the market is known as:
technology upgrading.
Consumers will bear switching costs if:
the benefits of adopting the new technology outweigh the costs of switching.
Which of the following statements about declining industries is true? a) Not all segments of an industry typically decline at the same rate. b) A declining industry should ideally use the leadership strategy when it does not have any strengths and the competition is low. c) A divestment strategy is when a company in a declining industry tries to improve sales by improving product quality. d) The greater the exit barriers of a declining industry, the lower the intensity of competition. e) The intensity of competition is lower in declining industries that sell commodity-like products.
Not all segments of an industry typically decline at the same rate.
__________ is a market growth factor that refers to the degree to which the results of using and enjoying a new product can be seen and appreciated by other people.
Observability
Cost-reduction pressures can be particularly intense in industries producing:
commodity-type products.
With reference to technical standards, a dominant design refers to a:
common set of features or design characteristics.
Price signaling in mature industries happens when:
companies increase or decrease product prices to convey their intentions to other companies and influence the price of an industry's products.
Technological disruption:
compels firms to adopt new business models.
The Achilles heel of international strategy is that:
competitors inevitably emerge.
A company pursuing a focus strategy:
concentrates on building market share in one market segment.
Which of the following statements is true in the context of local demand conditions? a) Companies are typically least sensitive to the needs of their closest customers. b) Home demand plays little role in helping companies upgrade their national competitive advantage. c) A nation's companies gain competitive advantage if their domestic customers are sophisticated and demanding. d) The characteristics of international demand alone shape the attributes of a company's products; not local demand. e) Local demand characteristics have little role to play in creating pressure for innovation and quality.
) A nation's companies gain competitive advantage if their domestic customers are sophisticated and demanding.
Swedish strength in fabricated steel products (such as ball bearings and cutting tools) has drawn on strengths in Sweden's specialty steel industry. This is an example of which of the following attributes that impact national competitive advantage?
Competitiveness of related and supporting industries
Which of the following factors that affect market growth rates refers to the degree to which a new product is perceived as complex to master? a) Complexity b) Relative advantage c) Compatibility d) Trialability e) Observability
Complexity
At The Luxury Hotel in Miami, Florida, three hotel employees serve the needs of each guest. In every room, a guest can summon a chef, a maid, or a valet by pressing a button at his or her bedside. Which generic business-level strategy is The Luxury Hotel utilizing?
Focus differentiation strategy
Jordan's Ice Creams is strategically located near a university. After realizing that most of its customers, who are mostly students, prefer a wide range of flavors, it started offering different combinations of premium flavors, cones, and toppings to create hundreds of extravagant, customized products. Which generic business-level strategy is Jordan pursuing?
Focus differentiation strategy
Nick, a professional magician, is often invited to perform magic tricks at birthday parties and other social gatherings from across the country. However, he offers his services only to clients who stay in the same city as him. He is also known to charge less than other magicians in the city. Nick is pursuing which generic business-level strategy?
Focus low-cost strategy
Dietizza is a fast-food network that makes low-calorie pizzas. As the firm wishes to expand its operations in different locations, it has licensed a few entrepreneurs to open Dietizza outlets under the company's trademark. The entrepreneurs will take up the responsibility of costs, while Dietizza will assist them in running operations. The company will receive royalty payments and a percentage of profits from the entrepreneurs. Which of the following concepts is illustrated here?
Franchising
Hydralicious, a juice bar, has been looking to expand its business. The company has given a few entrepreneurs in different locations the license to operate under its name. The entrepreneurs have permission to use the company's reputation and the business model to run operations. The entrepreneurs will be charged a fee, but they will also get a percentage of the profits. Which of the following strategies is Hydralicious most likely to be using?
Franchising
Which of the following statements is true about transnational strategy?
It fosters a flow of resources such as process knowledge between different subsidiaries in the company's global network of operations.
Which of the following statements is true about global standardization strategy? a) It emphasizes product customization to specifically meet customer needs. b) It involves the spreading of production, marketing, and research and development activities of companies to all the locations it operates in. c) It makes most sense when there are strong pressures for cost reductions. d) It makes most sense when there is maximum pressure for local responsiveness. e) It fails to focus on achieving location and scale economies.
It makes most sense when there are strong pressures for cost reductions.
__________ are applications or uses of a new technology or product that are so compelling that customers adopt them in droves, curbing the demand for competing formats.
