BA 405 (Exam Two) 5-7

Which of the following methods of implementing a differentiation strategy has been greatly enhanced because of Internet technologies? A. celebrity endorsements B. prestige packaging C. mass customization D. exceptional service

C. mass customization

A market that mainly competes on the basis of price and has stagnant growth is characteristic of what life cycle stage? A. introduction B. growth C. maturity D. decline

C. maturity

In a given market, key technology no longer has patent protection, experience is not an advantage, and there is a growing need to compete on price. What stage of its life cycle is the market in? A. introduction B. growth C. maturity D. decline

C. maturity

In the __________ stage of the industry life cycle, there are many segments, competition is very intense, and the emphasis on process design is high. A. introduction B. growth C. maturity D. decline

C. maturity

48. Primary value chain activities that involve the effective layout of receiving dock operations (inbound logistics) and support value chain activities that include expertise in process engineering (technology development) characterize what generic strategy? A. differentiation B. differentiation focus C. overall cost leadership D. stuck-in-the-middle

C. overall cost leadership

A manufacturing business pursuing cost leadership is likely to _______. A. focus on a narrow market segment B. use advertising to build brand image C. rely on experience effects to raise efficiency D. put heavy emphasis on product engineering

C. rely on experience effects to raise efficiency

As markets mature, ___________. A. costs continue to increase B. application for patents increase C. there is increasing emphasis on efficiency D. differentiation opportunities increase

C. there is increasing emphasis on efficiency

T or F: A firm can attain an overall cost leadership position by using automatied technology to reduce scrappage rates

True

T or F: An important advantage of first movers in a market is that they may establish brand recognition that may later serve as an important switching cost.

True

T or F: An important potential pitfall of an intergrated overall cost leadership and differentation stategy is that firms may fail to implement either one and become stuck-in-the-middle

True

T or F: Firms that compete on onverall cost leadership are vulnerable if there is an increase in the cost of the inputs on which the advantage is based.

True

T or F: Most analysts agree that use of the internet will lower transaction costs.

True

T or F: Reasons for acquisition failure include: ineffective integration of the acquisition, too high of a premium paid for the common stock of the target company, or inability to understand how the assets of the acquired firm would fit with the lines of business of the existing company.

True

T or F: The French automible maker, Renault, attain a competitive advantage by revamping cars to be more cost efficient

True

T or F: The example of Lexus automobiles in the text points out that a firm can stenghten its differentiatior stategy by achieveing intergration at multiple points along with the value chain.

True

Which of the following is a risk (or potential pitfall) of cost leadership? A. Cost cutting may lead to the loss of desirable features. B. Attempts to stay ahead of the competition may lead to gold plating. C. Cost differences increase as the market matures. D. Producers are more able to withstand increases in supplier costs.

A. Cost cutting may lead to the loss of desirable features.

The growth stage of the industry life cycle is characterized by A. in-kind competition (from the same type of product) B. premium pricing C. a growing trend to compete on the basis of price D. retaliation by competitors whose customers are stolen

A. in-kind competition (from the same type of product)

One aspect of using a cost leadership strategy is that experience effects may lead to lower costs. Experience effects are achieved by ____________. A. repeating a process until a task becomes easier B. hiring more experienced personnel C. spreading out a given expense or investment over a greater volume D. competing in an industry for a long time

A. repeating a process until a task becomes easier

Which of the following is most often true of mature markets? A. Some competitors enjoy a significant operating advantage due to increasing experience effects. B. Advantages that cannot be duplicated by other competitors are difficult to achieve. C. The market supports premium pricing, which attracts additional competitors. D. The magnitude of pricing differences and product differentiation is larger than in the growth stage.

B. Advantages that cannot be duplicated by other competitors are difficult to achieve.

Which of the following is not a potential pitfall of a differentiation strategy? A. Uniqueness that is not valuable. B. All rivals share a common input or raw material. C. The price premium is too high. D. Perceptions of differentiation may vary between buyers and sellers.

B. All rivals share a common input or raw material.

Which statement regarding competitive advantages is true? A. With an overall cost leadership strategy, firms need not be concerned with parity on differentiation. B. If several competitors pursue similar differentiation tactics, they may all be perceived as equals in the mind of the consumer. C. In the long run, a business with one or more competitive advantages is probably destined to earn normal profits. D. Attaining multiple types of competitive advantage is a recipe for failure.

B. If several competitors pursue similar differentiation tactics, they may all be perceived as equals in the mind of the consumer.

