STR 221 Final Exam

Business strategy can be summarized as: The means by which organizations achieve their long-term objectives The means by which individuals achieve their objectives The formal detailed plans used by organizations to guide their actions The will of top managers to change their organization

A. Business strategy refers to the plans and actions a company takes in order to achieve its long-term objectives. It involves deciding on the target customer segments, value proposition, and competitive advantage, as well as determining the key activities and resources necessary to deliver the offering and generate revenue. A well-designed business strategy helps a company to remain competitive and achieve its goals, while also taking into account the wider context of the industry and market it operates in. Ultimately, business strategy is the means by which organizations aim to create, deliver, and capture value in a sustainable way.

Which of the following represents (s) the strategic challenges of competing in a new industry? Positioning may be impossible because there may be no suppliers, no customers, and no clearly identified competitors. It may not be apparent who the potential entrants are or which products customers consider necessary complements and acceptable substitutes. Technology strategy is highly dynamic; it's about moving quickly to create value, adapt to others, deal with uncertainty, influence the evolution of the industry, and shape the competitive landscape. A firm with new technology may need to create or cooperate with an ecosystem. All answers are correct.

All answers are correct.

Corporate strategy is concerned with The scope of a firm's products The scope of a firm's activities The scope of a firm's structure and corporate governance system All of the above

All of the above

Which of the following is not one of Michael Porter's basic competitive position strategies?

All of the following are basic competitive position strategies according to Michael Porter: Cost leadership Differentiation Niche/focused differentiation So, none of the following is one of Michael Porter's basic competitive position strategies.

When complementary resources are critical to the market success of innovation: The technical risks are relatively unimportant The costs and risks are amplified A larger firm with established complementary resources is better placed than a start-up Answers b and c

Answers b and c

Michael Porter's "attractiveness test" means that a firm considering diversifying into another industry should:

Be able to see a way to make superior profits in that industry

Michael Porter's "attractiveness test" means that a firm considering diversifying into another industry should: See that the barriers to entry to that industry are low Be able to see a way to make superior profits in that industry Consider how unattractive their existing industry is, by comparison See that some firms in that industry have left, leaving space for newcomers

Be able to see a way to make superior profits in that industry

Corporate and Business strategy differ mainly in that: Corporate Strategy has a broader scope, including decisions about which industries to operate in Business strategy is subordinate to corporate strategy Both a and b There is no real difference; they are the same thing

Both a and b

The choice of a strategy to exploit innovation depends on two factors:

Characteristics of the innovation and a firm's resources and capabilities

The main concepts that assist us to analyze the scope of a firm's activities are:

Economies of scope, Transaction costs, and Corporate complexity

For a firm to imitate the strategy of another firm, it must do four things:

Identify the target firm, incentivize the rival, diagnose the sources of competitive advantage, and acquire the resources needed.

The idea of Porter's 5 Forces is to

Identify which forces are relatively more powerful, and to assess their impact on competition and industry profitability

Multi-domestic industries:

Internationalize through direct investment

To make a choice between vertical integration or external sourcing, which statement is true? It depends on the specific factors prevailing Vertical integration is preferable in a technology-intensive industry Market sourcing is preferable when the industry is very fragmented Is simply a matter of managerial preference

It depends on the specific factors prevailing

If an industry earns a return on capital in excess of its cost of capital: Incumbents will earn abnormal profit, and build entry barrier The government will intervene to make sure that competition will increase It is likely to attract the attention of firms looking to enter the industry, which may eventually lead to the return on capital falling It will attract firms outside the industry, but the incumbents will have erected entry barriers

It is likely to attract the attention of firms looking to enter the industry, which may eventually lead to the return on capital falling

Besides managing the overall corporate portfolio of businesses, corporate management adds value by: Providing encouragement, guidance and control, and managing change and linkages between businesses Hiring and firing useless employees, managing capabilities, and building advertising campaigns Designing strategic orientations, and developing detailed operational plans for each business Communicating the strategic orientations to the main stakeholders, and managing conflicts at lower divisional levels

Providing encouragement, guidance, and control, and managing change and linkages between businesses

"The market" and "the industry" are:

Related but not the same thing. A market is a group of buyers and sellers of a particular good or service. An industry is a group of firms that produce similar goods or services.

Transnational corporations (TNCs) differ from multinational corporations (MNCs) in that

TNCs are a globally integrated network of interdependent resources and capabilities.

Once a firm buys its supplier in order to vertically integrate a process: The high-powered incentive of market forces that keep costs low are removed Costs are certainly lower because the firm now knows what profit the supplier was making The supplier will now offer a better service since it's owned by its customer The purchasing department can be closed to save costs

The high-powered incentive of market forces that keep costs low is removed

The business model refers to

The way a company creates, delivers, and captures value. It is a blueprint for how a business operates, generates revenue, and makes a profit. The business model describes the company's value proposition, target customers, channels of distribution, customer relationships, revenue streams, and the resources, activities, and partners needed to deliver its offering. It outlines the underlying logic of how a company will create, deliver, and capture the value and is a crucial aspect of a company's strategy and overall success.

The only way to cope with true uncertainty is:

To be flexible enough to quickly react to the unexpected

The only way to cope with true uncertainty is: To be flexible enough to quickly react to the unexpected Prepare multiple scenario plans To construct a computer model simulation To calculate all the risks and analyse the chances of success in a spreadsheet model

To prepare multiple scenario plans

A sound strategy relies on four factors: measurable short-term targets; sound understanding of the competitive environment; objective appraisal of resources; and top-down implementation of strategic decisions. True or false?

