Quiz 2 Strat

Cost leaders manage to charge low prices and still make a profit by emphasizing efficiency.

True Cost leaders manage to do so by emphasizing efficiency.

In the late 1800s one of these companies was a pioneer in the use vertical integration

Carnegie Steel In the late 1800s, Carnegie Steel Company was a pioneer in the use of vertical integration. The company controlled the iron mines that provided the key ingredient in steel, the coal mines that provided the fuel for steelmaking, the railroads that transported raw material to steel mills, and the steel mills themselves. Having control over all elements of the production process ensured the stability and quality of key inputs.

Identify the accurate statement regarding a best-cost strategy?

Companies that charge relatively low prices and offer substantial differentiation are following a best-cost strategy This strategy is difficult to execute in part because creating unique features and communicating to customers why these features are useful generally raises a company's costs of doing business. Product development and advertising can both be quite expensive. However, companies that manage to implement an effective best-cost strategy are often very successful.

There are two competitive dimensions of business level strategies, they are ___________ and _________.

Competitive Advantage; Scope of Operations According to Porter, two competitive dimensions are the keys to business-level strategy. The first dimension is a company's source of competitive advantage. This dimension involves whether a company tries to gain an edge on rivals by keeping costs down or by offering something unique in the market. The second dimension is a company's scope of operations. This dimension involves whether a company tries to target customers in general or whether it seeks to attract just a segment of customers.

Which of the following is true about environmental determinism?

It is a theoretical perspective that contends that organizations are very limited in their ability to adapt to the conditions around them.

The four Ps of the marketing mix?

Product, Price, Place, Promotion

The most popular set of generic strategies is based on the work of Professor Michael Porter of the Harvard Business School.

True

A core competency is a skill set that is difficult for competitors to imitate, can be leveraged in different businesses, and contributes to the benefits enjoyed by customers within each business.

True A core competency is a skill set that is difficult for competitors to imitate, can be leveraged in different businesses, and contributes to the benefits enjoyed by customers within each business.

Institutional transaction theory centers on the extent to which firms copy each other's strategies.

True An old saying notes that imitation is the sincerest form of flattery. This flattery is the focus of institutional theory. In particular, institutional theory centers on the extent to which firms copy each other's strategies.

Creating best value supply chains requires four components: strategic supply chain management, agility, adaptability, and alignment.

True Creating best value supply chains requires four components. The first is strategic supply chain management - the use of supply chains as a means to create competitive advantages and enhance firm performance.

Divestment serves as a means to undo diversification strategies.

True Divestment serves as a means to undo diversification strategies. Divestment can be especially appealing to executives in charge of firms that have engaged in unrelated diversification.

Cost leadership is disadvantageous for firms because of the fact that:

downplaying research and development can slow cost leaders' ability to respond to changes once they are detected.

Which of the following is most likely to meet the criteria for strategic resources

A firm's organizational culture Intangible resources are quite difficult to see, touch, or quantify. Intangible resources include, for example, the knowledge and skills of employees, a firm's reputation, and a firm's culture. In comparing the two types of resources, intangible resources are more likely to meet the criteria for strategic resources (i.e., valuable, rare, difficult to imitate, and nonsubstitutable) than are tangible resources.

According to the resource-based theory, the four qualities that makes an asset a strategic resource for a business.

A strategic resource is an asset that is valuable, rare, difficult to imitate, and nonsubstitutable.

Which of the following is one of the four components required for creating best value supply chains?

Alignment Creating best value supply chains requires four components. The first is strategic supply chain management - the use of supply chains as a means to create competitive advantages and enhance firm performance.

Identify which of these is NOT a test a diversification strategy must pass before implementation.

Are there additional tax benefits? A proposed diversification move should pass three tests or it should be rejected: (1) How attractive is the industry that a company is considering entering? (2) How much will it cost to enter the industry? (3) Will the new unit and the company be better off?

Which of the following is NOT a generic business level strategy?

Best Cost Leadership There are four generic business-level strategies: (1) cost leadership, (2) differentiation, (3) focused cost leadership, and (4) focused differentiation.

Which of the following best describes copyrights?

Copyrights provide exclusive rights to the creators of original artistic works such as books, movies, songs, and screenplays.

Which of the following strategies allows firms to offer products or services with acceptable quality and features to a broad set of customers at a low price?

