GEB 4890 - Business Strategy Chapter 6

On average, the number of strategic alliances increases by what percentage annually?

25%

What are examples of ways that a firm can pursue vertical integration?

acquiring a company that performs activities further along the value chain, closer to the end user building positions in selected stages of the value chain and avoiding participation in others

In a strategic alliance between companies, the decision-making process should

allow partners to keep pace with developments in the market.

The best strategic offensives for companies involve which of the following?

striving to convert a competitive advantage into a sustainable advantage overwhelming rivals with swift and decisive action

First-movers are likely to experience significant advantages when

switching costs discourage a first mover's customers from seeking a different vendor. being first in a new market builds strong brand loyalty and enhances a firm's reputation.

Strategic alliances can be a viable alternative to

vertical integration strategies. traditional price-oriented contracts. horizontal mergers and acquisitions.

Which statement about establishing the technical standard in an industry is true?

Establishing a technical standard is an experience-based advantage that can grow over time.

What statement about winning standard wars among early movers is true?

Establishing relationships with other participants in the sector can help a firm win a standard war.

True or False: A company's strategic offensive is usually based on brand-name recognition.

False

Expanding along the value chain into products and services that are closer to the end user is called

forward vertical integration.

In order to be successful, a preemptive strike by a company needs to

give the company a prime position in the market that rivals cannot easily bypass.

Strategic alliances are more likely to succeed if partners

establish trust. protect themselves with safeguards. make mutual commitments.

Approximately what percentage of strategic business alliances fail each year?

60% to 70%

Which two firms would be the best targets for an offensive strategic attack by a company?

firms in danger of going out of business regional firms with limited capabilities

Companies in successful business alliances understand that collaborative arrangements should be

flexible enough to keep pace with changing customer requirements. capable of responding to shifting market changes.

Outsourcing typically ______ the scope of a business's operations.

narrows

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.

A merger or acquisition that extends business into new product categories

can be more cost-effective for a company than developing the product on its own. helps a company fill gaps in its product line.

Guerrilla warfare tactics in business competition include which of the following?

catching rivals off guard with intense burst of promotional activity launching special campaigns to weaken a rival that is undergoing a period of internal discord

Some companies have adopted forward vertical integration strategies to

decrease dependence on sales agents, wholesalers, and retailers. supplement to their core product line with iconography and memorabilia. facilitate the sale of overstocked and slow-moving items.

Combined companies may be able to reduce supply chain costs because

expanded operating capacity may increase the company's bargaining power with suppliers.

In industries in which technological developments occur at a fast pace, a strategic alliance can benefit a company by

granting the company quick access to the latest technological know-how. speeding up the company's cycles of learning.

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.

A vertically integrated firm

participates in multiple stages of an industry's value chain system.

When companies pursue operations that require new capabilities,

they may find that the new operations require skills that the company lacks.

True or false: 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

Decisions regarding the a company's scope of the firm

concern choices about which operations a company will conduct internally and which it will not.

Lowering prices can be a successful competitive strategy for a company if

its competitors maintain product prices at higher levels. the company convinces buyers that its products are as good as its competitors' products.

What can lead to victory in a standard war among early movers?

making use of fast-cycle product development capabilities employing penetration pricing gaining the support of key customers and suppliers

When buyer preferences shift, a vertically integrated company

may have difficulty adjusting its product lines to meet new demand.

In which situations do adept followers have an advantage over first movers?

when imitators can achieve the same benefits as pioneers with lower costs when the first-mover's products do not perform well when market uncertainties make it difficult to predict which products will succeed

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 when the company identifies a chance to improve its market share at a competitor's expense

Under which of the following circumstances might backward vertical integration lower costs?

when there are few suppliers in the market when the item being supplied is a major component of the final product

Good partners for a strategic alliance should

share the same goals for the relationship. bring complementary strengths to the relationship. hold compatible views about how the alliance should be managed.

The new owners of a long-established clothing retailer have experience in garment manufacturing and as a result they decide to expand into that business. This type of business growth is called

backward vertical integration.

Outsourcing is a recommended strategy when an activity

can be performed more efficiently by outside specialists. is not crucial to the company's ability to sustain its competitive advantage.

In some cases, backward vertical integration can increase efficiency by

coordinating production flows and preventing bottlenecks.

The benefits of forward vertical integration include

differentiating a company from its competitors. giving manufacturers better access to end users. improving a company's market visibility.

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?

diverting challengers to less threatening competition dissuading challengers from attacking altogether

Which statement concerning mergers and acquisitions is accurate?

The difference between a merger and an acquisition relates primarily to management control and financial arrangements.

True or false: Strategic alliances are preferable to horizontal mergers and acquisitions in a fast-paced market with evolving technologies.

True

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.

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.

In industries with changing boundaries, a company may pursue an acquisition strategy in order to

be prepared to respond to the various directions the industry might take. expand into new geographic regions. become more flexible in its capacity to respond to buyers' changing needs.

In many cases, strategic alliances are preferable to vertical integration strategies, as well as horizontal mergers and acquisitions, because strategic alliances

can lower investment costs by requiring partners to pool resources. can be deployed more rapidly in attempt to gain first-mover advantages. are more flexible and allow for swifter responses to changing market conditions.