True

An argument in favor of diversified companies with a balance of cash-generating and cash-devouring businesses is that it is cheaper and easier to balance capital requirements internally than to source capital in the financial markets. True False

True

An innovation that comes to dominate the market does not always lead to superior profits for the innovator. True False

True

Corporate strategy is concerned with 'where' a firm competes (in which industries it competes), while business strategy is concerned with 'how' a firm competes in a specific industry. True False

True

In situations where firms need to respond rapidly to changes in demand, market contracts may be preferable to vertical integration: True False

True

It's wise to manage the creative departments in a firm separately from the operational departments. True False

True. It can be wise to manage the creative departments in a firm separately from the operational departments. Creative departments such as marketing, design, and product development require a different management approach than operational departments such as manufacturing, logistics, and finance. Creative work often involves a high degree of autonomy, experimentation, and risk-taking, which can clash with the structured and process-driven nature of operational work.

Two basic questions concern corporate and business strategy:

What businesses should the company be in? (Corporate strategy) How should the company compete in these businesses? (Business strategy)

The advantage of alliances is that they:

allow firms to economize on resources by sharing the costs and risks of a project

In the past decade the impact of technology has: Been limited to science-based industries Been limited to digital technologies Been pervasive, in particular because of the influence of digital electronics technologies Overwhelmingly been about social networking services

been pervasive, in particular because of the influence of digital electronics technologies.

When considering foreign entry strategies the text asks 5 questions Which of these factors belong on that list?

companies should consider a number of factors, including product traceability, barriers to trade, and the existence of transaction costs

Industries such as pharmaceuticals have typically earned high returns on investment because they

have tended to be protected from competition by legal restrictions and have tended to have high entry barriers and differentiated product

Once the value is created, it is, in general: Equally shared between customers and producers Not equally shared between customers and producers Distributed to the firm's shareholders Reinvested into the firm or put aside as a reserve

not equally shared between customers and producers, as the customer is willing to pay only a portion of the value received, while the remaining portion accrues to the producer

Differentiation is when a firm: Offers customers something valuable and unique at a significantly lower price than rivals Offers customers something valuable and unique for which customers are willing to pay a price premium Offers customers a uniquely low price Offers customers products with many additional features

offers customers something valuable and unique that they are willing to pay a price premium for

The overall bargaining power of buyers depends on:

The buyer's price sensitivity and the relative bargaining power between the seller and the buyer.

A mission statement

A mission statement is a brief statement that defines the purpose, values, and goals of an organization. It serves as a guide for decision-making, sets expectations for stakeholders, and communicates the organization's vision to the public. Mission statements can also be used to inspire and motivate employees, and to shape the organization's culture.

Corporate Social Responsibility: Fits more readily with the central/southern Europe and Asian legal framework of broader stakeholder obligations Is not seen as an imperative requirement by all influential thinkers Is becoming more important for all firms to take account of due to the threat of adverse publicity All of the above

D. Corporate Social Responsibility (CSR) refers to the responsibility of companies to consider the social, economic, and environmental impacts of their actions and to act in a way that benefits both their stakeholders and society as a whole.

A problem associated with internal capital markets is:

Despite the cost savings, poor investment decisions are sometimes made

Starbucks' "third place" is an example of: Cost reduction Human resource strategy Differentiation Mass customization

Differentiation

Disruptors first appeal to mainstream customers and then migrate to the low-end. True False

False

Fifty years ago, vertical integration was a fashionable strategy, whereas nowadays the trend is towards de-integration True False

False

Only digital technology is of interest outside of the science-based industries. True False

False

The main factors in determining whether the innovator can make a good profit from an innovation are luck, and good timing. True False

False

Which exploitation strategy is best for an innovation depends entirely on whether the innovator prefers to license out the underlying patent or copyright. True False

False

Companies can know the exact timing of their innovation windows. True False

False. It is not always possible for companies to know the exact timing of their innovation windows. The emergence of new technologies, changes in market conditions, and unpredictable events can all affect the timing and duration of innovation windows. However, companies can use various methods such as trend analysis, scenario planning, and market research to identify potential innovation opportunities and anticipate the timing of these windows.

For manufacturer access to distribution is a barrier to entry because:

New entrants face a disadvantage from retailers who are reluctant to carry their new products.

The focus of the "Heartland" matrix is:

The fit between a business and its parent company. The Heartland matrix is a tool that helps companies evaluate the strategic fit between their businesses and their parent companies.

Innovation is more likely to diffuse more quickly throughout an industry if it is perceived as worth imitating by competitors. True False

True

Retaliation against a new entrant may take the form of aggressive price-cutting, increased advertising, sales promotion, or vexatious litigation. True False

True

True or false: Platform technologies exhibit indirect network effects. True False

True

Sheltered industries are protected by their:

perishability, transport difficulties, and high transport costs, the very small size of the operation, and lack of scale economies.

Differentiation is when a firm

uses to distinguish its products or services from those of its competitors. This differentiation can be based on various aspects, such as quality, features, design, customer service, brand image, or innovation. The goal of differentiation is to create a unique value proposition for the firm's target customers, making it easier to charge premium prices, increase customer loyalty, and achieve sustainable competitive advantage. By differentiating its offerings, a firm aims to create a perceived value for its customers that is different from that of its competitors, which can help it to gain a competitive edge in the market.