With experience, unit costs of production decline as _________ increases in most industries. A. costs B. output C. price D. volume

B. Output

A narrow market focus is to a differentiation-based strategy as a __________________. A. growth market is to a differentiation-based strategy B. broadly-defined target market is to a cost leadership strategy C. growth market is to a cost-based strategy D. technological innovation is to a cost-based strategy

B. broadly-defined target market is to a cost leadership strategy

Support value chain activities that involve excellent applications engineering support (technology development) and facilities that promote a positive firm image (firm infrastructure) characterize what generic strategy? A. overall cost leadership B. differentiation C. differentiation focus D. stuck-in-the middle

B. differentiation

Research shows that which of the following is not a strategy used by firms engaged in successful turnarounds? A. asset and cost surgery B. global expansion C. selective product and market pruning D. piecemeal productivity improvements

B. global expansion

A differentiation strategy enables a business to address the five competitive forces by ______. A. having brand-loyal customers become more sensitive to prices B. lessening competitive rivalry by distinguishing itself C. increasing economies of scale D. serving a broader market segment

B. lessening competitive rivalry by distinguishing itsel

Dell Computer has an online ordering system that allows consumers to configure their own computers before Dell builds them. This capability is an example of _____________. A. electronic data interchange B. mass customization C. knowledge management D. collaborative design

B. mass customization

One of the main reasons the Internet is eroding sustainable competitive advantages is that _______. A. incumbent firms are entering market segments that they previously considered to be too small B. nearly all competitors will have greater access to tools for managing costs C. differentiators have been able to preserve their unique advantages D. firms are ignoring opportunities to offer high-end services in niche markets

B. nearly all competitors will have greater access to tools for managing costs

A __________ can be defined as the total profits in an industry at all points along the industry value chain. A. profit maximizer B. profit pool C. revenue enhancer D. profit outsourcing

B. profit pool

Which of the following is not a potential pitfall of a focus strategy? A. Erosion of cost advantages can arise within the narrow segment. B. Product/service offerings that are highly focused are subject to competition from new entrants. C. All rivals share a common input or raw material. D. Focusers can become too focused to satisfy buyer needs.

C. All rivals share a common input or raw material.

Which of the following is not a potential pitfall of an integrated overall low cost and differentiation strategy? A. Firms that fail to attain both strategies may end up with neither and become stuck-in-the-middle. B. Firms that underestimate the challenges and expenses associated with coordinating value-creating activities in the extended value chain. C. Firms that target too large a market that causes unit costs to increase. D. Firms that miscalculate sources of revenue and profit pools in the company industry.

C. Firms that target too large a market that causes unit costs to increase.

83. The size of pricing and differentiation advantages between competitors decreases in which stage of the market life cycle? A. introduction B. growth C. maturity D. decline

C. Maturity

Which of the following is FALSE regarding how a differentiation strategy can help a firm to improve its competitive position relative to the Porter five forces model? A. By increasing firm margins, it avoids the need for a low cost position. B. It reduces buyer power because buyers lack comparable alternatives. C. Supplier power is increased, because suppliers will be able to charge higher prices for their inputs. D. Firms will enjoy high customer loyalty.

C. Supplier power is increased, because suppliers will be able to charge higher prices for their inputs.

A firm following a focus strategy must focus on _____________. A. governmental regulations B. the rising cost of inputs C. a market segment or group of segments D. avoiding entering international markets

C. a market segment or group of segments

Due to the Internet, firms that use a focus strategy have new opportunities to _________. A. respond quickly to customer requests B. provide more services and features C. access niche markets in a highly specialized fashion D. access markets less expensively

C. access niche markets in a highly specialized fashion

85. In the __________ stage of the industry life cycle, there are few segments, the emphasis on process design is low, and the major functional areas of concern are general management and finance. A. introduction B. growth C. decline D. maturity In the decline stage of the industry life cycle, there are few segments, the emphasis on process design is low, and the major functional areas of concern are general management and finance.