Cost leadership strategy A firm following a cost leadership strategy offers products or services with acceptable quality and features to a broad set of customers at a low price.

_____ requires a firm moving into new value chains.

Diversification While vertical integration involves a firm moving into a new part of a value chain that it already is active within, diversification requires moving into new value chains.

_____ are created when the cost of offering goods and services decreases as a firm is able to sell more items.

Economies of scale Economies of scale are created when the cost of offering goods and services decreases as a firm is able to sell more items.

Which of the following theories for explaining a firm's competitiveness contends that an organization can, at least in part, create an environment for itself that is beneficial to the organization?

Enactment Enactment treats executives as the masters of their domains. Enactment contends that an organization can, at least in part, create an environment for itself that is beneficial to the organization.

Backward vertical integration strategy can be useful for neutralizing the effect of powerful buyers.

False A backward vertical integration strategy involves a firm moving back along the value chain and entering a supplier's business. Some firms use this strategy when executives are concerned that a supplier has too much power over their firms.

In the focused differentiation strategy, narrow markets are defined in a single way in a single setting.

False A focused differentiation strategy requires offering unique features that fulfill the demands of a narrow market. As with a focused low cost strategy, narrow markets are defined in different ways in different settings.

Firms that charge relatively low prices and offer substantial differentiation are following a best-cost strategy.

False Firms that charge relatively low prices and offer substantial differentiation are following a best-cost strategy. This strategy is difficult to execute in part because creating unique features and communicating to customers why these features are useful generally raises a firm's costs of doing business. Product development and advertising can both be quite expensive.

The BCG matrix analysis suggests that dogs are good candidates for building into stars.

False Low market share units within slow growing industries are called dogs. These units are good candidates for divestment.

The strategic move of vertical integration involves firms trying to expand their presence in an industry by acquiring or merging with one of their rivals.

False Rather than rely on their own efforts, some firms try to expand their presence in an industry by acquiring or merging with one of their rivals. This is a strategic move known as horizontal integration.

SWOT analysis is a rigorous method for selecting strategies.

False SWOT analysis is a relatively simple tool for understanding a firm's situation. As a result, SWOT is best viewed as a brainstorming technique for generating creative ideas, not as a rigorous method for selecting strategies.

Successful use of a differentiation strategy depends only on offering unique features.

False Successful use of a differentiation strategy depends on not only offering unique features, but also on communicating the value of these features to potential customers.

Which of the following strategies requires a firm to compete with its rivals based on price to target a narrow market?

Focused cost leadership strategy A focused cost leadership strategy requires competing based on price to target a narrow market.

Which of the following strategies requires a firm to offer unique features that fulfill the demands of a narrow market

Focused differentiation strategy A focused differentiation strategy requires offering unique features that fulfill the demands of a narrow market.

What two areas of focus does the BCG matrix use for its axes?

Industry growth rate and Relative market share BCG matrix is the best known approach to portfolio planning - assessing a firm's prospects for success within the industry it competes. It categorizes businesses as high or low along two dimensions- the firm's market share in each industry and the growth rate of each industry.

_________ property refers to creations of the mind, such as inventions, artistic products, and symbols.

Intellectual property refers to creations of the mind, such as inventions, artistic products, and symbols. The four main types of intellectual property are patents, trademarks, copyrights, and trade secrets If a piece of intellectual property is also valuable, rare, and nonsubstitutable, it constitutes a strategic resource.

Which of the following best describes liquidation

It involves simply shutting down portions of a firm's operations.

Which of the following best describes liquidation?

It involves simply shutting down portions of a firm's operations. If selling off part of a business is not possible, the best option may be liquidation. This involves simply shutting down portions of a firm's operations, often at a tremendous financial loss.

Which of the following best describes the strategy of divestment?

It refers to selling off part of a firm's operations.

Which of the following best describes the strategy of forward vertical integration?

It requires a firm to enter a buyer's business. A forward vertical integration strategy involves a firm moving further down the value chain entering a buyer's business.

Ashton Manufacturers is an American manufacturing company that produces and sells several lines of consumer appliances. The firm also manufactures and sells home furniture. Ashton Manufacturers decide to simply shut down the furniture manufacturing business unit, as it has very low value. This move is referred to as _____.

Liquidation If selling off part of a business is not possible, the best option may be liquidation. This involves simply shutting down portions of a firm's operations, often at a tremendous financial loss.

