BA 405 Final Exam

Reverse Positioning

A break in the industry tendency to continuously augment products, characteristic of the product lifecycle, by offering products with fewer attributes and lower prices.

Breakaway Positioning

A break in the industry tendency to incrementally improve products alone specific dimensions, characteristic of the product lifecycle, by offering products that are still in the industry but are perceived by customers as being different.

Related Diversification

A firm entering a different business in which it can benefit from leveraging core competencies, sharing activities, or building market power.

Consolidation Strategy

A firm's acquiring or merging with other firms in an industry in order to enhance market power and gain valuable assets.

Harvesting Strategy

A strategy available in the decline phase, of wringing as much profit as possible out of a business in the short to medium term by reducing costs.

Overall Cost Leadership

Broad Target Market + Low Cost Position

Broad Differentiation

Broad Target Market + Superior Value Perceived by Customer

Potential Pitfalls of Focus Strategies

Cost advantages may erode within the narrow segment. Even product and service offerings that are highly focused are subject to competition from new entrants and from imitation. Focusers can become too focused to satisfy buyer needs.

Economies of Scope

Cost savings from leveraging core competencies or sharing related activities among businesses in a corporation.

Decline Stage

Failing sales and profits. Increasing price competition. Industry consolidation.

Support Activities

Firm Infrastructure Human Resource Management Technology Development Procurement

Stars

High Market Share High Market Growth

Cash Cows

High Market Share Low Market Growth

Which statement regarding competitive advantages is true?

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

Primary Activities

Inbound Logistics Outbound Logistics Operations Marketing & Sales Service

Question Marks

Low Market Share High Market Growth

Dogs

Low Market Share Low Market Growth

4 basic Strategies in the decline stage

Maintaining, harvesting, exiting, consolidating.

Cost Focus

Narrow Target Market + Low Cost Position

Differentiation Focus

Narrow Target Markets + Superior Perceived Value by Customer

Introduction Stage

New products that are not known by customers. Poorly defined market segments. Unspecified product features. Low sales growth. Rapid technological change. Operating losses. A need for financial support.

________ is when the corporate office helps subsidiaries make wise choices in their own acquisitions, divestures, and new ventures, thereby creating value within business units.

Parenting

What are some potential pitfalls of a differentiation strategy?

Perceptions of differentiation may vary between buyers and sellers. The price premium is too high. Uniqueness that is not valuable.

Which of the following is not a downside of portfolio models used to assist a firm in balancing its portfolio of businesses?

Portfolio models rely on loose rules regarding resource allocation across the SBUs.

Maturity Stage

Slowing demand growth. Saturated markets. Direct competition. Price Competition. Strategic emphasis on efficient operations.

Growth Stage

Strong increase in sales. Growing competition. Developing brand recognition. A need for financing complementary value-chain activities such as marketing, sales, customer service, and R&D.

Which of the following is not a reason for merger and acquisition failures?

The acquisition leads to value creation.

Experience Curve

The decline in unit costs of production as cumulative output increases.

Potential Pitfalls of Overall Cost Leadership Strategies

Too much on one or a few value-chain activities. Increase in the cost of the inputs on which the advantage is based. A strategy that can be imitated too easily. A lack of parity on differentiation. Reduced flexibility. Obsolescence on the basis of cost advantage.

Potential Pitfalls of Differentiation Strategies

Uniqueness that is not valuable. Too much differentiation. Too high of a price premium. Differentiation that is easily imitated. Dilution of brand identification through product-line extensions. Perceptions of differentiation that vary between buyers and sellers.

Microsoft offered in 2016 to buy LinkedIn for 26.2 billion USD which was 50 percent higher than the value for LinkedIn the day before. This high premium offer was necessary for Microsoft to complete ________ initiative.

a diversification

What are some strengths of transnational strategies

ability to attain economies of scale ability to adapt to local markets ability to locate activities in optimal locations

The Marriott International purchase of Starwood Hotels for 13.6 billion USD is an example of a(n)

acquisition.

Outright sales or sale and leaseback free up considerable cash and improve returns. This is an example of which turnaround strategy used by successful companies?

asset and cost surgery

Casio, a giant electronic products producer, synthesizes it abilities in miniaturization, microprocessor design, material science, and ultrathin precision castings to produce digital watches. It uses the same skills to produce card calculators, digital cameras, and other small electronics. These collective skills are

core competencies

High product differentiation is generally accompanied by

decreased emphasis on competition based on price.

BlackBerry lost its competitive advantage by 2016 because it

did not deliver innovations to respond to changing market demand.

To be responsive to local pressures, companies must ________ their offerings and strategies from country to country to reflect local consumer preferences.

differentiate

In reviewing the Indian software industry and the diamond of national advantage, which of the following is a relatively weak set of factors in the national competitive advantage in this industry?

domestic demand conditions

The sale of Boeing commercial aircrafts and Microsoft operating systems in many countries enables these companies to benefit from

economies of scale.

1. The factors that lead to a low-cost position also provide a substantial ________ barriers position with respect to ________ products introduced by new and existing competitors.

entry; substitute

Which of the following describes the most typical order of entry into foreign markets?

exporting, licensing, franchising, joint venture, and wholly owned subsidiary

Zara, a Spanish clothing company, often uses strategic alliances when entering new geographic markets. Which of the following best explains the potential advantage for them?

gaining knowledge about different cultures and regulatory environments

Corporate-level strategy focuses on

gaining long-term revenue.

