Chapter 6 Smartbook
Which statement about joint ventures is correct?
Joint ventures are more durable but involve more risk than many other types of collaborative business arrangements
Which statement concerning mergers and acquisitions is accurate?
The difference between a merger and an acquisition relates primarily from management control and financial arrangements
What is a sign that a leading firm may be vulnerable to an offensive strategic attack?
The firm's use of aging technology and outdated equipment
What would be an example of a firm pursuing vertical integration?
The owner of a poultry farm expanding into food distribution
A strategic alliance can be defined as a formal agreement between two or more separate companies in which ______________.
The parties agree to work collaboratively toward one strategically relevant objectives
If the race to market leadership in a particular industry is a marathon, _____________.
There may be enough time for fast followers and late movers to catch up
A company that aggressively pursues an online sales strategy risks _____________.
Threatening crucial relationships with distribution allies
What is the soundest approach for timing a company's offensive or defensive strategic moves?
To be aware of first-mover advantages and disadvantages
The defensive approach that companies use most frequently to defend their market position is _______________.
To block avenues that competitors might use to launch a strategic offensive
What are some reasons that companies adopt defensive strategies?
To learn the risk of being attacked by competitors, and to minimize the impact of any competitive attack that occurs
What are reasons for a company to favor Internet retailing?
To lower distribution costs, to lower costs for end users, and to increase brand recognition
Strategic alliances can be a viable alternative to which of the following?
Traditional price-oriented contracts, vertical integration strategies, and horizontal mergers and acquisitions
Which of the following companies have used disruptive product innovations to create new markets?
Venmo, and Twitter
Companies that outsource strategically important operations run the risk of ________________.
Weakening their ability to sustain their competitive advantage in areas vital to the company's success
In which situations do adept followers have an advantage over first movers?
When first-mover's products do not perform well, when market uncertainties make it difficult to predict which products will succeed, and when imitators can achieve the same benefits as pioneers with lower costs
When may contract-based outsourcing introduce problems?
When issues arising from delays and budget overruns are difficult to resolve, when a company has a difficult time monitoring the work of the outside company, and when the outside company lacks incentive to meet the needs of the outsourcing company
When can lowering prices be a successful competitive strategy for a company?
When its competitors maintain product prices at higher levels, and when the company convinces buyers that its products are as good as its competitors' products
When should a company undertake a strategic offensive?
When the company has no option other than to try to lessen a strong rival's competitive advantage, and when the company identifies a chance to improve its market share at a competitor's expense
Under which of the following circumstances might background vertical integration lower costs?
Where there are few suppliers in the market, and when the item being supplied is a major component of the final product
The term "blue ocean" refers to a market space in which ______________.
An industry does not yet exist and the market space is untainted by competition
On average, the number of strategic alliances increases by what percentage annually?
25 percent
Approximately what percentage of strategic business alliances fail each year?
60 percent to 70 percent
A joint venture can be defined as ______________.
A new corporate entity that is jointly owned by two or more companies that agree to share in the revenues, expenses, and control of the new company
In which of the following ways can a firm pursue vertical integration?
Acquiring a company that performs activities further along the value chain, closer to the end user; and building positions in selected stages of the value chain and avoiding participation in others
Which statements about strategic alliances are generally true?
All parties of the alliance contribute resources, the alliances involve mutual dependence and shared risk, and financial responsibility is shared among all parties of the alliance
The drawbacks of strategic alliances include the possibility that a company will do which of the following?
Become too dependent on a partner, accidently reveal knowledge that allows a partner to match core strengths, and overestimate the potential for sustaining a positive relationship
Which of the following are conditions in which first-mover advantages are most likely to arise?
Being first in the new market builds strong brand loyalty and enhances a firm's reputation, and switching costs discourage a first mover's customers from seeking a different vendor
Good partners for a strategic alliance should do which of the following?
Bring complementary strengths to the relationship, hold compatible views about how the alliance should be managed, and share the same goals for the relationship
Guerilla warfare tactics in business competition include which of the following?
Catching rivals off guard with an intense burst of promotional activity, and launching special campaigns to weaken a rival that is undergoing a period of internal discord
Which of the following are examples of company decisions concerned with the scope of the firm?
Choosing to remove leather goods from a line of product offerings, and choosing to focus solely on sales rather than designing and marketing
In a strategic alliance, a company's proprietary knowledge and trade secrets are most vulnerable when the partnership involves ____________.
Collaborative research and development
Decisions regarding the scope of a company's operations ____________.
Concern choices about which operations the company will conduct internally and which it will not
Outsourcing is a strategy that involves ________________.