One method commonly used by food trucks to pursue the Best-Cost Strategy is ______.

Lowering Overhead One method commonly used by food trucks to pursue the Best-Cost Strategy is lowering the overhead costs associated with food service.

_____ involves taking existing products and trying to sell them within new markets.

Market development

Which Harvard Business School Professor offers the most widely accepted work on generic business strategies?

Michael Porter

15. Which of the following is a primary activity that value chains include?

Operations Value chains include both primary and secondary activities. Primary activities are actions that are directly involved in the creation and distribution of goods and services. Operations refers to the actual production process, while outbound logistics tracks the movement of a finished product to customers.

_________ are legal decrees that protect inventions from direct imitation for a limited period of time.

Patents are legal decrees that protect inventions from direct imitation for a limited period of time.

Which of the following terms refers to the extent to which an increase in the cost of the product makes a buyer less likely to purchase an item?

Price sensitivity Price sensitivity refers to the extent to which an increase in the cost of the product makes a buyer less likely to purchase an item.

Which of the following is a secondary activity that value chains include?

Procurement Value chains include both primary and secondary activities. Secondary activities are not directly involved in the evolution of a product but instead provide important underlying support for primary activities. Procurement, which is the process of negotiating for and purchasing raw materials, is a secondary activity that value chains include.

Darnell Manufacturing Inc. produces breakfast cereals that it sells under the brand name, Crispy Time. After market research and portfolio planning, the firm launches a new line of canned soups for its existing market. In this example, Darnell Manufacturing Inc. uses which of the following strategies?

Product development

What are measures of "best" value supply chains?

Quality, Speed, Cost, & Flexibility Best value supply chains strive to excel along four measures. Speed (or "cycle time") is the time duration from initiation to completion of the production and distribution process. Quality refers to the relative reliability of supply chain activities. Supply chains' efforts at managing cost involve enhancing value by either reducing expenses or increasing customer benefits for the same cost level. Flexibility refers to a supply chain's responsiveness to changes in customers' needs.

Quill Books Inc. is an academic book publishing firm based in Michigan. After extensive market analysis, the firm decides enter the newspaper publishing industry. Quill Books Inc. begins to publish weekly community newspapers for several counties in Michigan. In this example, Quill Books Inc. uses which of the following strategies?

Related diversification Related diversification occurs when a firm moves into a new industry that has important similarities with the firm's existing industry or industries.

Which of the following takes the narrowest focus by centering on an individual firm?

SWOT analysis Five forces analysis examines the situation faced by the competitors in an industry. Strategic groups analysis narrows the focus by centering on subsets of these competitors whose strategies are similar to each other. SWOT analysis takes an even narrower focus by centering on an individual firm.

Which of the following considers a firm's strengths and weaknesses along with the opportunities and threats that exist in the firm's environment

SWOT analysis SWOT analysis is a tool that considers a firm's strengths and weaknesses along with the opportunities and threats that exist in the firm's environment.

A ______________ is a set of activities that an organization performs especially well.

Sociologist Philip Selznick developed the concept of distinctive competence through a series of books in the 1940s and 1950s. A distinctive competence is a set of activities that an organization performs especially well. A distinctive competence is not merely a strength that a company possesses. Instead, a company that has a distinctive competence in marketing, for example, stands out as exceptional among company who all have strengths in marketing.

Which of the following involves creating a new company whose stock is owned by investors?

Spin-off Spin-off involves creating a new company whose stock is owned by investors. General Motors, for example, turned a parts supplier called Delphi Automotive Systems Corporation from a GM subsidiary into an independent firm.

Ferns and Flowers sells unique products such as exotic plants, flowers, pots, and plant care services to a narrow market. Which of the following would be true about Ferns and Flowers?

The shop can charge very high prices for its unique products. Ferns and Flowers follows a focused differentiation strategy. In the case of focused differentiation, one advantage is that very high prices can be charged.

Which of the following is true about business units categorized as question marks in a BCG matrix?

They are low market share units within fast growing industries. Low market share units within fast growing industries are called question marks.

Which of the following is true about business units categorized as dogs in a BCG matrix?

They are low market share units within slow growing industries.

Which of the following is a component of a SWOT analysis

Threats SWOT analysis is a tool that considers a firm's strengths and weaknesses along with the opportunities and threats that exist in the firm's environment.

