MGMT 411 Chapters 6-9 Q's
True or False? Corporate strategy is focused solely on determining the geographic locations in which the firm should compete.
False
True or False? Firms that pursue extremely high or extremely low levels of diversification perform better than those that pursue moderate levels of diversification.
False
True or False? Managers have exactly two choices when determining the boundaries of the firm: produce goods and services in-house ("make") or purchase them externally ("buy").
False
True or False? Sending jobs out of the country to lower costs is known as outsourcing.
False
True or False? The internal and external costs associated with an economic exchange are known as interaction costs.
False
Why is following an unrelated diversification strategy especially advantageous in an emerging economy?
It allows the conglomerate to overcome institutional weaknesses in emerging economies.
Which of the following is a drawback of vertical integration?
It increases the potential of legal repercussions.
1) The pace of innovation has slowed in the 21st century.
False
4) True or False? Innovation and strategic entrepreneurship can only occur within new businesses.
False
4) True or False? When a firm operates at the minimum efficient scale, there is still opportunity for it to further reduce its cost per unit through economies of scale.
False
5) True or False? Managers who are eager to forge business alliances often forget that the expected benefits of the partnership must represent only a small percentage of its monetary and time-related costs.
False
5) True or False? Social entrepreneurs forego the pursuit of profits to achieve social and environmental goals.
False
6) True or False? A differentiator will always benefit when products have become commoditized.
False
6) True or False? Although Disney acquired Pixar through a hostile takeover, the merger has proven extremely profitable for both entities.
False
A drawback of short-term contracting as an alternative to making a component in-house is that
The supplying firm has no incentive to make any transaction-specific investments to increase performance or quality.
A firm follows a(n) ________ when less than 70 percent of its revenues come from a single business and there are few, if any, linkages among its businesses.
Unrelated diversification strategy
________ is best described as a firm's ownership of its production of needed inputs or of the channels by which it distributes its outputs.
Vertical integration
Decisions relating to "what stages of the industry value chain to participate in" determine a firm's
Vertical integration.
About 20 years ago, Sturdy Light, Inc., produced a sturdy, lightweight backpack in a market that was rapidly growing. Sturdy Light became a leader in this market. Eventually, the backpack market reached the maturity stage and slowed down. However, by this time, Sturdy Light had developed a strong brand name and continued to steadily lead the market. Which of the following describes this scenario?
Sturdy Light was a star that developed into a cash cow.
Which of the following stakeholders of a company would most likely be responsible for formulating a corporate strategy?
The chief executive officer
How does a conglomerate benefit from following an unrelated diversification strategy?
The conglomerate can overcome institutional weaknesses, such as a lack of capital markets, in emerging economies.
Which of the following is an example of an internal transaction cost?
The cost of maintaining a production unit
Which of the following is an example of an external transaction cost?
The cost of searching for a contract manufacturer
Banana Computers has decided to procure processing chips required for its laptops from external suppliers instead of manufacturing them in their own facilities. How will this decision affect the firm?
The firm will have more flexibility in purchasing and comparing prices of goods and services.
Firms that use taper integration also use ________ when they rely on outside-market firms for some of their supplies.
Backward vertical integration
________, which are incurred when pursuing a related-diversification strategy, are a function of the number, size, and types of businesses that are linked to one another.
Coordination costs
HealthTech wanted its research partner, an R&D company, to develop a cancer vaccine. However, the project required huge capital investments, and its research partner was not ready to solely face the risks involved. Thus, to gain its partner's confidence and to prove its involvement, HealthTech invested $100 million in the project. This investment made by HealthTech will result in a
Credible commitment.
Which of the following accurately describes a common difference between a merger and an acquisition? A) A merger tends to include mostly small firms; an acquisition can often involve large firms. B) A merger involves the combination of three or more firms; an acquisition involved the combination of two firms. C) A merger involves firms of different size; an acquisition involved firms of the same size. D) A merger tends to be friendly; an acquisition can be friendly or unfriendly.
D) A merger tends to be friendly; an acquisition can be friendly or unfriendly.
Win Goods Inc. is a large multinational conglomerate. As a single business unit, the company's stock price is estimated to be $200. However, by adding the actual market stock prices of each of its individual business units, the stock price of the company as one unit would be $300. What is Win Goods experiencing in this scenario?
Diversification discount
ESB Group is the parent company of many related businesses under its banner. Each share of the parent company is quoted at $220. However, if this had to be assessed by adding the stock prices of each of its strategic business units, the value would only be $200 per share. In this scenario, what has ESB Group created?
Diversification premium
In the context of the Boston Consulting Group (BCG) growth-share matrix, if one of the strategic business units of a conglomerate is categorized under dogs, the management should
Divest the strategic business unit.
ElectraSync Inc., a large consumer electronics company, has divided each product in its portfolio into a separate strategic business unit (SBU). The desktop SBU has been experiencing drastic decline in its cash flow, and its market share has also reduced to an insignificant 10 percent. This has been attributed to the low growth in the desktop market after the arrival of tablet computers and laptops. In the context of the Boston Consulting Group (BCG) growth-share matrix, the desktop SBU will be categorized under
Dogs.
Which of the following best illustrates site specificity?
Equipment necessary for mining bauxite and aluminum smelting
10) True or False? Even if a merger may not increase shareholder value as planned, it is often a wise idea to champion it so that managers will have the greater opportunities of working at an expanding company.
False
10) True or False? Network effects always lead to a virtuous cycle in which an increasing number of customers improves the quality of a product or service, thereby attracting more customers and continuing the cycle.
False
2) True or False? In recent years strategic alliances have declined because of increasing government regulation. `
False
2) True or False? The best way for a firm to keep its proprietary technologies, recipes, or formulas secret is to obtain a patent.
False
2) True or False? The goal of the differentiator is to have a smaller value gap than competitors.
False
3) True or False? A company that wants to enter a new geographic market within China or Saudi Arabia should avoid joint ventures with companies that are based in that country. Partnering with a foreign entity props up that entity's business rather than weakening it through competition. `
False
Incline Electronics relied on a large chain of consumer electronics stores to sell its tablet computers, cell phones, and televisions and also to provide customer service and technical support. However, that retailer outsourced its service departments, and customers began to complain that they could not get reliable tech support for Incline products. In response, Incline Electronics decided to set up its own tech support department, and it also began to investigate opening its own brand-based retail stores. What does this scenario best illustrate?
Forward vertical integration
Mondo Tacos, a fast food restaurant, operates through a business model in which individuals can buy the rights to set up Mondo Taco stores and sell the company's food in return for a lump sum fee at the beginning of the contract and a percentage of revenues every month. The owners of the stores have to offer a menu approved by the company's headquarters and also maintain consistent customer service as expected in its flagship store. Which of the following alternatives to integration does this best illustrate?
Franchising
Revolution Watches, a Swiss-based premium watch brand, has recently started selling its watches through company-owned retail outlets in major cities of developing nations. Which of the following types of diversification strategies is the firm pursuing?
Geographic diversification strategy
Using the Boston Consulting Group growth-share matrix, the managers of Xylicon International determined that their business unit devoted to personal health monitoring devices was a star. Based on this finding, which of the following strategies is likely to produce the best results?
Increase investment in the personal health monitoring unit to encourage future growth.
The Martinez Legal Firm (MLF) recently acquired a smaller competitor, Miller and Associates, which specializes in issues not previously covered by MLF, such as land use and intellectual property cases. Given the increase in the firm's size and complexity, it is likely that its internal transaction costs will
Increase.
Each stage of the vertical value chain typically represents a distinct ________ in which a number of different firms are competing.
Industry
________ are best described as costs that occur due to political maneuvering by managers to control capital and resource allocation and the resulting inefficiencies stemming from sub-optimal allocation of scarce resources.
Influence costs
Greenway Industries is a major multinational conglomerate. Its business units compete in a range of industries, including home appliances, pharmaceuticals, commercial real estate, and plastics manufacturing. Although its largest business unit, which produces kitchen appliances, is among the most profitable in the industry, it generates only 35 percent of the company's revenues. Which of the following is most likely true of Greenway's stock price?
It is valued at less than the sum of its individual business units.
While KFC focuses on international markets, its competitor, Chick-fil-A, focuses on the domestic U.S. market. What is the reason behind this strategic difference?
KFC has more financial resources than Chick-fil-A since it is a publicly traded stock company.
Decisions relating to the range of products and services a firm will offer determine the firm's
Level of diversification.
Which of the following motivations for business growth involves principal-agent problems?
Motivating managers
Bulldog Holdings is a U.S.-based consumer electronics company. It owns smaller firms in Japan and Taiwan where most of its cell phone technology is developed and manufactured before being released worldwide. Which of the following alternatives to integration does this best illustrate?
Parent-subsidiary relationship
Managers in a firm hired to improve the firm's profitability and ultimately the shareholders' value will add to the overall costs if they pursue their own self-interests. What does this best illustrate?
Principal-agent problem
WellMade Manufacturing is a large conglomerate that operates only in its home country. The company competes in industries like the consumer electronics, health care, hotel, airlines, education, and steel industries. Which of the following diversification strategies does this best illustrate?
Product diversification
Amazon.com has decided to enter the college bookstore market. The goal of "Amazon Campus" is to offer co-branded university-specific web sites that offer textbooks and paraphernalia, such as logo sweaters and baseball hats. This development shows Amazon's relentless pursuit of
Product diversification.
Groundswell Industries, a U.S.-based large conglomerate, competes in the hospitality, education, telecommunications, entertainment, airlines, and chemical industries. It currently operates in about 30 nations, and is planning to expand its portfolio by investing in rapidly developing countries. Which of the following strategies is Groundswell Industries pursuing?
Product-market diversification strategy
PepsiCo operates in many countries and sells a wide variety of aerated drinks, other beverages, different types of chips, and Quaker Oats goods to achieve continuous growth. From this data, we can conclude that PepsiCo has been involved in
Product-market diversification.
When executives of a firm consider business opportunities only where they can leverage their existing competencies and resources, it can be concluded that the firm is using
Related-constrained diversification.
A strategy of ________ will be most beneficial for a firm to enhance its overall corporate performance.