When firms expand into global markets, they are faced with the choice of reducing costs and/or adapting to the local market. When high pressures exist to lower costs, companies should choose a(n) ________ strategy or ________ strategy in order to compete in the global marketplace.

global; transnational

The antitakeover tactic, ________, is when a firm offers to buy shares of their stock from a company (or individual) planning to acquire their firm at a higher price than the unfriendly company paid for it.

greenmail

Which of the following is a reason for the rise in regional expansion?

increase in the number of trading blocs and free trade zones

Building production capacity in locations outside of Europe can threaten ________, an issue typically raised when investing in China.

intellectual property rights protection

Which would be the appropriate strategy for companies to use to compete in the global marketplace if both the pressures to lower costs and adapt locally are low?

international strategy

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.

introduction

The downsides or limitations of mergers and acquisitions include all of the following except

it is a slow means to enter new markets and acquire skills and competences

One of the reasons Ford found it difficult to increase sales in China is that

its cars did not meet customer expectations.

What agreement entails the creation of a third-party legal entity?

joint venture

What are some limitations of a global strategy?

limited ability to adapt to local markets the concentration of activities may increase dependence on a single facility single locations may lead to higher tariffs and transportation costs

The size of pricing and differentiation advantages between competitors decreases in which stage of the market life cycle?

maturity

Diversification initiatives include all the following

mergers and acquisitions. strategic alliances. joint ventures.

The primary means by which a firm can diversify are ________, ________, and ________.

mergers and acquisitions; joint ventures and strategic alliances; internal development

Internal development may be time consuming and, therefore, firms may forfeit the benefits of speed that growth through ________ and ________ can provide.

mergers; acquisitions

When the U.S. dollar appreciates against other currencies, U.S. goods can be ________ to consumers in foreign countries but can have ________ implications for American companies with branch operations overseas.

more expensive, negative

According to Michael Porter, firms that have experienced intense domestic competition are

more likely to design strategies that will allow them to successfully compete abroad.

Indian Coke, a subsidiary of Coca-Cola, offers a drink called Maaza Chunky. Production required modification of the production technique and the introduction of newly designed cans. These represent aspects of a ________ strategy.

multidomestic

A firm typically achieves an absolute cost advantage by offering a ________ product or service to a ________ target market using standardization to derive the greatest benefits from economies of scale and experience.

no frills; broad

Primark, a fashion retailer, has found a way to keep its cost structure lower than its rivals by leveraging streamlined logistics, a low marketing budget, and negotiating bargain prices from its suppliers. They are using a(n) ________ strategy.

overall cost leadership

Diversified public corporations such as Berkshire Hathaway and Virgin Group are examples of companies that create value using

parenting expertise.

Common steps in management restructuring include all the following except

penalties for missing short- to medium-term performance goals.

Renault paid 1 billion USD to acquire a 25 percent ownership stake in the Russian automaker AvtoVAZ in 2008. Just one year later, Russian Prime Minister Vladimir Putin threatened to dilute the Renault ownership stake unless it contributed more money to prop up AvtoVAZ, which was then experiencing a significant slide in sales. This is an example of ________ risk.

political

A ________ can be defined as the total profits in an industry at all points along the industry value chain.

profit pool

When a firm diversifies into ________ businesses, the primary potential benefits to be derived come from ________ relationships—those businesses that share intangible and tangible resources.

related; horizontal

A manufacturing business pursuing cost leadership is likely to

rely on experience effects to raise efficiency.

Exemplifying the phenomenon of ________, companies like GE have committed significant resources to developing products that meet the needs of developing nations, products that deliver adequate functionality at a fraction of the cost. Interestingly, these products have subsequently found considerable success in value segments in wealthy countries as well.

reverse innovation

Community hospitals in Mississippi can video conference with the specialists at the University of Mississippi Medical Center thus lowering health care delivery costs and increasing the quality of medical care. This system mirrors that of the Indian health care delivery system for reaching rural areas. This is an example of

reverse innovation.

Mass customization permits companies to manufacture unique products in relatively ________ quantities at ________ costs.

small; lower

Firms following a global strategy strive to offer ________ products and services as well as locate manufacturing, research and development, and marketing activities in a limited number of locations.

standardized

When using a BCG matrix, a ________ is a business that currently holds a large market share in a rapidly growing market and has minimal or negative cash flow.

star

Rivals would find it difficult to challenge Atlas Door in the short run because of

strong customer loyalty.

Proctor and Gamble is a large multinational organization that has many business sharing distribution resources. Diversification strategies take advantage of the ________ that exist in their organization.

synergies

What are sources of political risk in many countries?

the presence of social unrest the presence of military turmoil the presence of violent conflict

A firm should consider vertical integration when

the suppliers of raw materials to the firm are unable to maintain quality standards.

Regionalization is most important because it permits companies to organize their activities based upon

the true distance between the home country office and the foreign country.

China is pressuring Airbus to increase its productions facilities in China by using which technique?

using political favors in exchange for influence

Firms have several choices of diversification initiatives that can be used to create value.

using related diversification to acquire economies of scope using related diversification to acquire market power using unrelated diversification to acquire financial synergies

Sharing core competencies is one of the primary potential advantages of diversification. For diversification to be most successful, it is important that the

value chains of the firm be similar enough in at least one way to allow for the leveraging of the core competencies of the firm.