Killer applications
Tom tends to be ignorant about technological advancements. He was reluctant to own a smartphone even when they were well established and familiar in the market. However, Thomas slowly got used to the idea of a smartphone when his job demanded him to be connected to the office network all the time. Thomas is most likely to fall under which of the following categories of customers?
Laggards
With reference to high-technology industries, what is an example of a technical standard?
Layout of keys on a keyboard
Strong pressures for convergence due to a shared history and culture, or the establishment of a trading block where there are deliberate attempts to harmonize trade policies, infrastructure, and regulations have contributed to the rise in which of the following trends?
Regionalism
A company, Pluto Inc., employs the franchising strategy to enter a new national market. Which of the following statements is MOST likely to be true of Pluto? a) It is more likely to be a service company. b) It is more likely to have a greater control over the quality the products manufactured in the foreign country. c) It is less likely to impose strict rules regarding how a franchisee does business. d) It is less likely to receive royalty payments from the franchisee. e) It is more likely to bear the development costs associated with opening a foreign market on its own.
a) It is more likely to be a service company.
Nutrimax Corp., a breakfast cereal company, has designed extensive and elaborate advertising campaigns for its existing products. The campaigns mainly focus on the features and benefits of the products that differentiate the cereals from the competition. Nutrimax Corp. is most likely to be using which of the following strategies? a) Market penetration b) Product development c) Product proliferation d) Market development e) Capacity control
a) Market penetration
Which of the following is NOT a principal danger of a low-cost position approach? a) Substitute goods or services b) Technological change c) Imitation of production techniques d) Changes in consumer tastes e) Rivals lowering their costs
a) Substitute goods or services
Which of the following is a disadvantage of strategic alliances? a) They give competitors a low-cost route to new technology and markets. b) They do not facilitate entry into a foreign market. c) They do not allow for sharing of risks and fixed costs. d) They mandate that the companies do not share complementary competencies and assets. e) They cause problems when it comes to establishing technological standards for the industry.
a) They give competitors a low-cost route to new technology and markets.
Which of the following statements about horizontal mergers is true? a)Horizontal mergers enable companies to achieve economies of scale. b)Horizontal mergers result in the fragmentation of the industry. c)The horizontal merger strategy has been very successful in businesses with zero cases of failure. d)Companies that establish a network of distributor outlets to obtain the advantages of a low-cost position are known as horizontal mergers. e)Companies that adopt the strategy of centralization to gain control over all business units are known as horizontal mergers.
a)Horizontal mergers enable companies to achieve economies of scale.
In which of the following situations is a differentiation strategy used? a)The industry is fragmented into customer groups based on needs. b)Customer needs are primarily satisfied by the price of the product. c)A company's cost structure needs to be reduced. d)There is a demand for deep price discounts from powerful buyers. e)The industry is not allowed to charge a premium price for its products.
a)The industry is fragmented into customer groups based on needs.
Compared to a differentiator, the company that follows a low-cost strategy:
absorbs cost increases by powerful suppliers while keeping to their lower pricing.
In case of emergence of a disruptive technology, established companies should:
acquire newly emerging companies that are pioneering potentially disruptive technologies.
A company that follows a low-cost strategy could reasonably be expected to reduce costs by:
adopting lean production and flexible manufacturing technologies.
Music CDs and newspaper sales have been falling as users turn to the Internet for their music and news. Which of the following is NOT a strategy for companies in these declining industries? a) Leadership b) Chaining c) Niche d) Divestment e) Harvest
b) Chaining
Which of the following customer groups represents the leading wave or edge of the mass market? a) Early adopters b) Early majority c) Innovators d) Late majority e) Laggards
b) Early majority
Format wars, in the context of high-technology industries, refer to:
battles to control the source of differentiation, and thus the value that such differentiation can create for the customer.
Which of the following statements about growing industries is true? a) Innovators and early adopters have the same customer needs as the early majority. b) Innovators and early adopters are typically reached through specialized distribution channels. c) Reaching the early majority rarely requires advertising and is usually achieved through word of mouth. d) Companies serving innovators need to have large-scale mass production and very low prices. e) Companies competing in an embryonic market typically pay more attention to increasing the reliability of a product than to its performance.
b) Innovators and early adopters are typically reached through specialized distribution channels.