C. decline

The most likely time to pursue a harvest strategy is in a situation of _______. A. high growth B. strong competitive advantage C. decline in the market life cycle D. mergers and acquisitions

C. decline in the market life cycle

High product differentiation is generally accompanied by __________. A. higher market share B. higher profit margins and lower costs C. decreased emphasis on competition based on price D. significant economies of scale

C. decreased emphasis on competition based on price

The text discusses three approaches to combining overall cost leadership and differentiation competitive advantages. Which of the following is not one of these three approaches? A. automated and flexible manufacturing systems B. exploiting the profit pool concept for competitive advantage C. deriving benefits from highly focused and high technology markets D. coordinating the extended value chain by way of information technology

C. deriving benefits from highly focused and high technology markets

Convincing rivals not to enter a price war, protection from customer pressure to lower prices, and the ability to better withstand cost increases from suppliers characterize which type of competitive strategy? A. differentiation B. overall cost leadership C. differentiation focus D. cost leadership focus

C. differentiation focus

Which of the following is NOT one of the ways the Internet is lowering transaction costs? A. eliminating supply chain intermediaries B. minimizing office expenses C. evaluating employee performance D. reducing business travel

C. evaluating employee performance

Piecemeal productivity improvements during a turnaround typically do NOT involve _______. A. business process reengineering B. increased capacity utilization C. expansion of company product market scope D. benchmarking

C. expansion of company product market scope

During the decline stage of the industry life cycle, __________ refers to obtaining as much profit as possible and requires that costs be decreased quickly. A. maintaining B. exiting C. harvesting D. consolidating

C. harvesting

Research has consistently shown that firms that achieve both cost leadership and differentiation advantages tend to perform ______________. A. at about the same level as firms that achieve either cost or differentiation advantages B. about the same as firms that are stuck-in-the-middle C. higher than firms that achieve either a cost or a differentiation advantage D. lower than firms that achieve differentiation advantages but higher than firms that achieve cost advantages

C. higher than firms that achieve either a cost or a differentiation advantage

In the __________ stage of the industry life cycle, the emphasis on product design is very high, the intensity of competition is low, and the market growth rate is low. A. growth B. maturity C. introduction D. decline

C. introduction

Which of these statements regarding the industry life cycle is correct? A. Part of the power of the market life cycle is its ability to serve as a short-run forecasting device. B. Trends suggested by the market life cycle model are generally not reversible or repeatable. C. It points out the need to maintain a differentiation advantage and a low cost advantage simultaneously. D. It has important implications for company generic strategies, functional areas, value-creating activities, and overall objectives.

D. It has important implications for company generic strategies, functional areas, value-creating activities, and overall objectives.

Which of the following statements about the introduction stage of the market life cycle is TRUE? A. It produces relatively large, positive cash flows. B. Strong brand recognition seldom serves as an important switching cost. C. Market share gains by pioneers are usually easily sustained for many years. D. Products or services offered by pioneers may be perceived as differentiated because they are new.

D. Products or services offered by pioneers may be perceived as differentiated because they are new.

Atlas Door created competitive advantage by reducing the time to receive and process and order and through installing a just in time logistics operation. Which of the following is not a reason for their favorable position relative to the five forces of industry competition? A. It exerted power over its customers. B. It created high entry barriers for new entrants. C. The integration of many value-chain activities in the firm provided causal ambiguity and path dependency. D. The product was easily imitable.

D. The product was easily imitable.

The primary aim of strategic management at the business level is __________________. A. maximizing risk-return tradeoffs through diversification B. achieving a low cost position C. maximizing differentiation of products and/or services D. achieving competitive advantage

D. achieving competitive advantage

Which of the following is not a reason for the possible erosion of company competitive advantage? A. rapid change in technology B. globalization C. actions by rivals from within and outside of the industry D. company commitment to innovation

D. company commitment to innovation

Which of the following is not a reason for the successful turnaround that Ford experienced in 2011 under CEO Mulally? A. downsizing through the sale of non-Ford brands B. focus on a narrower range of cars C. tightening of the product design across brands D. increasing its manpower across the company

D. increasing its manpower across the company

A firm can achieve differentiation through all of the following means EXCEPT ________. A. improving brand image B. better customer service C. adding additional product features D. offering lower prices to frequent customers

D. offering lower prices to frequent customers

T or F: The Hewlett-Packard and Autonomy merger in 2011 is an example of a successful merger.

FALSE

T or F: When firms diversify into unrelated businesses, the primary potential benefits are horizontal relationships, i.e., businesses sharing tangible and intangible resources.

FALSE

T or F: A disadvantage of firms that successfully intergrate overall cost leadership and a differentiation stategy is that they are relatively easy for competitors to imitate.

False

T or F: Corporate-level strategy focuses on gaining short-term revenue through managing operations in multiple businesses.