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.

A merger can be defined as

the combining of two or more companies into a single corporate entity.

Vertically integrated companies may face challenges realizing economies of scale because

the company is too small. their production levels often fall below the minimum efficient scale.

A company's strategic offensive should be based on

the company's strengths as well as its rival's strengths and weaknesses.

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.

What are some reasons that companies adopt defensive strategies?

to minimize the impact of any competitive attack that occurs to lower the risk of being attacked by competitors

What are recommended strategies for companies that manage a large number of strategic alliances?

to restructure alliances to optimize collaborative effort to break relationships that no longer serve a useful purpose to continue to seek promising new alliances

Contract-based outsourcing can introduce problems because

the outside company may lack incentive to meet the needs of the outsourcing company. issues arising from delays and budget overruns may be difficult to resolve. a company may have a difficult time monitoring the work of the outside company.

What would be an example of a firm pursuing vertical integration?

the owner of a poultry farm expanding into food distribution

In a winner-take-all type of market,

first-mover advantages can insulate a company from competition.

A company that expands its geographic coverage typically

increases its bargaining power with suppliers and buyers. enhances its name recognition and brand awareness.

Outsourcing is a strategy that involves

contracting out certain value chain activities that are normally performed in-house to outside vendors.

What are examples of preemptive strikes?

entering into exclusive, long-term contracts with the best suppliers obtaining the best retail location in a mall

When there are improvements in technology at the supply stage of the value chain, a vertically integrated company

may be required to incur high costs for abandoning old technologies in an effort to keep pace with suppliers. may need to continue producing suboptimal products rather than upgrading its technology.

What are reasons for a company to favor Internet retailing?

to increase brand recognition to lower costs for end users to lower distribution costs

Which statements are true concerning horizontal scope?

It can be expanded through company mergers and acquisitions. It is the range of product and service segments that a firm serves within its product and service market.

Which statements are true concerning vertical scope?

It is defined by the range of activities that may extend from initial production to after-sale customer service. It is the extent to which a firm engages in the activities that make up the industry's entire value chain system.

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 are typical obstacles that a company might create to deter the strategic offensive of a would-be challenger?

lengthening warranties and offering free support services offering lower prices by maintaining a line-up of economy-based products introducing new features and adding new models

In order to make a backward vertical integration strategy profitable, a company must

match suppliers' production efficiency and quality. achieve the same economies of scale as suppliers.

A firm with a vertical integration strategy that seeks full integration

participates in all stages of the industry value-chain system.

The benefits of defensive strategies include which of the following?

protecting a firm's resources strengthening a firm's position in the market

Cultural differences among companies in a strategic relationship

should be respected and treated sensitively if the partners hope to have a productive relationship.

A business guerrilla offensive is best suited for

small companies that lack the capacity to launch a full strategic offensive against better established rivals.

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 objective.

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 statements about strategic alliances among large corporations is true?

Large corporations can be well-served by managing their strategic alliances like a portfolio. It is not uncommon for large corporations to have up to 50 strategic alliances.

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.

Which statements concerning strategic alliances are accurate?

Strategic alliances are used by some companies as a way of managing outsourcing. Strategic alliances are used by some companies to extend their scope of operations internationally.

What are reasons that mergers and acquisitions sometimes fail?

Cost savings are less than anticipated. Gains in competitive advantage materialize more slowly than was anticipated.

True or False: Interpersonal relationships are irrelevant to the success of strategic alliances.

False

If new infrastructure is required before buyer demand can surge, a company should

be careful about allocating too many resources into being first in the market.

The drawbacks of strategic alliances include the possibility that a company will

become too dependent on a partner. overestimate the potential for sustaining a positive relationship. accidentally reveal knowledge that allows a partner to match core strengths.

What are examples of company decisions concerned with scope of the firm?

choosing to remove leather goods from a line of product offerings 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.

A company that acquires another company in the same industry may be able to cut costs by

combining and downsizing administrative activities. closing inefficient plants.

Price cutting can be an effective strategy for companies that

have already achieved a cost advantage.

What are examples of ways that companies signal would-be challengers that retaliation is likely?

maintaining cash reserves and marketable securities to fund countermeasures publicly announcing a commitment to maintaining market share

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

When a company considers whether to pursue an emerging market opportunity aggressively or cautiously, the company needs

to bear in mind that any first-mover advantages can be fleeting. to determine whether the race to market leadership will be a marathon or a sprint.

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.

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.

Which statements about strategic alliances are generally true?

All parties of the alliance contribute resources. Financial responsibility is shared among all parties of the alliance. The alliances involve mutual dependence and shared risk.

Which companies have used disruptive product innovations to create new markets?

Amazon Apple Music

What is an example of a strategically sound outsourcing relationship?

An industry-leading shoe company outsources its IT operations to a leading technology firm.

What are some of the negative effects that mergers and acquisitions can have on personnel?

Employees may resist efforts to mesh the cultures of the two companies. Difficulty coping with new management may lead to lower morale. Managers may make mistakes when deciding which systems to integrate.

What are common objectives of merger and acquisition strategies?

gaining quick access to new technologies extending business into new product categories expanding geographic coverage