Which of the following has occurred in international trade over the past half-century? a) There has been a dramatic increase in the barriers to international trade. b) Tariff rates on manufactured goods traded by advanced nations have fallen. c) Regulations prohibiting foreign companies from entering domestic markets and establishing production facilities have increased. d) The volume of world trade has decreased dramatically. e) There has been a decline in the value of foreign direct investment.
b) Tariff rates on manufactured goods traded by advanced nations have fallen.
Which of the following statements is true about establishing technical standards? a) Companies in an industry cannot lobby the government to mandate an industry standard. b) Technical standards are often set by cooperation among businesses, without government help. c) Companies cannot adopt technical standards that are in the public domain. d) Market demand is not taken into consideration when it comes to establishing technical standards. e) The strategy and business model a company has developed for promoting its technological standard holds little importance when it comes to establishing standards.
b) Technical standards are often set by cooperation among businesses, without government help.
Which of the following statements is true of technology in industries? a) Technology in industries is accounting for only a minimal share of economic activity. b) Technology is revolutionizing aspects of the product or production system even in industries not typically considered high-tech. c) High-technology industries are not required to adhere to technical standards to achieve product differentiation. d) The lack of complementary products does not affect the success of a high-technology industry. e) High-technology industries are usually not faced with the challenge of developing business models to achieve a competitive advantage like low-technology industries.
b) Technology is revolutionizing aspects of the product or production system even in industries not typically considered high-tech.
A market segment consists of a group of:
b) customers who have similar needs.
A differentiation strategy is based on creating a product that customers perceive as being:
b) superior to other available products.
Which of the following statements about customer categories in growing industries is true? a) Laggards frequently adopt new products even when the benefits are not obvious. b) Innovators are the customers who are the last ones to adopt a new product. c) A typical late majority customer group is a behaviorally conservative set of customers. d) Customers in the early majority generally do not understand the value of new technology. e) Laggards form the leading wave or edge of the mass market.
c) A typical late majority customer group is a behaviorally conservative set of customers.
Which of the following is NOT a necessity for leveraging the competencies of global subsidiaries? a) Incentives for local managers to share knowledge and ideas b) Awareness among managers that competencies can develop anywhere c) Assertion of monopoly of the corporate center over subsidiaries d) Transfer of competencies around the company e) Incentives that encourage employees to take necessary risks
c) Assertion of monopoly of the corporate center over subsidiaries
On which of the following ideas is a localization strategy based? a) There is a convergence in the tastes of consumers in different nations of the world. b) There are substantial economies of scale to be realized from centralizing global production. c) Consumer tastes and preferences differ among national markets. d) There are cost advantages associated with manufacturing a standard product for global consumption. e) Competitive strategy should be centralized at the world head office.
c) Consumer tastes and preferences differ among national markets.
Which of the following is a functional-level strategy designed to improve differentiation? a) Designing products that can be produced and delivered at as low a cost as possible b) Standardization of the product offering and marketing mix to different market segments c) Hiring and employee development strategies designed to ensure that employees act in a manner that is consistent with the image that the company is trying to project to the world d) Initiation of a price war in order to grow volume and drive its weaker rivals out of the industry e) Products that have lower prices to allow a company to erect an economic moat around its business that thwarts higher-cost rivals out
c) Hiring and employee development strategies designed to ensure that employees act in a manner that is consistent with the image that the company is trying to project to the world
hich of the following factors increases pressures for local responsiveness? a) Powerful buyers b) Uniformity in distribution channels c) Host government demands d) Similarities in customer tastes and preferences e) Competitors that are based in high-cost locations
c) Host government demands
Which of the following statements is true about international strategy? a) It is usually adopted by companies that face intense cost pressures due to competition. b) It makes most sense when the pressures for local responsiveness are very intense. c) It often involves the head office retaining tight control over marketing and product strategy. d) It often involves decentralizing product development functions such as R&D to different subsidiaries. e) It involves extensive scope for localization and product differentiation.
c) It often involves the head office retaining tight control over marketing and product strategy.
Which of the following is a disadvantage of franchising? a) It restricts the franchisor from expanding. b) It results in the franchisor taking all the financial burden of the franchisees. c) It results in the delegation of authority to franchisees, and the franchisor may not enjoy complete control. d) It does not provide sufficient incentive to the franchisees to run operations effectively because franchisees are not entrepreneurs. e) It requires the franchisees to create a new business model and plan strategies.
c) It results in the delegation of authority to franchisees, and the franchisor may not enjoy complete control.