To earn a patent from the U.S. Patent and Trademark Office, an inventor must demonstrate that an invention is ________, nonobvious, and useful.

To earn a patent from the U.S. Patent and Trademark Office, an inventor must demonstrate that an invention is new, nonobvious, and useful. Patents require inventions to be both innovative and useful.

_____ refer to formulas, practices, and designs that are central to a firm's business and that remain unknown to competitors.

Trade secrets refer to formulas, practices, and designs that are central to a firm's business and that remain unknown to competitors.

_________ are phrases, pictures, names, or symbols used to identify a particular organization.

Trademarks

Which of the following theories for explaining a firm's competitiveness can help executives decide whether to pursue a backward integration strategy or not?

Transaction cost economies Transaction cost economics is a theory that centers on just one element of business activity: whether it is cheaper for a firm to make or to buy the products that it needs. This is a very important element, however, because choosing the more efficient option can enhance a firm's profits. Airlines always buy (or rent) their airplanes. Large planes are generally bought from Boeing or Airbus while modest-sized airliners are purchased from companies such as Brazil's Embraer. It would be simply too costly for an airline to pursue a backward integration strategy and enter the airplane manufacturing business.

Which of the following strategies involves a firm entering an industry that lacks any important similarities with the firm's existing industry or industries?

Unrelated diversification Unrelated diversification occurs when a firm enters an industry that lacks any important similarities with the firm's existing industry or industries.

A resource that do not have all four strategic qualities can still be very useful, but they ______________________

are unlikely to provide long-term advantages

The process of a company entering into the business of one its suppliers is known as __________________

backward integration Airlines always buy (or rent) their airplanes. Large planes are generally bought from Boeing or Airbus, while modest-sized airliners are purchased from companies such as Brazil's Embraer. It would be too costly for an airline to pursue a backward integration strategy and enter the airplane manufacturing business. Insights such as these are powerful enough that the creator of transaction cost economics, Professor Oliver Williamson, was awarded a Nobel Prize in Economic Sciences in 2009.

A(n) _____ strategy involves a firm entering a supplier's business.

backward vertical integration A backward vertical integration strategy involves a firm moving back along the value chain and entering a supplier's business.

Some firms use the strategy of _____ when executives are concerned that a supplier has too much power over their firms.

backward vertical integration Some firms use this strategy when executives are concerned that a supplier has too much power over their firms.

A _____ strategy requires firms to charge relatively low prices and offer substantial differentiation.

best-cost Firms that charge relatively low prices and offer substantial differentiation are following a best-cost strategy.

Companies following the focused differentiation strategy:

can charge very high prices.

A supply chain differs from a value chain in that a supply chain:

captures the entire process of creating and distributing a product, often across several firms. A supply chain is a system of people, activities, information, and resources involved in creating a product and moving it to the customer. A supply chain is a broader concept than a value chain; the latter refers to activities within one firm while the former captures the entire process of creating and distributing a product, often across several firms.

In a BCG matrix, high market share units within slow growing industries are called _____.

cash cows High market share units within slow growing industries are called cash cows.

Differentiation strategy is disadvantageous for a firm because of the fact that:

competitors may be able to imitate the features well enough that they are no longer unique. In certain cases, customers desire the unique features that a firm offers, but competitors are able to imitate the features well enough that they are no longer unique.

Product development involves:

creating new products to serve existing markets.

A firm is following a(n) _____ if it competes on the basis of uniqueness rather than price and is seeking to attract a broad market.

differentiation strategy In terms of the two competitive dimensions described by Porter, using a differentiation strategy means that a firm is competing based on uniqueness rather than price and is seeking to attract a broad market.

Firms which follow the cost leadership strategy:

emphasize efficiency Being able to charge low prices and still make a profit is very challenging. Cost leaders manage to do so by emphasizing efficiency.

Dorothy opens a beauty salon exclusively for ladies. She uses only natural extracts for skin treatments. This makes her stand apart from the other salons in the area. This is an example of a(n) _____ strategy.

generic A generic strategy is a general way of positioning a firm within an industry. The most popular set of generic strategies is based on the work of Professor Michael Porter of the Harvard Business School. According to Porter, two competitive dimensions are the keys to business-level strategy. The first dimension is a firm's source of competitive advantage. This dimension involves whether a firm tries to gain an edge on rivals by keeping costs down or by offering something unique in the market.