Related-linked diversification
The Boston Consulting Group (BCG) growth-share matrix locates a firm's individual strategic business units (SBUs) in which two dimensions?
Relative market share and speed of market growth
The smartphone division of the large consumer electronics company, True Electra Inc., has a significant market share in the fast-growing cell phone market. If the company invests further into this division, it will be able to reap increased cash flows. In the Boston Consulting Group (BCG) growth-share matrix, the smartphone division of True Electra will be categorized under
Stars.
________ are best described as voluntary arrangements between firms that involve the sharing of knowledge, resources, and capabilities with the intent of developing processes, products, or services to lead to competitive advantage.
Strategic alliances
BestDrive Inc. is a large automobile company. The company's petrol cars strategic business unit (SBU) has been recognized as a cash cow, and its hybrid electric cars SBU has been categorized under stars. Which of the following can be inferred from this scenario?
The petrol cars SBU operates in a low-growth market, whereas the hybrid electric cars SBU operates in a high-growth market.
9) True or False? Differentiators tend to score highly on most competitive elements on a strategy canvas, while cost leaders tend to hover near the bottom of the strategy canvas.
True
3) True or False? For ideas and inventions to be innovative, they must first be commercialized.
True
3) True or False? The major value drivers that managers have at their disposal include product features, customer service, and complements.
True
4) True or False? Organizations seeking strategic alliances often pursue non-equity alliances because they are the easiest to create and to sever. However, the short duration of these alliances often means there is little trust or commitment on either side.
True
5) True or False? A firm operating on a 70 percent learning curve will achieve lower per-unit costs after doubling its output than a firm operating on an 80 percent learning curve will.
True
6) True or False? Process innovation typically overtakes product innovation in importance during the shakeout stage of the industry life cycle.
True
7) True or False? A cost leader is the firm most likely to survive a price war.
True
True or False? A conglomerate receives less than 70 percent of its revenues from any single business and features a number of strategic business units that have little to no relationship with each other.
True
True or False? A firm that decides to stop purchasing components from suppliers and start producing them in-house is pursuing backward vertical integration.
True
True or False? Firms are more capable than markets at coordinating highly complex tasks, while markets are more capable of providing high-powered incentives for entrepreneurship.
True
True or False? Not all firms are motivated by a need to grow.
True
True or False? The most challenging diversification strategy is likely to be one that combines new core competencies with new and emerging markets.
True
Anita has been named CEO of a popular sports apparel company. As CEO, she is tasked with setting the firm's corporate strategy. Which of the following decisions is Anita most likely to make?
What range of products the firm should offer
Coastal Pharma and Brainwave Technologies have together invested and created a new organization, InnerView, to focus on developing diagnostic devices. Through this new firm, both companies are attempting to combine their core competencies to innovate and reduce their risks associated with transaction-specific investments. However, the new organization operates independent of Coastal Pharma and Brainwave Technologies. Which of the following alternatives to integration does this scenario best illustrate?
A joint venture
Which of the following best illustrates physical-asset specificity?
A machine solely designed to give a candy its trademarked shape
Argus Inc. is a large multinational company owned by two partners, is active in the petroleum, capital market, chemicals, steel, beverages, hospitality, airlines, education, automobiles, and consumer electronics industries. The company has multiple brands and a large product portfolio under its banner. Which of the following terms would best describe this company?
A conglomerate
Royal Motor Corp. generates a major portion of its revenues by manufacturing luxury sports cars. However, the company also derives an insignificant percent of its annual revenues by selling its sports merchandise that includes apparel, shoes, and other accessories under the same brand name. Which of the following terms best describes Royal Motor Corp.?
A dominant-business firm
Which of the following best illustrates forward vertical integration?
A firm that manufactures and sells car engines to major automobile companies launches its own line of cars.
A factor favoring the success of disruptive innovation is that A) incumbent firms are slow to change. B) new entrants have highly formal organizational structures and processes. C) the low end of the market is highly guarded. D) incumbent firms focus on radical innovation rather than incremental innovation.
A) incumbent firms are slow to change.
How is an equity alliance different from a joint venture?
An equity alliance involves taking ownership in a partner; a joint venture involves two or more entities owning a firm.
The managers at Camphor Plastics decided that their firm needed to diversify because of overall falling sales and lower performance in one sector. How does diversifying compensate for the lackluster performance in this sector?
By having higher performance in another sector
Nina is in an interview for a sales job that requires no experience. She is trying to portray herself as a highly enthusiastic, energetic person with high-level communication and interpersonal skills. The interviewer is convinced that Nina should be hired as a salesperson in the company. However, in her resume, Nina had not mentioned her previous work experience as she was fired from that job because of her frequent absenteeism. Which of the following does this scenario best illustrate?
Information asymmetry
True Tomato Inc. makes organic ketchup. To promote its products, this firm decided to make bottles in the shape of tomatoes. To accomplish this, True Tomato worked with its bottle manufacture to create a set of unique molds for its bottles. Which of the following specialized assets does this example demonstrate?
Physical-asset specificity
Best Burger is a major fast food chain. Its managers are motivated to grow the firm in order to increase their market power and change the industry structure in their favor. Which of the following strategies is most associated with their motive for growth?
Purchasing competitors
Phoenix Guitars is interested in pursuing backward integration to take greater ownership of the extraction of raw materials and production of components used in its signature line of guitars. Although this approach would lower the overall cost of producing a guitar, the costs associated with producing electronic pickups for sound amplification are far greater than those associated with sourcing pickups from a reliable supplier. Which of the following approaches is likely to produce superior results?
Pursue taper integration.
7) True or False? According to the crossing-the-chasm framework, the biggest chasm between customer segments is between early adopters and the mass market made up of the early majority and the late majority.
True
7) True or False? If two large movie-theater chains decide to merge, the result is likely a horizontal integration that creates a more favorable industry structure by decreasing competition.
True
Gold Leaf Computers sources the components for its laptops from various suppliers on the market. The firm pays $100 for processors, $35 for disk drives, $50 for screens, $10 for memory, and $40 for graphics and wireless internet cards. Gold Leaf has determined that it would cost $200 per unit to produce all of the necessary components in its in-house manufacturing facility. In this scenario, Gold Leaf should
Vertically integrate.
Real Goods Inc. is a large conglomerate. The company's beverages strategic business unit (SBU) has been recognized as a cash cow, and its tobacco SBU has been categorized as a dog. Which of the following can be inferred from this scenario?
While the market share of the company in the beverages industry will be high, the market share in the tobacco industry will be low.
Potomac Industries is a manufacturer of high-definition televisions. The industry has gone through a period of rapid growth and expansion, and has started to experience a decline in the rate of growth. Several smaller firms have been bought out by larger competitors, and competition for market share is intensifying. Which of the following strategies is most likely to give Potomac a competitive advantage? A) Implement process innovations that lower per-unit costs. B) Introduce product innovations that differentiate Potomac televisions from the competition. C) Imitate the features of the highest-selling television on the market. D) Increase spending on marketing and attempt to acquire a high-profile celebrity spokesperson.
A) Implement process innovations that lower per-unit costs.
Which of the conditions prevail when an industry is at the end of its life cycle? A) The level of process innovation reaches its maximum as firms attempt to lower cost. B) The industry structure is perfectly competitive with a large number of buyers and sellers. C) The strategic objectives of businesses will involve gaining market acceptance. D) The market reaches its maximum size at this stage.
A) The level of process innovation reaches its maximum as firms attempt to lower cost.
Which of the following statements accurately brings out the distinction between the introduction and growth stages of the industry life cycle? A) There is more strategic variety in the growth stage when compared to the introduction stage. B) The number of competitors is more in the introduction stage than the growth stage. C) The market size for a new product or service is larger in the introduction stage when compared to the growth stage. D) While achieving market acceptance is the strategic objective during the introduction stage, the objective in the growth stage is to pursue a harvest strategy.
A) There is more strategic variety in the growth stage when compared to the introduction stage.
A ________ primarily details the goal-directed actions managers take in their quest for competitive advantage when competing in a single product market. A) business-level strategy B) code of ethics C) mission statement D) functional-level strategy
A) business-level strategy
Bargain Styles Inc. is an apparel company that caters to the highly price-conscious customers. Through its simple apparel designs, acceptable quality levels, and minimal customer service, the company has been able to sell its merchandise at the lowest prices in the industry. Which of the following generic business strategies is Bargain Styles applying? A) cost-leadership B) differentiation C) niche marketing D) product diversification
A) cost-leadership
Tangles Costume Jewelry offers slightly lower quality merchandise than competitors at a much lower price. What strategy is Tangles using? A) cost-leadership B) differentiation C) niche marketing D) product diversification
A) cost-leadership
Trader Joe's successfully used a blue ocean strategy by offering lower cost food than Whole Foods for the same market of patrons. By doing this, Trader Joe's was able to A) gain a market share and make up the loss in margin through increased sales. B) create higher value creation and thus generate greater profit margins. C) gain a market share and make up the loss in margin through increased pricing. D) create higher value creation and thus generate greater sales.
A) gain a market share and make up the loss in margin through increased sales.
Although Mountaintop Electronics still sells its DVD players, a product in its decline stage, the investments made by the company on improving or marketing the product are very low. The company has allocated the least amount of human and financial capital to this department. Which of the following strategies has Mountaintop Electronics adopted in this scenario? A) harvest strategy B) maintain strategy C) consolidation strategy D) differentiation strategy
A) harvest strategy
A blue ocean strategy differs from a low-cost strategy in that A) the intent of a blue ocean strategy is not to be the absolute lowest-cost provider because a blue ocean must also increase perceived value. B) the focus of a blue ocean strategy is on lowering the economic value created, whereas a cost-leader focuses on increasing the economic value created. C) economies of scale are more important to a blue ocean strategy, while economies of scope are more important to a cost-leader. D) a blue ocean's research and development focus is on process technologies, and a cost-leader's focus is on product technologies.
A) the intent of a blue ocean strategy is not to be the absolute lowest-cost provider because a blue ocean must also increase perceived value.
11) Which of the following accurately describes how Netflix used innovation to gain a competitive advantage? A) Netflix moved from content development to upgrading its data analytics to provide faster online streaming. B) Netflix applied big data analytics to its user preferences to provide highly personalized viewing recommendations. C) Netflix moved from online streaming to online DVD rentals via the Internet. D) Netflix applied first mover advantages to lock up talent needed to produce original content for DVD rentals and online streaming.