WKL Entertainment Inc. is a service-based firm with very few competitors. The company is looking to sell its services in different nations with substantial differences in consumer preferences and where cost pressures are not too intense. Which of the following strategies should WKL Entertainment Inc. managers pursue? a) Global standardization b) Transnational c) Localization d) International e) Multinational
c) Localization
Which of the following statements is true about new entrants in the context of a technological paradigm shift? a) New entrants often face the risks of product cannibalization. b) Pressures to continue the existing out-of-date business model hamstring new entrants. c) New entrants do not need to worry about their established customer base. d) It is difficult for new entrants to focus all their energies on the opportunities offered by the new disruptive technology. e) New entrants are not constrained by lack of capital.
c) New entrants do not need to worry about their established customer base.
Which of the following individuals is most likely to fall under the category of laggards in the context of customer groups? a) Lauren, who is tech-savvy and tends to actively seek out new and innovative products in the market b) Suresh, who appreciates technology but tends to refrain from trying products that are extremely new c) Phillip, who is ignorant about the newest uses of technology and buys new products only when they become an absolute necessity d) Charlotte, who is aware of the value that technology offers; she tends to weigh costs and benefits of a product before making a buying decision e) Maria, who tends to be a little apprehensive about buying new technology but buys nevertheless when she observes that a lot of people are using the new technology
c) Phillip, who is ignorant about the newest uses of technology and buys new products only when they become an absolute necessity
Libra Electronics has invented a new technology to make laptops that are extremely lightweight and unbreakable. The company is advertising aggressively and wishes to create demand for its new range of laptops. To attract customers, the company has priced the laptops attractively. However, in order to earn a profit, the company has priced the batteries required for the laptops extremely high. Which of the following is illustrated in this scenario? a) Downsizing strategy b) Harvest strategy c) Razor and blade strategy d) Divestment strategy e) Switching costs
c) Razor and blade strategy
Which of the following statements is true about technological paradigm shifts? a) They often do not change the nature of competition in an industry. b) They occur when government regulations restrict the use of certain technologies. c) They have the potential to threaten the survival of established industries. d) They can often be handled by established companies without adopting new strategies. e) They strongly deter new entrants.
c) They have the potential to threaten the survival of established industries.
Which of the following statements is true about marginal costs in high-technology industries? a) They are invariably higher than fixed costs. b) They are the costs that customers need to bear in order to adopt a new technology. c) They include the costs of packaging and product distribution. d) They are extremely high in software-making companies. e) They do not exist if the product is sold by a sales force directly to end-users.
c) They include the costs of packaging and product distribution.
Which of the following statements about fragmented industries is true? a) They are usually characterized by large, mass-production operations. b) They essentially enjoy a national brand loyalty. c) They require companies to use focus strategies to meet specialized customer needs. d) They do not attract new entrants as they have extremely high entry barriers due to economies of scale. e) They are usually dominated by one or two large companies that enjoy the power to influence industry prices.
c) They require companies to use focus strategies to meet specialized customer needs.
Factors leading to the slow growth of demand for products in embryonic industries include all of the following EXCEPT: a) the poor quality of the first products. b) a lack of complementary products. c) customer passion for the products. d) high production costs. e) poorly developed distribution channels.
c) customer passion for the products.
The intensity of competition is greater in declining industries in which: a) the industry is declining slowly instead of rapidly. b) the product is easy to differentiate. c) exit barriers are high. d) entry barriers are high. e) technology is stable.
c) exit barriers are high.
Which of the following is NOT a strategy used by mature industries to manage industry rivalry? a) Market development b) Non-price competition c) Strategic commitments d) Price signaling e) Market penetration
c) Strategic commitments
Which of the following pieces of advice would you give to a firm that wants to exploit network effects? a)Charge a heavy license fee for new technology. b)Refrain from using technical standards. c)Create incentives for other firms to develop complementary products. d)Do not use aggressive marketing strategies for killer applications. e)Increase switching costs.
c)Create incentives for other firms to develop complementary products.
Global expansion:
can enable companies to increase their profitability and grow their profits more rapidly.
One strategy used to consolidate fragmented industries is:
chaining
Differentiation allows a company to:
charge a premium price for its good or service, should it choose to do so.