James wants to open a library. There are already four other libraries in his town. In order to attract customers James decides to keep the fee for lending books and CDs lower than what is charged by the other four libraries. This is an example of a(n) _____ strategy.

generic A generic strategy is a general way of positioning a firm within an industry. The most popular set of generic strategies is based on the work of Professor Michael Porter of the Harvard Business School. According to Porter, two competitive dimensions are the keys to business-level strategy. The first dimension is a firm's source of competitive advantage. This dimension involves whether a firm tries to gain an edge on rivals by keeping costs down or by offering something unique in the market.

A general way of positioning a firm within an industry is termed as a:

generic strategy.

Innovations in the fast food hamburger business such as dollar menus and drive-thru windows tend to be introduced by one firm and then duplicated by the others. This is an example of _____.

institutional theory An old saying notes that imitation is the sincerest form of flattery. This flattery is the focus of institutional theory. In particular, institutional theory centers on the extent to which firms copy each other's strategies. Consider, for example, fast food hamburger restaurants. Innovations such as dollar menus and drive-thru windows tend to be introduced by one firm and then duplicated by the others.

Companies following the differentiation strategy:

invest heavily in advertising and brand building.

Differentiation strategy is advantageous for a firm because of the fact that:

it creates an ability to obtain premium prices from customers.

Cost leadership is advantageous for firms because of the fact that:

it makes them well positioned to withstand price competition from rivals. In the case of cost leadership, one advantage is that cost leaders' emphasis on efficiency makes them well positioned to withstand price competition from rivals.

According to strategic purity research by Thornhill and White, companies pursuing a pure strategy __________ companies that tried a hybrid approach.

outperformed The notion of strategic purity suggests that organizations that follow the "recipe" associated with a generic strategy will outperform those that become "stuck in the middle" by trying to be a hybrid of more than one generic strategy. This assertion was validated by a study of 2,351 businesses. In general, companies pursuing a pure strategy outperformed companies that tried a hybrid approach

Diversification differs from vertical integration in that diversification:

requires moving into new value chains. While vertical integration involves a firm moving into a new part of a value chain that it already is active within, diversification requires moving into new value chains.

A business using a retrenchment strategy is akin to an army making a(n) ___________.

small retreat Trench warfare inspired the business term retrenchment. Companies following a retrenchment strategy shrink one or more of their business units. Much like an army under attack, companies using this strategy hope to make just a small retreat rather than losing a battle for survival.

In the book In Search of Excellence, Peters and Waterman assert that excellent companies "_________," which means companies that expand their businesses are wise to do so in a manner that involves horizontal diversification within their own industry rather than pursue ownership of dissimilar companies that compete in different industries.

stick to the knitting One of the enduring principles in the book is the assertion that excellent companies "stick to the knitting." That is, companies that expand their businesses are wise to do so in a manner that involves horizontal diversification within their own industry (e.g., cosmetic giant Estée Lauder's 2017 acquisition of a stake in multi-brand skincare firm DECIEM) rather than pursue ownership of dissimilar companies that compete in different industries.

A car manufacturer introduces a new car in the market. The car is aimed at the premium segment. It is priced more than any other car in its category, and it offers features that are standard for cars in its category. Thus, the newly launched car can compete neither on the basis of price nor on the basis of any unique feature that can convince customers to buy it. This is the example of a(n) _____ firm.

stuck in the middle

A firm is said to be _____ if it does not offer features that are unique enough to convince customers to buy its offerings and its prices are too high to effectively compete based on price.

stuck in the middle A firm is said to be stuck in the middle if it does not offer features that are unique enough to convince customers to buy its offerings and its prices are too high to effectively compete based on price.

When two or more businesses produce benefits together that could not be produced separately ________ is created.

synergy Synergy is created when two or more businesses produce benefits together that could not be produced separately.

SWOT analysis is a tool:

that considers a firm's strengths and weaknesses along with the opportunities and threats that exist in the firm's environment.

Market penetration involves:

trying to gain additional share of a firm's existing markets using existing products.

Market penetration differs from market development in that market penetration involves:

trying to gain additional share of existing markets using existing products

H. J. Inc., a broadband and telecommunications company, acquires a chain of retail stores called Daily Fresh that sell grocery products. This is a good example of _____.

unrelated diversification Unrelated diversification occurs when a firm enters an industry that lacks any important similarities with the firm's existing industry or industries.