B) Netflix applied big data analytics to its user preferences to provide highly personalized viewing recommendations.
Dominic is the founder of an innovative "impromptu catering" business that provides elegant, healthy party food and decorations on less than 24 hours' notice. The company has grown by over 150 percent in the past year. Dominic credits some of the company's success to studying the strategies of prominent social entrepreneurs, such as Wikipedia's Jimmy Wales. What can Dominic do to exemplify the social entrepreneurship model? A) Launch a social media platform for food lovers. B) Provide free weekly catered meals for the homeless. C) Seek investments from venture capitalists. D) Buy out his closest competitors to ensure a competitive advantage.
B) Provide free weekly catered meals for the homeless.
Which of the following is a drawback of using the industry life cycle as a framework to guide strategic choice? A) The framework believes that the life cycle of industries is unpredictable. B) The framework does not explain everything about changes in industries. C) The framework is based on the tenet that industries can be rejuvenated even in the declining stage. D) The framework believes that the number and size of competitors remain constant throughout the life cycle.
B) The framework does not explain everything about changes in industries.
n developed economies, the electric car industry is in the introduction stage, and the industry for MP3 players is in the shakeout phase. What does this imply? A) The mode of competition in the electric car industry will be based on price, whereas in the MP3 player industry, the mode of competition will be non-price based. B) The industry for electric cars will focus more on product innovation, whereas in the MP3 player industry, the focus will be on process innovation. C) The electric car industry will move to the growth stage, whereas the industry for MP3 players will enter the growth stage next. D) The industry for electric cars will primarily pursue an integration strategy, whereas in the MP3 players industry, the focus will be on differentiation.
B) The industry for electric cars will focus more on product innovation, whereas in the MP3 player industry, the focus will be on process innovation.
Which of the following is a feature of the maturity stage of the industry life cycle? A) The competitive intensity within the industry is at its peak. B) The market reaches its maximum size. C) The industry structure is more monopolistically competitive. D) The focus on product innovation is higher than that on process innovation
B) The market reaches its maximum size.
While cell phones with holographic keyboards are currently in the introduction stage of the industry life cycle, tablet computers are in the growth stage. In the context of this scenario, which of the following statements is true? A) The industry for cell phones with holographic keyboards will face greater competition than the tablet industry. B) While the industry for cell phones with holographic keyboards will focus more on product innovation, the tablet industry will focus more on process innovation. C) While the industry for cell phones with holographic keyboards can reap the benefits of economies of scale, the tablet industry will experience no such benefits. D) The industry for cell phones with holographic keyboards will face price competition, whereas, in the tablet industry, the mode of competition will be non-price.
B) While the industry for cell phones with holographic keyboards will focus more on product innovation, the tablet industry will focus more on process innovation.
According to the five forces model, which of the following is viewed as a major risk to a business pursuing a cost-leadership strategy? A) competition switching from non-price attributes to pricing B) innovation that allows competitors to emerge with more economical replacements C) new entrants with small production scale D) suppliers requesting a 2% price increase across the industry
B) innovation that allows competitors to emerge with more economical replacements
The key objective for firms during the growth phase is to A) invest as many resources as possible in product innovations. B) stake out a strong strategic position not easily imitated by rivals. C) pursue a harvest strategy. D) reduce their network effects.
B) stake out a strong strategic position not easily imitated by rivals.
When a firm makes choices between a cost or value position to achieve competitive advantage, it is primarily involved in A) collective bargaining. B) strategic trade-offs. C) arbitration. D) mediation.
B) strategic trade-offs.
The typical four-step innovation process begins with A) the modification and recombination of an existing product or process. B) the presentation of an idea as findings derived from basic research. C) the commercialization of an invention by entrepreneurs. D) a competitor's attempt to imitate an innovation.
B) the presentation of an idea as findings derived from basic research.
When a firm pursues a maintain strategy, it A) exits a declining industry to maintain the goodwill of its overall brand name. B) reduces investments in product support and allocates only a minimum of human and other resources. C) continues to support marketing efforts even if the demand for the product is declining. D) chooses to consolidate the industry by buying rival firms, those who plan to exit.
C) continues to support marketing efforts even if the demand for the product is declining.
In a focused cost-leadership strategy, a firm A) caters to the segment of the market that is least cost-sensitive. B) provides high-priced products for many different segments of the mass market. C) delivers low-cost products and services to a specific, narrow part of the market. D) focuses on reducing the economic value created to drive down costs.
C) delivers low-cost products and services to a specific, narrow part of the market.
It is important for a firm to win over the early majority section of the market to ensure the commercial success of an innovation because they A) are driven by technology concerns rather than the practicality of a new product. B) influence the purchase decisions of early adopters. C) enter into the market in large numbers, creating a herding effect. D) have the highest purchasing power when compared to the other customer segments.
C) enter into the market in large numbers, creating a herding effect.
To be successful and to survive the shakeout stage of the industry life cycle, a firm should A) charge higher prices than its competitors. B) focus on product innovation rather than process innovation. C) gain economies of scale. D) shift from price to non-price competition.
C) gain economies of scale.
To initiate a strategic move that allows a firm to open up new and uncontested market space through value innovation, managers must address four key questions when formulating a blue ocean business strategy. These questions focus on A) increasing cost and maintaining perceived customer benefits. B) lowering cost and maintaining perceived customer benefits. C) lowering cost and increasing perceived customer benefits. D) increasing cost and increasing perceived customer benefits.
C) lowering cost and increasing perceived customer benefits.
A firm's business strategy can lead to a competitive advantage if it allows the firm to A) execute the same activities performed by the rivals in a similar manner. B) reduce the value gap. C) perform different activities than its rivals. D) position itself below the productivity frontier.
C) perform different activities than its rivals.
) A firm experiences diseconomies of scale when it A) has a constant return to scale. B) moves down the experience curve. C) produces at an output level beyond the minimum efficient scale. D) has a steep learning curve when compared to its competitors.
C) produces at an output level beyond the minimum efficient scale.
In the multiplex industry, Vibrant Movies Inc. is an upscale multiplex that focuses on superior customer experience. The firm charges premium prices for its movie tickets and services. Global Cine Inc., in contrast, charges the lowest price in the industry with its no-frills approach. In between these two segments is True Movies Inc., which offers a customer experience comparable to that of Vibrant Movies at a price almost as low as that of Global Cine. What strategy is True Movies pursuing in this scenario? A) liquidation strategy B) product diversification strategy C) market penetration strategy D) blue ocean strategy
D) blue ocean strategy
Quick Clean Chemicals outsources its production to contract manufacturers located in underdeveloped nations where unskilled labor is available in plenty for very low wages. This has helped the company become a price leader in the chemicals industry. Which of the following is the key driver behind Quick Clean's strategic position? A) network effects B) superior customer service C) availability of complements D) low-cost input factors
D) low-cost input factors
8) True or False? When pursuing a Blue Ocean strategy, a firm in a crowded marketplace attempts to out-compete rivals on both cost and product features with the goal of gaining market share at the expense of other competitors in the same industry.
False
9) True or False? Pipeline businesses are typically better than platform businesses at incorporating user feedback and taking advantage of network effects.
False
1) True or False? When deciding whether to build, borrow, or buy as a means of growth, firms no longer need to consider the need for physical closeness to their resource partners.
False
10) True or False? A value curve that zig-zags across the strategy canvas indicates a focused strategy that is likely to achieve a sustainable competitive advantage.
False
Which of the following provides an example of a firm in a red ocean? A) Chique Apparel offered clothing at a low price but failed to differentiate its product as being exclusive. B) Cheap Apparel offered clothing at a price matching that of its competitors and, as a result, it had lower profit margins. C) Goode Apparel offered clothing at a mid-range price but failed to differentiate its product as being of decent quality. D) Top Drawer Apparel offered clothing at a higher price than competitors and, as a result, failed to make a profit.
A) Chique Apparel offered clothing at a low price but failed to differentiate its product as being exclusive.
While Fun Frames incurs a cost of $12 for a pair of eyeglasses, Highwire, its competitor, manufactures a pair of glasses at $10. Both the companies are able to sell their glasses for a maximum of $30 per pair. Which of the following statements is true in this scenario? A) Fun Frames and Highwire have achieved differentiation parity. B) Fun Frames is a cost-leader when compared to Highwire. C) Fun Frames has created a greater economic value than Highwire. D) Highwire has a higher opportunity cost than Fun Frames.
A) Fun Frames and Highwire have achieved differentiation parity.
How is a cost-leader protected from threats from powerful suppliers? A) It is more able to absorb price increases through accepting lower profit margins. B) It is more able to absorb price increases through generating higher profit margins. C) It is able to create a significant difference between perceived value and current market prices. D) It is able to create a significant difference between actual value and future market prices.
A) It is more able to absorb price increases through accepting lower profit margins.
Elemental Pharma Inc. recently acquired Crick Pharmaceuticals Inc. It now sells its own products along with the products originally sold by Crick Pharmaceuticals. As a result, Elemental Pharma's sales force will also be marketing the acquired company's products. How will this horizontal integration most likely affect Elemental Pharma? A) It will lower its costs through economies of scale. B) It will diminish its economic value creation. C) Elemental Pharma will increase its cost of distribution. D) Elemental Pharma will reduce the size of its product line.
A) It will lower its costs through economies of scale.
Overall, was the Adidas acquisition of Reebok a success? A) No. Adidas has slipped from number two in the U.S. market to number three. B) Yes. By acquiring Reebok, Adidas improved its market share and made sure that Nike could not acquire it. C) The acquisition was a success for Reebok but not for Adidas. D) The acquisition was a success for Adidas but not for Reebok.
A) No. Adidas has slipped from number two in the U.S. market to number three.
Ayesha is a strategist for the firm Optiks Inc., which produces high-quality HD movie cameras. This company needs a specific material for a new camera they are developing, which is manufactured in large quantities by a competitor called Expert Technology Inc. However, this material is difficult to trade. Because of this, which of the following is most likely the best strategy for Ayesha to suggest? A) Optiks should acquire Expert Technology. B) Optiks should form a short-term agreement with Expert Technology. C) Optiks should form a long-term agreement with Expert Technology. D) Optiks should enter into co-opetition with Expert Technology.