Which of the following is true of first movers? a) The first mover cannot be able to establish brand loyalty. b) The first mover has no opportunity to exploit network effects and positive feedback loops. c) The first mover cannot create switching costs for its customers to deter rivals. d) The first mover that creates a revolutionary product is in a monopoly position. e) Being a first mover guarantees instant success.
d) The first mover that creates a revolutionary product is in a monopoly position.
Which of the following statements about embryonic industries is true? a) They are characterized by very a high initial customer demand. b) They are characterized by well-developed distribution channels. c) They involve low production costs because of large volumes of production. d) They face the challenge of educating customers who are not familiar with their product benefits. e) They enjoy the abundance of complementary products that help increase sales.
d) They face the challenge of educating customers who are not familiar with their product benefits.
Which of the following entry modes allows a company to engage in global strategic coordination? a) Exporting b) Licensing c) Joint ventures d) Wholly owned subsidiaries e) Franchising
d) Wholly owned subsidiaries
Which of the following generic competitive strategies would a producer of commodity steel most likely pursue? a)Exclusive dealing b)Broad differentiation c)Focus differentiation d)Broad low cost e)Horizontal integration
d)Broad low cost
Which of the following statements is true about localization strategy? a)It focuses on marketing a standardized product worldwide to achieve cost reductions. b)It makes most sense when cost pressures are extremely intense. c)It is most appropriate when there are similarities across nations with regard to consumer tastes and preferences. d)It involves some duplication of functions and smaller production runs. e)It usually relieves companies of the task of closely monitoring their costs.
d)It involves some duplication of functions and smaller production runs.
The main difference between companies following a broad low-cost strategy and those following a focus low-cost strategy is in the:
degree of market segmentation.
In order to work toward winning a format war, a company should:
develop its own killer applications.
When a company decides to exit an industry by selling its business assets to another company, it is said to be using a(n) __________ strategy.
divestment
To compete in the fragmented restaurant industry, Starbucks built, and now operates, hundreds of restaurants across the United States and Canada. Which of the following strategies is Starbucks using? a) Acquisitions b) Horizontal mergers c) Franchising d) Licensing e) Chaining
e) Chaining
Which of the following strategies should a company NOT adopt if it wants to win a format war? a) Developing killer applications b) Developing complementary products c) Joining forces with other companies to develop new technologies d) Aggressively marketing to jump-start demand e) Charging extremely high license fee for the technology
e) Charging extremely high license fee for the technology
Lucy's Swimwear Boutique offers swimwear that is targeted at affluent people who can afford to buy expensive, handmade swimsuits. Which of the following approaches to market segmentation is Lucy's Swimwear Boutique using? a) Broad differentiation strategy b) Low market segmentation strategy c) Medium market segmentation strategy d) Broad high-cost strategy e) Focus differentiation strategy
e) Focus differentiation strategy
Which of the following is an advantage of franchising? a) It gives the franchisor the same level of tight control over franchisees as does chaining. b) It allows the franchisor to earn all of the profits made by franchisees. c) It is beneficial for franchisees because they do not have to face higher capital costs. d) It helps the franchisees by relieving them of the responsibility of running operations. e) It can help the franchisor expand his or her business rapidly.
e) It can help the franchisor expand his or her business rapidly.
Which of the following is an advantage of international licensing? a) It enables the company to realize scale economies and location economies through manufacturing products in a centralized location. b) It allows the company to collect profits from one licensee and use them to support others. c) It eliminates the risk of losing control over a technology that the company owns. d) It enables the company to coordinate its strategy efficiently to achieve competitive advantage. e) It takes away the pressure of development costs and risks associated with opening up a foreign market from the company.
e) It takes away the pressure of development costs and risks associated with opening up a foreign market from the company.
Which of the following is NOT a characteristic of a fragmented industry? a) Low barriers to entry b) Diseconomies of scale c) Brand loyalty in the industry that may primarily be local d) Very specialized customer needs e) Large, mass-production operation
e) Large, mass-production operation
Which of the following factors increases pressures for cost reductions? a) Meaningful differentiation between products b) Reduced international competition c) Competitors that are based in high-cost locations d) High switching costs e) Persistent excess capacity
e) Persistent excess capacity
Which of the following strategies helps companies with high cost structures, allowing them to survive without having to implement strategies to become more efficient? a) Price signaling b) Non-price competition c) Capacity control d) Market development e) Price leadership
e) Price leadership
Which entry mode gives a multinational the tightest control over foreign operations? a) Exporting from the home country and letting a foreign agent organize local marketing b) Licensing c) Franchising d) Entering into a joint venture with a foreign company to set up overseas operations e) Setting up a wholly owned subsidiary
e) Setting up a wholly owned subsidiary
Which of the following statements is true in the context of attributes of national competitive advantage? a) Factor endowments do not encompass aspects such as managerial sophistication. b) Companies are typically least sensitive to the needs of their closest customers. c) The benefits of investments in advanced factors of production by related and supporting industries are confined to those industries. d) Domestic rivalry creates pressures to increase costs and avoid investing in upgrading advanced factors. e) The nature of home demand shapes the attributes of domestically made products.