Contracting out certain value chain activities that are normally performed in-house to outside vendors
In some cases, backward vertical integration can increase efficiency by _____________.
Coordinating production flows and preventing bottlenecks
What are reasons that mergers and acquisitions sometimes fail?
Cost savings are less than anticipated, and gains in competitive advantage materialize more slowly than was anticipated
What must a company do when considering whether to pursue an emerging market opportunity aggressively or cautiously?
It must bear in mind that any first-mover advantages can be fleeting, and it must determine whether the race to market leadership will be a marathon or a sprint
A company can achieve which of the following by signaling would-be business challengers that retaliation is likely in the event of any strategic attack?
Dissuading challengers from attacking altogether, and diverting challengers to less threatening competition
Which statement about establishing the technical standard in an industry is true?
Establishing a technical standard is like an experience-based advantage that can grow over time
What are common objectives of merger and acquisition strategies?
Extending business into new product categories, gaining quick access to new technologies, and expanding geographic coverage
For a company making a strategic move, being a fast follower or a late mover is always better in the long run than being a first mover.
False
Strategic offensives should not exploit the power of a company's strongest competitive assets.
False
Which two firms would be the best targets for an offensive strategic attack by a company?
Firms in danger of going out of business, and regional firms with limited capabilities
Price cutting can be an effective strategy for companies that _______________.
Have already achieved a cost advantage
A blue-ocean strategy is a strategy that seeks to gain a competitive advantage by _______________.
Inventing a new segment of the market that makes existing competitors no longer relevant
The introduction of disruptive product innovations _______________.
Is a risky business strategy that has the potential to earn a company a majority of the market share
What may a vertically integrated company need to do when there are improvements in technology at the supply stage of the value chain?
It may be required to incur high costs for abandoning old technologies in an effort to keep pace with suppliers, and it may need to continue producing suboptimal products rather than upgrading its technology
What are some of the negative effects that mergers and acquisitions can have on personnel?
Managers can make mistakes when deciding which systems to integrate, employees must resist efforts to mesh the cultures of the two companies, and difficulty coping with new changes may lead to lower morale
Which statement about strategic alliances in industries experiencing rapid technological advances is true?
Many companies find strategic alliances an essential way to keep pace with technological change
What must a company do to make a backward vertical integration strategy profitable?
Match suppliers' production efficiency and quality, and achieve the same economies of scale as suppliers
Which statement about entering the supply stage of the value chain as part of a vertical integration strategy is true?
Matching a supplier's production efficiency often requires significant investment in research and development
When buyer preferences shift, a vertically integrated company ___________.
May have difficulty adjusting its product lines to meet new demand
Outsourcing typically ___________ the scope of a business's operations.
Narrows
What are typical obstacles that a company might create to deter the strategic offensive of a would-be challenger?
Offering lower prices by maintaining a line-up of economy-based products, lengthening warranties and offering free support services, and introducing new features and adding new models
A firm with a vertical integration strategy that seeks full integration _____________.
Participates in all stages of the industry value-chain system
A vertically integrated firm _____________.
Participates in multiple stages of an industry's value chain system
What are examples of ways that companies signal would-be challengers that retaliation is likely?
Publicly announcing a commitment to maintaining market share, and maintaining cash reserves and marketable securities to fund countermeasures
Adept followers have an opportunity to meet the achievement of industry pioneers at far lower costs when ______________.
Second movers can produce equal or better products than pioneers while avoiding the pioneer's costly mistakes
Cultural differences among companies in a strategic relationship _____________.
Should be respected and treated sensitively if the practices hope to have a productive relationship
A business guerilla offensive is best suited for ______________.
Small companies that lack the capacity to launch a full strategic offense against better established rivals
In industries in which technological developments occur at a fast pace, a strategic alliance can benefit a company by doing which of the following?
Speeding up the company's cycles of learning, and granting the company quick access to the latest technological know-how
Which statements concerning strategic alliances are accurate?
Strategic alliances are used by some companies to extend their scope of operations internationally, and strategic alliances are used by some companies as a way of managing outsourcing
The benefits of defensive strategies include which of the following?
Strengthening a firm's position in the market, and protecting a firm's resources
The best strategic offensives for companies involved which of the following?
Striving to convert a competitive advantage into a sustainable advantage, and overwhelming rivals with swift and decisive action
A merger can be defined as _____________.
The combining of two or more companies into a single corporate entity
A company's strategic offensive should be based on _____________.
The company's strengths as well as its rival's strengths and weaknesses