A) Optiks should acquire Expert Technology.
Which of the following scenarios would be characteristic of an entrepreneur? A) Rachel implemented a new and more efficient way to produce pottery. B) Mary imitated a new, more efficient method of producing pottery. C) Alissa scaled back the production of pottery because it wasn't cost effective. D) Ursula used a proven marketing method to advertise her pottery.
A) Rachel implemented a new and more efficient way to produce pottery.
Which of the following is a feature of the growth stage of the industry life cycle? A) The consumer demand increases. B) The prices of goods begin to rise. C) The basis of competition moves away from process innovation. D) The number of competitors decreases.
A) The consumer demand increases.
Which of the following is true of acquisitions? A) They can be friendly or hostile. B) They can occur only when the involved entities are of comparable size. C) In acquisitions, two independent companies join to form a separate third entity. D) Acquisitions increase the competitive intensity in an industry.
A) They can be friendly or hostile.
Garrett is an executive vice president at Samm Hardware. He researches a proposal by a larger company, Maximum Hardware, to combine the two companies. By analyzing past performance, conducting focus groups, and interviewing Maximum employees, Garrett concludes that Maximum has poor profit margins, sells shoddy merchandise, and treats customers poorly. What actions should Garrett and Samm Hardware take? A) Turn down the acquisition offer and prepare to resist a hostile takeover. B) Attempt a friendly merger and use managerial hubris to improve results at Maximum. C) Welcome the acquisition and use knowledge transfer to impart Sam Hardware's management practices. D) Do nothing; the two companies cannot combine without Samm Hardware's explicit consent.
A) Turn down the acquisition offer and prepare to resist a hostile takeover.
Canon was able to redesign the copying machine so that it didn't need professional service—reliability was built directly into the machine, and the user could replace parts, such as the cartridge. What Xerox had not envisioned was the possibility that the components of the copying machine could be put together in an altogether different way that was more user-friendly. This example describes A) architectural innovation. B) incremental innovation. C) radical innovation. D) disruptive innovation.
A) architectural innovation.
In a successful ________ strategy, the trade-offs between differentiation and low cost are reconciled. A) blue ocean B) focused differentiation C) liquidation D) divestment
A) blue ocean
A differentiator is least likely to be threatened by increases in input prices due to powerful suppliers when the A) differentiator is able to create a significant difference between perceived value and current market prices. B) differentiator is able to significantly reduce the value gap. C) source of a competitor's differential appeal is tangible rather than intangible. D) new product features added raise costs but not the perceived value in the minds of consumers.
A) differentiator is able to create a significant difference between perceived value and current market prices.
A(n) ________ leverages new technologies to attack existing markets. A) disruptive innovation B) incremental innovation C) radical innovation D) architectural innovation
A) disruptive innovation
As a research scholar, Denise had built a helicam as part of her project. The helicam could capture aerial images. Realizing the potential use of this product in movie production and military and rescue operations, she started a new venture where she could customize these helicams to fit the specific needs of the buyers and sell them. Denise can be best described as a(n) A) entrepreneur. B) category captain. C) franchisor. D) early adopter.
A) entrepreneur.
32) Nendry is the owner of a firm that produces sports drinks. Since there are a number of firms in the industry competing on cost, Nendry has decided to pursue a differentiation strategy. In this case, she should A) focus on adding unique features to her product that customers will value. B) concentrate on improving process technologies to achieve economies of scale. C) enforce strict budget controls at all levels of the organization. D) devote all resources to reducing the value gap.
A) focus on adding unique features to her product that customers will value.
Adidas acquired Reebok primarily to A) overcome its competitive disadvantage against Nike. B) get access to the superior technology of Reebok. C) overcome its principal-agent problems. D) pursue an unrelated diversification strategy.
A) overcome its competitive disadvantage against Nike.
The strategy canvas for movie theaters includes factors such as prices, comfort, customer service, concessions variety, and hours of operation. Which of the following value curves is most likely to represent a theater that successfully positions itself as a differentiator? A) high price, high comfort, high customer service, high concessions variety, low hours of operation B) low price, high comfort, high customer service, high concessions variety, low hours of operation C) high price, low comfort, low customer service, high concessions variety, low hours of operation D) low price, low comfort, low customer service, low concessions variety, low hours of operation
A) high price, high comfort, high customer service, high concessions variety, low hours of operation
Lillypad Toys is a manufacturer of educational toys for children. Six months ago, the company's research and development division came up with an idea for a unique touchscreen device that can be used to introduce children to a number of foreign languages. Three months ago, the company produced a working prototype, and last month the company successfully launched its new device on the commercial market. What should Lillypad's managers prepare for next? A) increased competition from imitators B) a prolonged period of uncontested success C) a sharp decline in demand for the product D) a difficult struggle to move from invention to innovation
A) increased competition from imitators
Which of the following is a common drawback of a non-equity alliance? A) lack of trust between partners B) difficulty initiating the contract C) difficulty terminating the contract D) lack of flexibility for the partners
A) lack of trust between partners
Both BioThink Inc. and GD Pharma Inc. have discovered similar vaccines to prevent cancer. While GD Pharma's vaccine sells at $100 per unit, BioThink sells its vaccine at $90 per unit. This price differentiation has mainly been attributed to the companies' capital decisions. While BioThink used its retained earnings to develop the vaccine, GD Pharma borrowed funds from banks to develop the vaccine. Thus, GD Pharma pays a higher interest on its capital, which makes it necessary to price its vaccine higher. Thus, the key driver for BioThink's competitive advantage is A) low-cost input factors. B) economies of scale. C) superior customer service. D) availability of complements.
A) low-cost input factors.
In Eli Lilly's Office of Alliance Management, the alliance champion is primarily responsible for A) making sure that an alliance fits within the firm's existing alliance portfolio and corporate-level strategy. B) providing technical expertise and knowledge needed for the specific technical area in an alliance. C) providing alliance training and development, as well as diagnostic tools. D) serving as an alliance process resource and business integrator between the two alliance partners.
A) making sure that an alliance fits within the firm's existing alliance portfolio and corporate-level strategy.
The main reason behind Alphabet's decision to acquire the Israeli start-up company Waze for $1 billion was probably to A) preempt its competitors from buying Waze. B) share its capabilities with Waze. C) support start-up companies with venture capital. D) gain access to technology that is alien to it.
A) preempt its competitors from buying Waze.
The strategic objective of a first mover during the introduction stage of the industry life cycle is to A) pursue a harvest strategy. B) survive by drawing on deep pockets. C) achieve market acceptance. D) lower entry barriers.
A) pursue a harvest strategy.
Disney became the world's leading media company to a large extent by pursuing a corporate strategy of A) related-linked diversification. B) cost-leadership. C) unrelated diversification. D) hostile takeovers.
A) related-linked diversification.
When a blue ocean strategy goes bad, a firm has neither a clear differentiation nor a clear cost-leadership profile. This situation is referred to as A) stuck in the middle. B) buried at the bottom. C) burned at the top. D) caught in the transition.
A) stuck in the middle.
The Hershey Company, the largest U.S. chocolate manufacturer, decided to enter the Chinese market because A) the U.S. population was growing slowly and becoming more health conscious. B) its strategic position in the U.S. market was well protected through high entry barriers. C) this would help the company gain access to large cocoa plantations in China. D) Hershey's main strategic focus was on product and market diversification and not on the domestic market.
A) the U.S. population was growing slowly and becoming more health conscious.
Which of the following reasons motivated Facebook to acquire Instagram, a photo and video-sharing social media site, for $1 billion? A) the desire to gain a new capability B) the need to enter a new geographical market C) the need to reduce its level of horizontal integration D) the desire to pursue an unrelated diversification strategy
A) the desire to gain a new capability
Value drivers contribute to a firm's competitive advantage only if A) the increase in value creation exceeds the increase in costs. B) they can shrink the firm's value gap. C) they can restrict the firm from claiming a premium price for its products. D) the decrease in perceived value leads to an increase in costs
A) the increase in value creation exceeds the increase in costs.
In 1990, Roche, a Swiss pharmaceutical company, initially invested $2.1 billion to purchase a controlling interest in the biotech startup Genentech. In 2009, after witnessing the success of Genentech's drug discovery and development projects, Roche spent $47 billion to purchase the remaining minority interest in Genentech, making it a wholly owned subsidiary. In terms of strategic alliances, this scenario best indicates A) the real-options perspective. B) co-opetition. C) explicit knowledge. D) the stakeholder strategy.
A) the real-options perspective.
When does a merger between companies typically occur? A) when two firms of comparable size join to form a combined entity B) when large, incumbent firms buy start-up companies C) when a target firm does not want to be acquired D) when two or more firms enter a temporary vertical strategic alliance
A) when two firms of comparable size join to form a combined entity
A primary advantage of organizing economic activity within firms is the
Ability to coordinate highly complex tasks to allow for specialized division of labor.
Which of the following statements about managing alliance-related tasks is true? A) Forming an alliance with another firm prohibits that firm from forming other alliances. B) Alliance management capability is based on three alliance-related tasks. C) A merger is one of the three options for alliance design and governance. D) In post-formation alliance management, none of the firms in an alliance is permitted to gain a competitive advantage.
B) Alliance management capability is based on three alliance-related tasks.
Which of the following statements is true about managing alliance-related tasks? A) Forming an alliance with another firm prohibits that firm from forming other alliances. B) Alliance management capability is based on three alliance-related tasks. C) A merger is one of the three options for alliance design and governance. D) In post-formation alliance management, none of the firms in an alliance is permitted to gain a competitive advantage.
B) Alliance management capability is based on three alliance-related tasks.
In the context of industrial growth, which of the following statements is true of standards? A) Standards emerge exclusively from bottom-up through competition in the marketplace. B) As the size of a market expands, a standard signals the market's agreement on a common set of engineering features and design choices. C) Standards are exclusively imposed top-down by government or other standard-setting agencies such as the Institute of Electrical and Electronics Engineers. D) After a standard is established in an industry, the basis of competition tends to move away from process innovations toward product innovations.