False

T or F: The market life cycle should be used as a short-run forecasting device because it provides a conceptual framework for understanding what changes typically occur.

False

T orF: All diversification moves, including those involving mergers and acquisitions, erode performance.

False

A cost leadership strategy is not susceptible to the risk of reduced flexibility

False:

Competitive advantage is not affected by actions by rivals within and outside of the industry.

False:

T or F: If a firm has successful differentiation stategy, it is neccessary to attain parity on cost.

False:

T or F: The internet offers few advantages for focusers because niche players and small companies cannot implement capabiltites as effectively as their larger competitors.

False:

T or F: To generate above average returns, a firm following an overall cost and leadership position should NOT be concerned with attending parity or proximity on the basic of differentiation relative to its peers

False:

The internet has provided a small subset of companies with greater tools for managing costs.

False:

Focus, by itselef, often constitutes a competitive advantage

False: A focus stategy is based on the choice of a narrow competitive scope within an industry.

T or F: A need for turnaround occurs only during the maturity or declining stage of the life cycle.

False: A need for turnaround may occur at any stage in the life cycle but is more likely to occur during maturity or decline.

T or F: An important idea behind the prtofit pool concept is that there is always a strong relationship between the generation of revenue and the capturing of profits.

False: A profit pool is defined as the total profits in the industry value chain. The pattern of profit concentration in an industry is avery often different from the pattern of revenue generation.

A sucessful differentiation strategy increases rivalry since buyers become more price-sensitive

False: Differentiation provides protection against rivalry since brand loyalty lowers customer sensitvity to price and rasies customer switching costs.

T or F: A suffessful differentiation strategy lowers entry barriers because of customer loyalyty and the ability of the firm to provide uniqueness in its prodcuts and services.

False: Differentiation provides protection against rivalry since brand loyaly lowers customers sensitvity to price. By increasing margins of the firm, differentiation also avoids the need for a low-cost position. Higher entry barriers result because of customer loyalty and the ability to provide uniqueness in its prodcuts and services.

T or F: Businesses that compete in markets that are in decline should simply be harvested or divested since they are no longer profitable.

False: Four basic strategies are available in the decline phase: maintaining, harvesting, exiting, or consolidating. Managers must carefully monitor the actions and intentions of competitors before deciding on a course of action.

T or F: During the decline stage of the product life cycle, a harvesting strategy means that a firm keeps a product going without significantly reducing marketing support, technological development, or other investments, while hoping that competitors will exit the market.

False: Harvesting involves obtaining as much profit as possible and requires that costs be reduced quickly. Maintaining refers to keeping a product going without significantly reducing marketing support, technological development, or other investments, in the hope that competitors will eventually exit the market.

T or F: A firm can attain an overall cost leadership position by increasing the management layers in order to reduce overhead costs.

False: In order for a firm to attain a cost leadership position use its infastructure, it should decrease the number of management layers in order to reduce overhead costs.

T or F: Given the attractiveness of premium pricing during the growth stage of the market life cycle, managers should emphasize short-term results to increase profits.

False: In the growth stage, revenues increase at an accelerating rate because new consumers are trying the product and a growing proportion of satisfied consumers are making repeat purchases. Since repeat purchases are necessary, a long-term strategy is desirable.

T or F: During the growth stage of the market life cycle, customers are very likely to establish brand loyalty

False: In the growth stage, the primary key to success is to build consumer preferences for specific brands. This requires strong brand recognition, differentiated products, and the financial resources to support a variety of value-chain activities such as marketing and sales, and research and development.

T or F: The three generic strategies presnted by Mchael Porter can be shown on two dimensions:

False: Michael Porter presnted three generic stategies that a firm can use to achieve competitive advantage. THey can be illustrated as two dimensions: competitive advantage and strategic target.

T or F: The three generic stategies that Michael Porter believes a firm can use to overcome the five forces and achieve competitive advantage include overall price leadership.

False: Michael Porter presnted three generic stategies that a frim can use to overcome the five forces and achieve competitive advantage. The stategies are: overall cost leadserhip, differentiation, and focus.

T or F: Concentrating solely on one form of competitive advantage generally leads to the highest possible level of profitability

False: Observation and research support the notion that firms that indentify on more than one of the firms competitive advantage outperform those that do not.

T or F: The decline stage of the industry life cycle stage is inevitably followed by death.

False: Old technologies that are in decline do not always quickly fade away. Research shows that in a number of cases, old technologies actually enjoy a very profitable last gasp, and can become resilient survivors in some circumstances.