e) The nature of home demand shapes the attributes of domestically made products.
Which of the following is an advantage of first movers? a) They are not prone to mistakes. b) They bear lower pioneering costs than later entrants do. c) They only invest in the latest technology. d) They do not run the risk of building the wrong resources as they are highly customer-focused. e) They have an opportunity to exploit network effects and positive feedback loops.
e) They have an opportunity to exploit network effects and positive feedback loops.
When a company grows its sales volume through international expansion, it can realize cost savings from economies of scale through all of the following EXCEPT: a) spreading fixed costs over its global sales volume. b) utilizing its production facilities more intensely. c) increased bargaining power with its suppliers. d) learning effects associated with higher volume. e) adopting high cost structures.
e) adopting high cost structures.
Which of the following is NOT an attribute of a national or country-specific environment that has an impact on global competitiveness of companies located within that nation? a)Factor endowments b)Local demand conditions c)Related and supporting industries d)Firm strategy, structure, and rivalry e)Advertising expenses
e)Advertising expenses
Customers who understand a new technology may have important future applications and are willing to experiment with it to see if they can pioneer new uses for the technology are called:
early adopters.
The highest market demand and industry profits arise when:
early and late majority users enter the market.
Venus Corp. a high-technology, gadget-making company has introduced a gaming console with attractive features. Even though the console is priced modestly and has better features than the existing ones, it has failed as many customers are apprehensive about buying it. In order to create demand, Venus Corp. should:
ensure that there are adequate complementary products.
Gadgetbug, an electronic gadgets company, has established itself as one of the industry leaders. The company has been facing competition from new entrants. The new entrants offer gadgets in different colors, with compelling artwork embossed on the cases. Seeing the interest in this market, Gadgetbug introduced its own range of uniquely designed gadgets. In this scenario, Gadgetbug's attempt to cater to the different segments of customers to deter competition demonstrates:
product proliferation.
A differentiated product is a product that:
provides greater reliability than rival products.
The basic proposition of the blue ocean strategy is that many successful companies have built their competitive advantage by:
redefining their product offering through value innovation and creating a new market space.
Cooperating with competitors:
reduces competition in the market.
A market growth factor that explains customers' perceptions of a new product as better at satisfying their needs than the product it supersedes is called:
relative advantage.
When a company recognizes that the needs of one market segment is not the same as another and accordingly customizes its product offerings, it is said to be pursuing a __________ strategy.
segmentation
The advantage that focused companies have over their broad market rivals is that they:
sell fewer products in bulk to outsell their rivals.
A differentiator has the advantage of:
selling on non-price factors, such as design or customer service.
Cellular phone service providers often sell the phone itself at a very low price and then charge a relatively high fee for usage. This illustrates:
the razor and blade strategy.
Network effects arise in industries where:
the size of the network of complementary products is a primary determinant of demand for an industry's product.
An advantage of being a first mover is that:
there is an opportunity to increase sales volume ahead of rivals
Companies that pursue a __________ strategy are trying to develop a business model that simultaneously achieves low costs, differentiates the product offering across geographic markets, and fosters a flow of skills between different subsidiaries in the company's global network of operations.
transnational
Relish is a large fast-food chain that operates in many countries. As there are several competitors in the fast-food sector, the company has been facing intense pressures for achieving low-cost structures. The company also faces the task of customizing its product line as there are significant differences in tastes and preferences among customers in different geographic locations. In order to achieve both low costs and product differentiation, the company should aim to pursue a __________ strategy.
transnational
The term value innovation is used to describe:
what happens when innovation pushes out the efficiency frontier in an industry, allowing for greater value to be offered through superior differentiation at a lower cost than was previously thought possible.
For a strategic alliance, firms should seek partners that are:
willing to share costs and risks of new-product development.