BEC B5 - M3
What is brainstorming?
- a meeting technique used to generate ideas, - although brainstorming could be used as part of an organization's approach to SWOT analysis, it is not, the evaluation of internal and external factors
What is comparative advantage?
- even if one of two regions is absolutely more efficient in the production of every good than is the other, if each region specializes in the products in which it has a comparative advantage (greatest relative efficiency), trade will be mutually profitable to both regions. Real wages of productive factors will rise in both places.
What is a balanced scorecard?
- summarizes measures of achievement of critical success factors - does not represent the objective review of internal and external factors that may impact achievement of strategy
What is strategic planning?
- the creation of an overall strategic plan for an organization to achieve its overall "business objectives". - the strategic plan will establish the general direction of the organization
What are potential competitive advantages?
1) 2 major forms of competitive advantage are product differentiation and cost leadership 2) differentiation advantage may best be obtained by a firm when the firm builds market share or increases its price 3) cost leadership advantage may best be obtained by a firm when the firm builds market share or matches the price of its rival
What are the factors that increase the bargaining power of the customer?
1) customers make up a large volume of a firm's business 2) there is much information available to customers 3) buyers have low switching costs 4) there are high number of alternate suppliers
When does cost leadership strategies work well?
1) heavy price competition exists in the market 2) buyers have large amounts of bargaining power in the market 3) new entry firms are able to influence buyers to switch to their product by cutting the price of their product for a period of time in an effort to gain market share and increase profits
What are situations that cause competition to be an even stronger force impacting the profitability of a firm?
1) the market is not growing fast 2) there are several equal-sized firms in the market 3) customers do not have strong brand preferences 4) costs of exiting the market exceed the costs of continuing to operate 5) some firms profit from making certain moves to increase market share 6) various firms in the market use different types of strategic plans
What are Porter's Five Forces?
1. Buyer Power 2. Supplier Power 3. Threat of substitute products or services 4. Threat of new entrants 5. Market competitiveness
Having identified their mission, overall strategy, and critical success factors, organizations often review the internal and external factors that will contribute to their success. This analysis is often referred to as: a) TOC evaluation b) SWOT analysis c) Brainstorming
A: SWOT analysis - evaluation of internal and external factors contributing to an organization's success is referred to as strengths, weaknesses, opportunities, and threats (SWOT). - strengths and weaknesses focus on internal factors while opportunities and threats relate to external factors
When does competition NOT become an even stronger force impacting the profitability of a firm? a) the costs of exiting the market are less than the costs of continuing to operate b) customers do not have strong brand preferences
A: costs of exiting the market are less than the cost of continuing to operate
Which of the following statements regarding competitive advantage is NOT correct? a) differentiation advantage may best be obtained by a firm when it builds market share or decreases its price b) cost leadership advantage may best be obtained by a firm when it builds market share or matches the price of its rival
A: differentiation advantage may best be obtained by a firm when it builds market share or decreases its price
The manufacturer of a high priced car emphasizes the prestige, performance, and safety of the vehicle. The strategy pursued by the manufacturer can be best characterized as: a) differentiation focused on a broad range of buyers b) differentiation focused on a narrow range (niche) of buyers
A: differentiation focused on a broad range of buyers - manufacturer's attempt to appeal to prestige, performance, and safety targets a broad range of motivations in the automotive market and markets to wealthy individuals, corporations, etc. - the manufacturer seeks to differentiate itself from other vehicles with various superatives
Price discrimination is accomplished most effectively in markets with which of the following characteristics? a) excess capacity that meets high demand at different price levels b) fairly distinct segments of customers
A: fairly distinct segments of customers - when customers are distinct, a seller can charge different prices to different groups by justifying that the products they are buying are unique to that specific group - there is also less power from the perspective of the customer because they cannot join together as easily and bargain with the seller
Which of the following statements regarding the existence of substitute products is correct? a) when the cost of buyers switching to new products is high, the effect of substitutes on the competitive environment of a firm is high b) if few substitutes exist, buyers have little choice of products and may be willing to pay a higher price for the products that are available
A: if few substitutes exist, buyers have little choice of products and may be willing to pay a higher price for the products that are available
In the long-run, a firm may experience increasing returns due to: a) economies of scale b) comparative advantage
A: in the long-run, a firm may experience increasing returns due to economies of scale which come into full play only if a large enough number of units is being produced to make it worth while to set up a fairly elaborate productive organization
When does competition not become an even stronger force impacting the profitability of a firm? a) customers do not have strong brand preferences b) the market is fast-growing c) costs of exiting the market exceed the costs of continuing to operate d) market consists of several equal-sized firms
A: it is not a factor that would cause market competitiveness to be even stronger
Patents are granted to encourage firms to invest in the research and development of new products. Patents are an example of: a) exclusionary practices b) market concentration c) barriers to entry
A: patents are an example of barriers to entry. Patents prevent other rival firms (without patents) from entering the market and consequently, are a form of barriers to entry. - patents can be "process-related" or "product-related"
Which of the following is NOT an external factor that directly affects the competitive environment of the firm? a) political issues b) bargaining power of suppliers
A: political issues are external factors that affect the overall industry, not simply the competitive environment of the firm
Factors internal to the organization that impact strategy and are sources of strengths and weaknesses include all of the following, EXCEPT: a) marketing effectiveness b) regulations and laws c) innovation of product lines d) competence of management
A: regulations and laws are external factors of opportunities and threats that affect the overall industry
Which of the following is NOT correct regarding best cost provider strategies? a) when generic products are not acceptable to buyers, yet they still remain price sensitive to the value they are receiving for their money, the best cost strategy may work well b) the best cost strategy strives to have the firm evaluate and change its value chain such that it can achieve the highest cost among its closets competitors with a quality differentiated product in an effort to obtain the highest profit
A: the best cost strategy strives to have the firm evaluate and change its value chain such that it can achieve the lowest (not highest) cost among its closest competitors while matching them on the features desired by consumers
Michael Porter identified 5 forces that affect profitability. Which of the following was NOT one of those forces? a) existence of a substitute product b) existence of complementary products c) bargaining power of customers d) barriers to market entry
A: the existence of complementary products was not one of Porter's 5 forces
Which of the following is NOT true regarding strategic plans? a) various levels of the organization will implement strategic plans differently b) the process of strategic planning begins with the creation of the plan c) strategic plans will vary by segment based on the characteristics of the segments d) continual re-evaluation and revision of strategic plans is necessary
A: the process of strategic planning begins with the creation of the plan - the process of strategic planning actually begins with defining the firm's vision and mission statements and then moves to setting the goals and objectives of the firm before it considers creation of the strategic plan
Which of the following is NOT considered a factor that increases the bargaining power of the customer? a) buyers have low switching costs of changing products b) firm is unable to change suppliers easily
A: when a firm is unable to change suppliers easily, that is a factor that increases the bargaining power of the suppliers
(T/F) if the manufacturing costs of a firm are less than those of close rivals, then the firm has a competitive market advantage
FALSE - simply because the manufacturing costs of a firm are less than those of close rivals does not necessarily mean that the firm has a competitive market advantage. - only if TOTAL costs to a firm are less than those of close rivals will a firm have a competitive market advantage.
(T/F) buyers become less price sensitive and start to have brand loyalty, therefore cost leadership fails
TRUE
What is the TOC evaluation?
Theory of constraints, is an evaluation technique for optimizing throughput time, it does not relate to overall strategy evaluation