T or F: A firm striving for cost leadership will typically spend relatively more on product related R&D than on process related R&D.

False: Overall cost leadership requires a tight set of interrelated tactics that include aggressive construction of efficient-sacle facilitles.

T or F: Research shows that the vast majority of acquisitions results in value creation rather than value destruction.

False: Research shows that the vast majority of acquisitions result in value destruction rather than value creation

T oR F: With reverse positioning, a strategy to be used during the mature stage of the industry life cycle, a product escapes its category by deliberately associating with a different one

False: Two positioning strategies that managers can use to affect consumer mental shifts are reverse positioning, which strips away sacred product attributes while adding new ones, and breakaway positioning, which associates the product with a radically different category.

T or F: At times, the only other people who may have benefited from a merger-acquisition were the shareholders of the acquired firms.

TRUE

T or F: Because many countries are investing in countries other than their own, each country is becoming more autonomous and independent.

TRUE

T or F: Diversification initiatives must be justified by the creation of value for shareholders.

TRUE

T or F: Many acquisitions ultimately result in divestiture.

TRUE: Many acquisitions ultimately result in divestiture, that is, an admission that things did not work out as planned. In fact, some years ago, a writer for Fortune magazine lamented that studies show that 33 percent to 50 percent of acquisitions are later divested, giving corporate marriages a divorce rate roughly comparable to that of men and women.

One potential pitfall of a differentiation strategy is that identification of the brand in the marketplace may become diluted thriough excessive product lin extensions.

True

T or F: As markets mature, competition on the basis of differentiation is preferable to price competition

True : In the mature stage, rivalry among existing rivals intensifies because of fierce price competition at the same time that expenses associated with attracting new buyers are rising. Advantages based on efficient manufacturing operations and process engineering become more important for keeping costs low as customers become more price sensitive

A potential pitfall of a focus stategy is that over time the cost advantages in a narrow niche can erode, leavings the company with little profit.

True.

A potential pitfall of a focus strategy is that focusers can become too focused to satisfy buyer needs.

True:

T or F: A cost leadership strategy can be at risk of obsolescense of the basic of the cost advantage

True:

T or F: In technology intensive industries, the duration of competitive advantages is declining.

True:

T or F: Mass customization enables manufaturers to be more responsive to customer demands for higher quality prodcuts.

True:

T or F: Many firms facing a turnaround situation try to reduce their costs by outsourcing the production of many inputs.

True: Firms in turnaround situations try to aggressively cut administrative expenses and inventories and speed up collection of receivables. Costs also can be reduced by outsourcing production of various inputs for which market prices may be cheaper than in-house production costs.

T or F:A firm can attain an overall cost leadership positioned by purchasing media in large blocks and maximizing sales force utlization through territory management.

True: In order for a firm to attan a cost leadership position using its marketing and sales activites it can purchase media in large blocks and maxmimiz the utlization of its sales force through territory management.

T or F: One was the internet and digital tech are creating opportunites for firms with differentiation stategies is be enabling mass customization.

True: In particular, the internet has created new ways of differentiating by enabling mass customization, which improves the response to customer wishes.

T or F: As markets mature the magnitude of differentiation and cost leadership advantages among competitors decrease.

True: In the mature stage, rivalry among existing rivals intensifies because of fierce price competition at the same time that expenses associated with attracting new buyers are rising. It also becomes more difficult for firms to differentiate their offerings, because users have a greater understanding of products and services.

T or F: Too much focus on one of a few value-chain activities can be a pitfall of the overall cost leadership strategy.

True: Managers should explore all value-chain activities, including relationships among them, as canidates for cost reductions.

T or F: The software maker, Intuit, successfully implemented a turnaround strategy by discontinuing product lines and focusing all resources on a few core profitable areas.

True: Software maker Intuit is a case of a quick but well-implemented turnaround strategy. After stagnating and stumbling during the dot-com boom, the company discontinued its offers in online finance, insurance, and bill-paying operations that were losing money and focused on software for small businesses that employ less than 250 people. The company also instituted a performance-based reward system that greatly improved employee productivity

T or F: The experience curve concept suggests that production costs tend to decrease as production increases.

True: The experience curve refers to how business learns to lower costs as it gains experience with production processess. With experience, unit costs or production decline as ouput increases in most industries.

Incumben firms that thought a niche market as too small to enter in the past may use internet technologoes to enter that sgment with focusers

TrueL n