B) As the size of a market expands, a standard signals the market's agreement on a common set of engineering features and design choices.
Which of the following summarizes the benefit of the strategic alliance between HP and DreamWorks? A) HP and DreamWorks each strengthened their separate markets without impinging on each other's markets. B) Both HP and DreamWorks were able to enter a new market that they would not have been able to pursue alone. C) HP was able to enter a new market, and DreamWorks was able to strengthen its old market. D) DreamWorks was able to enter a new market, and HP was able to strengthen its old market.
B) Both HP and DreamWorks were able to enter a new market that they would not have been able to pursue alone.
Judging from the Disney-Pixar merger, which of these is an effective way to create shareholder value from a merger? A) Integrate the acquired company as fully as possible, merging staffs and locations, so that all employees have as similar an on-the-job experience as possible. B) If the acquired company creates high-quality products or services, don't force it to mirror the management style of the acquiring company. C) Cut prices at the acquired company but not the acquiring company so that the acquisition covers all consumer price points. D) Raise consumer prices at the acquiring company and the acquired company to reflect the fact that the market is now less competitive.
B) If the acquired company creates high-quality products or services, don't force it to mirror the management style of the acquiring company.
Which of the following statements is true of an equity alliance? A) An equity alliance is based on contractual agreements rather than partial ownership. B) In an equity alliance, the partners frequently exchange personnel to make the acquisition of tacit knowledge possible. C) In an equity alliance, a standalone organization is created that is jointly owned by two or more parent companies. D) An equity alliance creates weaker ties between the alliance partners when compared to a non-equity alliance.
B) In an equity alliance, the partners frequently exchange personnel to make the acquisition of tacit knowledge possible.
How did the strategic alliance between HP and DreamWorks Animation SKG affect HP? A) It helped HP pursue a taper integration strategy. B) It enabled HP to compete head on with Cisco's videoconferencing solution. C) It resulted in depreciation of HP's shareholder value. D) It failed because HP lacked the expertise in selecting and integrating technology acquisitions.
B) It enabled HP to compete head on with Cisco's videoconferencing solution.
Although JetBlue used a blue ocean strategy to achieve an initial competitive advantage, it failed to maintain this advantage. Which of the following provides the best reason for this development? A) It failed to drive up the perceived customer value. B) It failed to refine its strategic position over time. C) It failed to move into a contested market space. D) It failed to offer enough strategic trade-offs.
B) It failed to refine its strategic position over time.
Which of the following is a disadvantage of a horizontal integration corporate strategy? A) It increases competitive intensity within an industry. B) It increases the potential for legal repercussions. C) It increases the costs associated with increasing value. D) It increases the threat of new entrants in an industry.
B) It increases the potential for legal repercussions.
9) What must a cost-leadership strategy accomplish to be successful? A) It must increase the firm's cost above that of its competitors while offering adequate value. B) It must reduce the firm's cost below that of its competitors while offering adequate value. C) It must increase the firm's cost above that of its competitors while offering superior value. D) It must reduce the firm's cost below that of its competitors while offering superior value.
B) It must reduce the firm's cost below that of its competitors while offering adequate value.
Which of the following best explains why a blue ocean strategy is difficult to implement? A) It combines the benefits of similar strategic positions—differentiation and low cost. B) It requires the reconciliation of fundamentally different strategic positions—differentiation and low cost. C) It requires the combination of fundamentally similar strategic positions—differentiation and strategic innovation. D) It requires the reconciliation of fundamentally different strategic positions—differentiation and strategic innovation.
B) It requires the reconciliation of fundamentally different strategic positions—differentiation and low cost.
Because strategic alliances rarely work as well as managers expect they will, why do companies continue to go through with them? A) Recent advances in management science have greatly improved the success rate of strategic alliances. B) Many owners, managers, and business analysts believe they are essential to survive in an industry. C) Government entities such as the Federal Trade Commission or the European Union sometimes force companies into strategic alliances. D) These alliances have an excellent record of success if managers have enough confidence in the outcome.
B) Many owners, managers, and business analysts believe they are essential to survive in an industry.
What is the main reason that most mergers and acquisitions negatively effect shareholder value? A) The entire market becomes an oligopoly or a monopoly. B) Promised synergies never take place. C) Market conditions change too quickly. D) Companies that resist acquisitions are subject to the "winner's curse."
B) Promised synergies never take place.
77) Intel's Celeron chip and Atom chip are initiatives to A) introduce a new product in a new market to extend its leadership. B) guard the company against disruptive innovation by protecting the low end of the market. C) stall its own disruption strategies and wait for its rivals to introduce disruptive forces. D) target that section of the market that is not particularly price sensitive.
B) guard the company against disruptive innovation by protecting the low end of the market.
Showstopper Inc. dominates the ladies' wig market and wants to expand into men's toupees. How can Showstopper's managers determine whether the company should develop a toupee division internally, ally with a toupee maker, or acquire a toupee-making firm? A) To protect themselves, Showstopper's managers should choose the option that leads to the largest company with the most managerial positions. B) The managers need to determine whether the skills needed to create wigs and toupees are similar and whether Showstopper creates better hairpieces than its competitors do. C) The managers must determine whether wig making and toupee making require substantially different skills. If so, the company should pursue internal development. D) Unless the market for toupees is booming, Showstopper should stick to what it knows and focus on creating the best ladies' wigs in the industry.
B) The managers need to determine whether the skills needed to create wigs and toupees are similar and whether Showstopper creates better hairpieces than its competitors do.
A software firm is interested in acquiring an app development company that is small but highly profitable. The app developer also has a widely admired management structure and much lower attrition rates than are common in the industry. Which of these problems should the software firm anticipate? A) A rival software firm may imitate this approach by acquiring a similar app developer. B) The software firm may overpay for the app developer, poorly serving the software firm's shareholders. C) Because most acquisitions are profitable, there is little to worry about in this scenario. D) The software firm may underpay for the app developer, cheating the app developer's shareholders of profit.
B) The software firm may overpay for the app developer, poorly serving the software firm's shareholders.
Solaris Autos Inc., a large automobile company, made an initial small investment in a start-up company that was developing a solar-powered car. This gave Solaris Autos controlling interests in the start-up company. However, Solaris Autos had no obligations to make continued investments in the experiments of the start-up company. It could invest small amounts depending on the new product's success at each stage of its development. If the product proved to be successful, Solaris Autos would have the right to buy out the start-up company. This approach to strategic alliance is referred to as A) a break-even analysis. B) a real-options perspective. C) credible commitment. D) transaction cost economics.
B) a real-options perspective.
Braintree Inc., a manufacturer of smartphones, has entered into a 15-year partnership with a software company to develop sophisticated operating systems and innovative mobile applications for its phones. This would mean that both the companies will have to mutually share their resources, knowledge, and capabilities to develop a superior product. What is the relationship between Braintree and the software company best referred to as in this scenario? A) an acquisition B) a strategic alliance C) a leveraged buyout D) a proprietorship
B) a strategic alliance
In the decline stage, which of the following strategies involves a reduction of investments in product support? A) exit strategy B) harvest strategy C) maintain strategy D) consolidate strategy
B) harvest strategy
When Turbo Autos Inc. wanted to sell its cars in the country of Sylvanistan, it lacked access to distribution channels and marketing expertise in the country. Thus, Turbo Autos had to enter into a strategic alliance with a local automobile company to get access to the foreign partner's well-established distribution channels. Which of the following reasons for entering into a strategic alliance is best illustrated in this scenario? A) increasing competitive intensity B) accessing critical complementary assets C) procuring additional capital investments D) reducing differentiation of product and service offerings
B) accessing critical complementary assets
When entering a foreign market, it is advisable for a new venture that has a core competency only in R&D to form a strategic alliance with a local partner because A) the local partner can better protect its proprietary know-how. B) building downstream complementary assets can be expensive and time-consuming. C) the strategic alliance will reduce the differentiation of its product and service offerings. D) the value gap created by the firm can be easily lowered in an alliance.
B) building downstream complementary assets can be expensive and time-consuming.
Beach Grub is a chain of "fast casual" restaurants that sells its menu items at higher prices than its competitors. Yet, the restaurant has a large customer base due to its wide product portfolio and superior customer service. Which of the following generic business strategies has Beach Grub adopted in this scenario? A) cost-leadership B) differentiation C) market penetration D) product diversification
B) differentiation
) Horizontal integration through mergers and acquisitions can help firms strengthen their competitive positions by increasing A) perfect competition. B) differentiation. C) oligarchy. D) natural monopoly.
B) differentiation.
Heirloom Furniture is a brand reputed for its wide variants of sofas that introduced a new range of mattresses and bed frames a few years ago. Since most of its products could be produced using the same resources and technology, the company's cost structure lowered, while its product portfolio widened. In this scenario, which of the following value and cost drivers is Heirloom applying? A) mass customization B) economies of scope C) learning-curve effect D) network effect
B) economies of scope
A candy company called Hearts Aflame Inc. forms an agreement with another candy company called Dreamcatcher Inc. Through this agreement, Hearts Aflame owns 30 percent of Dreamcatcher. However, Dreamcatcher does not own any part of Hearts Aflame. This type of agreement is called a(n) A) non-equity alliance. B) equity alliance. C) joint venture. D) capital venture.
B) equity alliance.
When a differentiator charges a similar price as its competitors in the same strategic group but offers more perceived value, it A) loses its competitive advantage. B) gains market share from other firms. C) lowers the economic value created. D) results in diseconomies of scale.
B) gains market share from other firms.
Foot Friendly is a manufacturer of athletic shoes. It has released an improved version of its premier running shoe in markets in which the company already operates. Which of the following types of innovations does this scenario best illustrate? A) radical innovation B) incremental innovation C) architectural innovation D) disruptive innovation
B) incremental innovation
Why did Quaker Oats Company's acquisition of Snapple fail? A) intercompany competitiveness B) managerial hubris C) stockholder revolt D) unstable market conditions
B) managerial hubris
Winter Wonder Inc. is a leader in producing winter sports equipment, including skis and skates. Recently, the firm decided to expand into the bobsled market and acquired Sleds by Bob Inc. This company produced bobsleds, but its sales had slowed. The managers of Winter Wonder convinced themselves that they were able to manage the business of Sleds by Bob more effectively even though they had no experience in the bobsled market. However, this move backfired and the sale of Sleds by Bob's bobsleds plummeted. Which of the following terms is often used to describe this scenario? A) winner's curse B) managerial hubris C) winner's disadvantage D) interdepartmental apathy
B) managerial hubris
What causes the winner's curse? A) buying a firm with principal-agent problems B) overpaying for an acquisition C) buying a firm with a competitive disadvantage D) underpaying for an acquisition
B) overpaying for an acquisition
When ReGen Pharmaceuticals released a new drug to treat insomnia, its chemical composition was disclosed at the back of the drug's cover. However, any attempts by competitors to copy the chemical composition would result in infringement of ReGen Pharmaceuticals intellectual property rights. Thus, the drug is protected by a A) promissory bill. B) patent. C) franchise. D) royalty.
B) patent.
Incumbent firms favor incremental innovation over radical innovation because A) their business decisions are independent of the other parties in their innovation ecosystem. B) radical innovation will disturb the existing power distribution within the firms. C) incumbent firms do not have formal organizational structures and processes like the way new entrants do. D) incremental innovations help firms sustain a permanent competitive advantage, whereas radical innovations only help gain a temporary advantage.
B) radical innovation will disturb the existing power distribution within the firms.
A drawback involved in using cross-border strategic alliances to enter new foreign markets is that A) the foreign firm will need to make larger investments when compared to entering the new market on its own. B) some of the firm's proprietary know-how may be appropriated by the foreign partner. C) all potential business risks in the new market will have to be faced alone by the foreign firm. D) the shareholder value of the foreign partner will decline drastically.
B) some of the firm's proprietary know-how may be appropriated by the foreign partner.
The downside of equity alliances is A) the weaker ties and reduced trust between partners. B) the amount of investment that can be involved. C) that the alliances cannot be abandoned if not promising. D) that they are not useful stepping-stones toward full integration of the partner firms.
B) the amount of investment that can be involved.
Why did incumbent pharmaceutical firms enter into hundreds of strategic alliances with biotech start-ups? A) to pursue an unrelated-options perspective without disrupting existing market economics B) to make small-scale investments in ventures poised to disrupt existing market economics C) to invest their excess cash flow in the superior technology of the biotech start-ups D) to share their continuously updated research technology with the biotech start-ups
B) to make small-scale investments in ventures poised to disrupt existing market economics
Red Sapphire is a wristwatch company known for its luxury watches and that follows a differentiation strategy. In this scenario, Red Sapphire should ideally compare its strategic position with a A) watch retailer that sells pre-owned watches. B) watch maker that sells high-end, premium watches. C) watch maker that manufactures low-priced watches. D) watch maker that follows a differentiation strategy.
B) watch maker that sells high-end, premium watches.
A value curve indicates a lack of effectiveness in a firm's strategic profile when it A) stays level. B) zigzags. C) trends downward. D) trends upward.
B) zigzags.
Radial Autos currently sources components such as airbags, upholstery, and brake pads from various suppliers in the industry value chain. In order to lower costs and reduce the risk of interruptions in the supply of components, Radial should pursue
Backward integration.
Which quadrant in the core competence-market matrix is the hardest to pursue?
Building new core competencies to create and compete in markets of the future
In 2007, Salesforce.com recognized an emerging market for platform as a service (PaaS) offerings and developed a new competency in delivering software development and deployment tools. This allowed its customers to either extend their existing CRM offering or build completely new types of software. This is an example of
Building new core competencies to create and compete in markets of the future.
Ancho Corp. is an automobile company whose core competency lies in manufacturing petrol- and diesel-based cars. The company realizes that more of its potential customers are switching to electric cars. The R&D department of the company acquires competencies in developing electric cars and launches its first hybrid car, which uses both gas and electricity. In this scenario, Ancho is primarily
Building new core competencies to protect and extend current market position.
AccuroDisk Inc. manufactures external hard disks for $32 per unit, and the maximum price customers are willing to pay is $47 per unit. TD Storage Inc. is a competitor of AccuroDisk Inc. that produces external hard disks for $37 per unit, and customers are willing to pay a maximum price of $50 per unit. What does this imply? A) AccuroDisk and TD Storage share differentiation parity. B) TD Storage has a competitive advantage over AccuroDisk in terms of perceived value. C) AccuroDisk creates a greater economic value than TD Storage. D) TD Storage is a cost-leader when compared to AccuroDisk.
C) AccuroDisk creates a greater economic value than TD Storage.
American Snacks Inc., a conglomerate, has a strategic alliance with Très Bien Limité, a French snack-maker. However, Très Bien managers are concerned that the different business units of American Snacks will set up partnerships with direct competitors of Très Bien in France. What can owners and managers at American Snacks do to respond to Très Bien's concern? A) Require business units at American Snacks and Très Bien to sign loyalty pledges. B) Encourage business units at American Snacks to act independently. C) Arrange for the alliance to be managed at the corporate level. D) Sever the relationship with Très Bien and find a more trusting corporate partner.
C) Arrange for the alliance to be managed at the corporate level.
&M Chatelaine is one of the largest tax-preparation firms in the United States. It wants to acquire The Tax Experts, a smaller rival. After the merger, Chatelaine will be one of the two largest income-tax preparers in the U.S. market. What should Chatelaine include in its acquisition plans? A) It should refocus its attention from the national to the international market. B) In addition to acquiring The Tax Experts, it should also determine the best way to drive independent "mom and pop" tax preparers out of business. C) Chatelaine will need to explain to the Federal Trade Commission how the acquisition will not result in an increase in prices for consumers. D) Chatelaine should enter a price-based competition with its other major competitor to force it out of business and become a monopoly.
C) Chatelaine will need to explain to the Federal Trade Commission how the acquisition will not result in an increase in prices for consumers.
Which of the following best explains why Disney showed superior post-merger integration capabilities? A) Disney pursued a combination of horizontal and vertical integration through its acquisitions. B) Disney did a thorough job in eliminating principal-agent problems in the firms it acquired. C) Disney managed its new subsidiaries more like alliances rather than attempting full integration. D) Disney used a corporate strategy based on a build-borrow-or-buy framework for its acquisitions.
C) Disney managed its new subsidiaries more like alliances rather than attempting full integration.
56) Unicorn Toys faces stiff competition from Playtime Inc., a rival firm with which Unicorn Toys has achieved differentiation parity. Both firms have invested in state-of-the art production facilities and have similar learning curves of 85 percent. Assuming neither firm can reduce the cost of its input factors, how can Unicorn Toys achieve a competitive advantage as a cost leader? A) Reduce the manufacturing staff by half to save on labor costs. B) Increase spending on product features. C) Have a cumulative output that is greater than Playtime Inc.'s. D) Eliminate several features that customers value to cut costs.
C) Have a cumulative output that is greater than Playtime Inc.'s.
Which of the following most accurately describes a difference between incremental innovation and radical innovation? A) Incremental innovation researches new materials; radical innovation researches new processes. B) Incremental innovation targets new markets and technologies; radical innovation reinvents markets and technologies. C) Incremental innovation builds on an established knowledge base; radical innovation uses an entirely different knowledge base. D) Incremental innovation draws on novel methods; radical innovation draws on proven methods.
C) Incremental innovation builds on an established knowledge base; radical innovation uses an entirely different knowledge base.
How has Kraft Foods benefited from its hostile takeover of Cadbury PLC? A) Its main strategic focus is now on the domestic market. B) It has opened a market that is growing slowly but has high profit margins. C) It has access to convenience stores and a new distribution channel. D) It gained a monopoly in the chocolate-manufacturing industry.
C) It has access to convenience stores and a new distribution channel.
Thomas is the owner of a landscaping company that caters to a very wealthy clientele. His company has struggled to differentiate itself from the other high-end landscapers in the area, but because he has hired several expensive but highly-qualified team members, Thomas is unable to shift to a cost leadership strategy. Which strategy is most likely to achieve a competitive advantage? A) Offer similar services as competitors but raise prices to increase profits. B) Lower prices but continue employing high-paid expert gardeners. C) Narrow the scope of competition and focus on unique features such as the use of organic materials. D) Maintain prices but replace all the expert employees with less-skilled workers to control costs.
C) Narrow the scope of competition and focus on unique features such as the use of organic materials.
Juno LLC is a small, new pharmaceutical company that is developing a valuable new drug. Which of these strategies would it be wise for Juno's owners or managers to take? A) Quickly build downstream complementary assets. B) Enter multiple learning races within strategic alliances. C) Seek an alliance with a company or companies that will complete the value chain. D) Pursue managerial hubris at all levels of development.
C) Seek an alliance with a company or companies that will complete the value chain.
Starfish Sodas has successfully achieved a competitive advantage in the soft drink industry as a differentiator. Which of the following scenarios would undermine Starfish's position? A) Starfish improves the recipe for its most popular soda without increasing the price. B) Starfish introduces a new biodegradable bottle that raises cost and perceived value. C) Starfish's customers start to consider soda a commodity. D) Starfish's product has not established an acceptable standard of quality.
C) Starfish's customers start to consider soda a commodity.
In order to achieve a competitive advantage, the Coastal Haven Hotels, a chain of luxury beach resorts, wants to increase its market share. Which of the following strategies is most likely to do so? A) Maintain prices but significantly increase spending on customer service and other amenities. B) Lower prices but eliminate several of the features that have come to define Coastal Haven properties for consumers, such as complimentary meals and in-room massages. C) Take advantage of economies of scale and scope by opening a chain of lower-priced economy hotels that leverage the Costal Haven brand image. D) Raise prices without increasing spending on customer service or resort features.
C) Take advantage of economies of scale and scope by opening a chain of lower-priced economy hotels that leverage the Costal Haven brand image.
A microchip company wants a computer company to produce more powerful tablets and therefore use more of its chips. That same computer company wants the microchip maker to create chips with faster processing power. What approach could these companies take so that both can serve stockholders well? A) Both companies should reduce prices to force out competitors and make entering the market less appealing to potential rivals B) Whichever company is larger should acquire the smaller one and impose its management system on the acquired company. C) The two companies should enter a strategic alliance to bring about a win-win situation for them and to limit their rivals' power. D) For data security reasons, both companies should remain separate and refrain from sharing information.
C) The two companies should enter a strategic alliance to bring about a win-win situation for them and to limit their rivals' power.
Which of the following is an advantage of equity alliances when compared to non-equity alliances? A) They are more flexible and easy to initiate and terminate. B) They require smaller capital investments. C) They produce stronger ties between partners. D) They are based on contracts rather than ownership.
C) They produce stronger ties between partners.
Why is it easier for new entrants to get involved in radical innovations when compared to incumbent firms? A) Unlike incumbent firms, new entrants do not have to face the high entry barriers, initially. B) New entrants are embedded in an innovation ecosystem, while incumbent firms are not. C) Unlike incumbent firms, new entrants do not have formal organizational structures and processes. D) Incumbent firms do not have the advantages of network effects that new entrants have.
C) Unlike incumbent firms, new entrants do not have formal organizational structures and processes.
Airbase is a consumer electronics company known for its affordable mobile devices that follows a cost-leadership strategy. In this scenario, Airbase should ideally compare its strategic position with A) a company that sells small kitchen appliances at affordable prices. B) a consumer electronics company that sells high-end devices. C) a consumer electronics company popular among price-conscious customers. D) an online company that sells customized electronics accessories.
C) a consumer electronics company popular among price-conscious customers.
When large, incumbent firms buy start-up companies, the transaction is generally described as a(n) A) joint venture. B) partnership. C) acquisition. D) alliance.
C) acquisition.
The Palace Hotel Group purchased Orange Roof Hotels for an estimated value of $120 billion. All the hotels previously owned by Orange Roof Hotels are now managed by the Palace Hotel Group and are known as Palace hotels. What does this scenario best illustrate? A) a merger B) a joint venture C) an acquisition D) an equity alliance
C) an acquisition
When firms innovate by leveraging existing technologies into new markets, they are said to be involved in A) incremental innovations. B) radical innovations. C) architectural innovations. D) disruptive innovations.
C) architectural innovations.
Body Sync Inc. is a chain of gyms. It offers a fitness package that allows its members to use the gym facilities for 12 months by paying only for 10 months. Included in the package are two health checkups and a gym kit. These add-ons by themselves are not very valuable, but as a package they can enhance the perceived value of the service offerings. In this case, Body Sync's primary value driver is A) economies of scale. B) learning-curve effects. C) availability of complements. D) experience-curve effects.
C) availability of complements.
How did the recent horizontal integration in the U.S. airline industry provide benefits to the surviving carriers? A) by facilitating excess capacity in the industry B) by preventing mergers from taking place C) by lowering competitive intensity in the industry overall D) by increasing the threat of entry in the industry
C) by lowering competitive intensity in the industry overall
RHC Pharmaceuticals Inc., Lawrence Pharma Inc., and Quincy Pharma Inc. are three rival firms who have set up an alliance to conduct research and find a cure for cancer. They have made almost equal contributions to the research, and they also share their expertise with one another. However, the three firms will continue to behave as competitors in markets for other drugs and vaccines. What is this arrangement best referred to as? A) takeover B) buyout C) co-opetition D) acquisition
C) co-opetition
When the market for standalone Global Positioning System (GPS) devices declined with the arrival of GPS-enabled mobile phones, Magnet Inc., a manufacturer of GPS devices, bought out most of its rivals that were planning to exit. This allowed the company to get rid of all the excess capacity and acquire a monopolistic market power in the declining industry. Which of the following strategies has Magnet adopted in this scenario? A) harvest strategy B) maintain strategy C) consolidation strategy D) differentiation strategy
C) consolidation strategy
When Japanese carmakers entered the existing U.S. automobile market by first offering small fuel-efficient cars, and then leveraging their low-cost and high-quality advantages into high-end luxury segments, they were engaging in A) regressive innovation. B) radical innovation. C) disruptive innovation. D) architectural innovation.
C) disruptive innovation.
Google, the leader in online search and advertisement, engaged in a number of smaller acquisitions of tech ventures. It did this in order to A) imitate the actions of its competitors like Apple and Facebook. B) solve its principal-agent problems. C) fill gaps in its competency lineup. D) expand through unrelated diversification.
C) fill gaps in its competency lineup.
Sanibel Autos Inc. merged with its competitor Vroom Autos Inc. This allowed Sanibel Autos to use its technological competencies along with Vroom Autos' marketing capabilities to capture a larger market share than what the two entities individually held. What type of integration does this scenario best illustrate? A) supply-chain B) technological C) horizontal D) perfect
C) horizontal
Whole Foods differentiates itself from competitors by offering top-quality foods obtained through sustainable agriculture. This business strategy implies that Whole Foods focuses on A) decreasing the existing value gap by providing luxury goods to customers. B) maintaining a less steeper learning curve as compared to its competitors. C) increasing the perceived value created for customers, which allows it to charge a premium price. D) lowering its costs compared to its competitors,' while offering adequate value for its products and services.
C) increasing the perceived value created for customers, which allows it to charge a premium price.
A. G. Lafley at Procter & Gamble (P&G) had implemented an open-innovation model, which had greatly benefitted the company. In the light of this information, we can conclude that A. G. Lafley is a(n) A) venture capitalist. B) category captain. C) intrapreneur. D) early adopter.
C) intrapreneur.
Nirvana Shoes Inc. and StepOut Shoes Inc., two competing shoe brands, entered into a strategic alliance to study and acquire each other's competencies. Nirvana Shoes entered the strategic alliance to acquire the production system pioneered by StepOut Shoes. Similarly, StepOut Shoes agreed to the strategic alliance to study the design process of Nirvana Shoes. However, Nirvana Shoes was more successful and faster than StepOut Shoes in accomplishing its alliance goal. What does this scenario best illustrate? A) network effects B) economies of scope C) learning races D) time compression diseconomies
C) learning races
Icarus Airway's decision to acquire Midas Fuels Inc. proved to be ill-fated because the Icarus managers overestimated their abilities and skills. They believed that they had the skills to manage such diversified businesses and create additional shareholder value. However, the acquisition failed to create the anticipated synergies because the managers' capabilities were restricted to the airline industry. What does this scenario best illustrate? A) knowledge race B) competitive feasibility C) managerial hubris D) unfettered free market
C) managerial hubris
In a radical innovation, a firm targets A) existing markets by using new technologies. B) new markets by using existing technologies. C) new markets by using new technologies. D) existing markets by using existing technologies.
C) new markets by using new technologies.
The primary goal of a firm pursuing a blue ocean strategy should be to A) create the highest perceived value in its respective industry. B) build a reputation of being the lowest-cost producer in its chosen industry. C) offer a differentiated product or service at a low cost. D) achieve a less steep learning curve.
C) offer a differentiated product or service at a low cost.
The managers at Speed Automobile Inc. want to diversify the business by acquiring a consumer electronics company. This acquisition would mean increased job security, higher compensation, and greater decision-making authority for the managers. The managers correlate this acquisition to greater power for them rather than to the appreciation in shareholder value. In this scenario, this acquisition by Speed Automobile is most likely a result of A) time compression diseconomies. B) experience-curve effects. C) principal-agent problems. D) resource ambiguity.
C) principal-agent problems.
Fleet Foot Shoes has been successful at differentiating itself from competitors by claiming a premium price for its athletic footwear based on superior design and high-quality materials. In this scenario, which of the following is the key value driver? A) economies of scale B) low-cost input factors C) product features D) premium prices
C) product features
Edna Gomez is the founder of the restaurant chain Good and Green. She ensures that the products in her stores are ethically and responsibly sourced. Most products are therefore 100 percent organic and all packaging is manufactured from recycled material. Also, her company sources ingredients from farms within 100 miles from her locations. Edna's belief is that her restaurants should be able to support the community at large. Which of the following terms best describes Edna Gomez? A) headhunter B) category captain C) social entrepreneur D) trade creditor
C) social entrepreneur
A voluntary arrangement between firms that involves the sharing of knowledge, resources, and capabilities with the intent of developing processes, products, or services is best described as a A) proprietorship. B) cooperative. C) strategic alliance. D) leveraged buyout.
C) strategic alliance.
In a non-equity alliance, which of the following types of information would firms most likely share? A) a manager's knowledge related to solving non-routine problems B) a top-level manager's experience related to making strategic decisions C) the documented information about the material composition of a product D) the employees' entrepreneurial skills
C) the documented information about the material composition of a product
Which of the following best describes a strategic trade-off? A) the tension between innovation and keeping manufacturing costs down B) the tension between maintaining both high-quality products and service C) the tension between value creation and the pressure to keep costs in check D) the tension between raising prices and keeping a loyal clientele
C) the tension between value creation and the pressure to keep costs in check
9) True or False? In general, it is shortsighted to acquire companies as a defensive move to prevent rival organizations from gaining access to certain patents, technology, or customer bases.
False
8) True or False? Fabulous Jewelry Inc. is considering a takeover of its competitor, Cranberry Dream Jewelry LLC. In general, Fabulous should go ahead with the acquisition as long as Cranberry is more valuable as a continued standalone company than it would be inside Fabulous.
False
Due to its large sales volume and low cost structure, Quick Serve Mini-Marts enjoys a cost leadership position. Which of the following scenarios might threaten Quick Serve's competitive advantage? A) Existing competitors in the mini-mart industry lower their prices to match those of Quick Serve. B) Industry suppliers raise their prices. C) Competitors engage in an all-out price war. D) A new competitor is perceived to provide similar value, but in addition offers innovative self-checkout.
D) A new competitor is perceived to provide similar value, but in addition offers innovative self-checkout.
40) How is differentiation parity different from cost parity? A) Differentiation parity deals with pricing not innovation. B) Differentiation parity deals with innovation not value. C) Differentiation parity deals with pricing not value. D) Differentiation parity deals with value not cost.
D) Differentiation parity deals with value not cost.
hich of the following best illustrates a merger between the two companies HQ Inc. and AV Inc.? A) HQ Inc. purchases AV Inc. for $80 billion despite AV Inc. being against the purchase. B) HQ Inc. and AV Inc. join together to form a third new entity, while they also operate separately. C) HQ Inc. outsources a few of its business activities to AV Inc. for competitive advantage. D) HQ Inc. and AV Inc. join together to form a single new company called HQAV Inc.
D) HQ Inc. and AV Inc. join together to form a single new company called HQAV Inc.
Which of the following examples describes the task of an alliance manager? A) Parker oversaw the agreement between her company and the potential alliance partner and offered support when needed. B) Fred used his knowledge of digital watches to help him manage the day-to-day operations of the alliance. C) Allyson reviewed the alliance portfolio to make sure it fit with the corporate strategy of her firm. D) Hussein trained the employees of his alliance partner in the skills needed to create a display for an e-notebook.
D) Hussein trained the employees of his alliance partner in the skills needed to create a display for an e-notebook.
Which of the following is an example of social entrepreneurship? The committee approved the new formula for an all-purpose cleaner because it A) cleaned better than other cleaners and used easy-to-obtain ingredients. B) cleaned better than other cleaners and did not cost more to produce. C) cleaned as well as other cleaners and could be produced more efficiently. D) cleaned as well as other cleaners and used organic ingredients.
D) cleaned as well as other cleaners and used organic ingredients.
8) True or False? Innovation that targets new markets with existing technologies is known as disruptive innovation.
False
How did Marriott use economies of scope to achieve greater economic value than its competitors? A) Marriott sees increases in cost per hotel unit as number of customers increases. B) Marriott sees decreases in cost per hotel unit as number of customers increases. C) Marriott lowered its cost structure by focusing its production assets on one type of hotel, which increased the diversity of its hotel line and thus its differentiated appeal. D) Marriott lowered its cost structure by sharing its production assets over several types of hotels, which increased the diversity of its hotel line and thus its differentiated appeal.
D) Marriott lowered its cost structure by sharing its production assets over several types of hotels, which increased the diversity of its hotel line and thus its differentiated appeal.
Which of the following examples uses a focused differentiation strategy? A) a tennis pro shop that sells low-quality racquets priced at 150 dollars per racquet B) a coffee shop that offers mediocre lattes at a price of five dollars for a small latte C) a hotel chain that offers high-quality furnishings and service with room rates of under 75 dollars per night D) a cosmetics brand that offers superior skin lotion for sensitive skin priced at 100 dollars per bottle
D) a cosmetics brand that offers superior skin lotion for sensitive skin priced at 100 dollars per bottle
DigitalHealth Electronics Inc. is a company that builds diagnostic devices. It was the first company to develop a compact MRI scanner by reconfiguring the components of the MRI technology. This smaller and user-friendly version of the huge MRI scanner created demand from small hospitals, nursing homes, and private practice doctors who were earlier dependent on the scanning machines in large hospitals. Which of the following types of innovations does this scenario best illustrate? A) disruptive innovation B) incremental innovation C) radical innovation D) architectural innovation
D) architectural innovation
When wireless service providers offer free or discounted mobile phones for subscriptions to their wireless voice and data service, the perceived value of the service offering increases. In this case, the value driver would be A) economies of scale. B) learning-curve effects. C) experience-curve effects. D) availability of complements.
D) availability of complements.
As a start-up company, DigiWrist entered the low end of the highly competitive smartwatch industry with its low-cost smartwatches. Initially, the company was able to sell its inferior technology due to its low prices. Over the years, however, its rate of technology improvements increased above the industry standards. This helped the company to create a strong strategic position for its smartwatches in the high-end segment and claim a premium price. Which of the following types of innovation does this scenario best illustrate? A) radical innovation B) incremental innovation C) architectural innovation D) disruptive innovation
D) disruptive innovation
Streaming video services replacing brick-and-mortar video rental stores would be an example of a(n) A) regressive innovation. B) radical innovation. C) architectural innovation. D) disruptive innovation.
D) disruptive innovation.
Sunshine Technologies introduced a tablet that could run completely on solar energy and was less expensive than competitors' tablets. On the downside, it required more frequent charging than the competition's tablets. However, the technology of the Sunshine tablet improved rapidly, thereby improving its recharge frequency. This example describes A) architectural innovation. B) incremental innovation. C) radical innovation. D) disruptive innovation.
D) disruptive innovation.
A differentiation strategy works best when a A) firm has tangible resources, its focus of competition shifts to price, and equivalent substitutes are readily available. B) firm's focus of competition shifts to price, and when increasing differentiation of product features do not create additional value. C) firm's differentiated products are commoditized, and costs of providing uniqueness do not rise above the customer's willingness to pay. D) firm has intangible resources, is able to pass on increases in supplier cost to the customer, and its differentiation appeal creates customer loyalty.
D) firm has intangible resources, is able to pass on increases in supplier cost to the customer, and its differentiation appeal creates customer loyalty.
Swan Song is a spa that caters to the needs of a small percentage of highly health-conscious consumers. It offers state-of-the-art treatments in a luxurious setting. Since there are very few spas that offer the same unique services, customers are willing to pay a premium price for its products and services. In this scenario, Swan Song is following a A) product diversification strategy. B) liquidation strategy. C) broad differentiation strategy. D) focused differentiation strategy.
D) focused differentiation strategy.
Which of the following is an ineffective practice in alliance management? A) coordinating a firm's portfolio of alliances B) establishing knowledge-sharing routines between alliance partners C) developing relational capabilities to manage mergers and acquisitions D) focusing on developing an alliance-management capability in isolation
D) focusing on developing an alliance-management capability in isolation
The four-step innovation process ends with A) idea generation. B) invention. C) idea testing. D) imitation.
D) imitation.
Which of the following drivers simultaneously increases value while lowering cost? A) economies of scale B) superior customer service C) availability of complements D) innovation
D) innovation
Elegance Inc. is a large cosmetics company that made an initial small investment in a start-up company, Peace Planet, which was developing an organic face lotion. This gave Elegance controlling interests in the start-up company. However, Peace Planet soon began to have financial difficulties because of principal-agent problems. As a result, Elegance did not invest in the next stage of development and pulled out of the company. This approach to strategic alliance is referred to as a A) break-even analysis. B) partial joint venture. C) credible commitment. D) real-options perspective.
D) real-options perspective.
Medequip Inc. is a large firm involved in the highly competitive market of high-tech medical equipment. In this market, smaller firms that focus on research are constantly making new technological developments. Which of the following approaches would best serve the needs of Medequip? A) mergers B) serial mergers C) acquisitions D) serial acquisitions
D) serial acquisitions
The pursuit of both differentiation and low cost at the same time in a way that creates a leap in value for both the firm and consumers is called A) cost driving. B) cost innovation. C) value driving. D) value innovation.
D) value innovation.
1) True or False? Differentiation and cost leadership strategies are only effective in manufacturing industries.
False
________ is best described as a situation in which one party is more informed than another, because of the possession of private information.
Information asymmetry
With reference to the Strategy Highlight 8.2, the Tata Group's corporate strategy is attempting to
Integrate different strategic positions, pursued by different strategic business units.
Coca-Cola was primarily known for its core competencies in marketing, bottling, and distributing aerated drinks. However, with the success of Gatorade, Coca-Cola developed competencies in the development and marketing of its own sports drink, Powerade. Which of the following is true of Coca-Cola?
It is building new core competencies to protect and extend its current market position.
Hiku Inc. developed a superior touch screen technology for tablet computers that enabled multiple users to operate the screen at the same time. The technology was leased to Broadway Technologies, a consumer electronics company, for five years. Which of the following alternatives to integration does this best illustrate?
Licensing
There are many reasons why firms need to grow. Which of the following reasons is strongly influenced by economies of scale?
Lowering costs
TimeEnough Inc. entered the low-priced digital watch market several years ago. This firm's earnings have been unsteady, but might be growing. According to the BCG growth matrix, TimeEnough is a
Question mark.
Skylark Sodas has been a market leader in the soft drink industry for several decades. However, its market research shows that consumer tastes have begun to shift to sugar-free flavored seltzer waters, a product that Skylark is capable of producing with minimal changes to its facilities and production processes. Based on your knowledge of the core competence-market matrix, which diversification strategy should Skylark pursue?
Redeploy and recombine existing core competencies to compete in markets of the future.
The core competency of GoGo Motors is its fuel-efficient engine found in its cars. These engines are developed and built in-house. The company realizes that the growing demand for "green" vehicles has created a new market opportunity. Thus, it uses its existing technology to develop an engine that improves the fuel efficiency of recreational motorhomes. In this scenario, GoGo Motors is
Redeploying and recombining existing core competencies to compete in future markets.
Beagle Autos is known for its affordable and reliable brand of consumer vehicles. Because its shareholders expect to see an improved rate of growth in the coming years, Beagle's executives have decided to diversify the company's range of products so that at least 40 percent of the firm's revenue is generated by new business units. However, the company's resources, capabilities, and competencies are limited to producing other forms of motorized vehicles, such as motorcycles and all-terrain vehicles (ATVs). Which type of corporate diversification strategy should Beagle pursue?
Related-constrained
Nocturnal Products started as a luxury brand for designer apparel. Soon, the company expanded by launching its own line of premium perfumes, watches, bags, and home furnishings. This expansion allowed the businesses under the company to share a few of the common competencies in products, services, technology, and distribution. Which of the following corporate strategies is Nocturnal pursuing in this scenario?
Related-linked strategy
WJ Group Inc., a large multinational conglomerate, had begun to experience declining revenues over the years. The top management at the headquarters of the company decided that it was important for the company to avoid deviating from its core competencies. Thus, a few of the company's key businesses like energy, telecommunications, and automobiles were centralized, giving the top management more control over them. Also, relatively newer businesses like beverages and food processing were divested. In this scenario, WJ Group is involved in
Restructuring.
TL & Co. is following a related-linked diversification strategy, and Soar Inc. is following a related constrained diversification strategy. How do the two firms differ from each other?
TL & Co. will share fewer common competencies and resources between its various businesses when compared to Soar Inc.
Fortress International, a large conglomerate, procures a few component parts from external suppliers and also manufactures some of the key raw materials in its own subsidiaries. Aside from this, the company does not solely depend on outside distributors to reach its customers. In fact, it has its own retail stores to distribute its products. In this scenario, which of the following alternatives to vertical integration is Fortress International applying?
Taper integration