MGT 6890 Chapter 6

Which of the following is NOT a disadvantage of franchising as a business strategy?

Franchisees have little incentive to improve the efficiency and effectiveness of their operations by developing new offerings and/or processes.

Which of the following is a disadvantage of franchising as a business strategy?

Franchisees may face a higher cost of capital, which lowers system costs. b.Franchisees own their operation.

The entry of the early majority signifies the beginning of the _____ stage.

Growth

The speed at which a market develops can be measured by its:

Growth rate

Heartland Inc. is using which of the following strategies to optimize its cash flow by reducing to a minimum the assets it employs?

Harvest

The use of nonprice competition is:

based on product differentiation strategies to deter potential entrants and manage rivalry within an industry.

Managers of embryonic and growth industries need to remember that:

competitive forces in embryonic and growth industries change over time.

At the point at which a mass market starts to develop for an industry's product, the industry moves from the _____ stage to the _____ stage.

embryonic; growth

Which of the following can offer unique opportunities for enterprises to consolidate their industries, often creating significant wealth for the consolidating enterprise and its owner?

fragmented industries

A leadership strategy makes the most sense when a company:

has distinctive strengths that allow it to capture market share in a declining industry.

A niche strategy should be used when a company:

has unique strengths relative to those segments in which demand remains relatively strong.

The _____ make up the smallest segment of the market.

innovators

By expanding through _____, a value innovator can quickly build a national brand.

Chaining

McQuaid Co. pursued a(n) _____ strategy when it quickly opened additional stores after perfecting its formula at its first location in Detroit, Michigan.

Chaining

_____ is a strategy designed to obtain the advantages of cost leadership by establishing a network of linked merchandising outlets interconnected by information technology that functions as one large company.

Chaining

In some companies, customer needs are so specialized that only a small amount of product is required; hence, there is no scope for a large, mass-production operation to satisfy the market. Which of the following is an example of this type of operation?

Clothing alteration

A company is offering a single passenger automated car. It is most suitable for in-city driving. If it is perceived as being consistent with the needs of potential adopters, it contributes the _____ factor to market growth rate.

Compatability

_____ tend(s) to intensify in a declining industry.

Competition

When _____ rivals as a capacity-control strategy, caution must be exercised because collusion on the timing of new production capacity investments is illegal under antitrust law.

Coordinating with

When it comes to building market share or maintaining product differentiation, product development is:

Crucial

Which of the following describes the strategy by which a company sells the business to others?

Divestment

What is the second group of customers to enter a market?

Early adopters

A lack of _____ translates into few, if any, cost advantages to large-size industries.

Economies of scale

At which stage do innovators and early adopters enter the market?

Embryonic

The intensity of competition is greater in declining industries in which:

Fixed costs are high

A _____ is composed of a large number of small- and medium-sized companies.

Fragmented industry

Van Braun Inc. operates in an industry in steep decline with intense competition. The company wants to exit the industry but hopes to optimize its cash flow in the process. Van Braun should follow which of the following strategies? a.Niche

Harvest

A company just produced a rhythmic light designed to be used as a sleep aid. Terry is one of the first people to purchase this device. Terry is known as a(n):

Innovator

Which of the following statements regarding a tit-for-tat strategy is true?

It can be a useful way of shaping pricing behavior in an industry.

Which of the following best describes the competitive chasm that companies must cross?

It represents the transition businesses must make between the embryonic market and the mass market.

Which of the following elements contributes to fragmentation?

Lack of scale economies

What is the last group to enter the market?

Laggards

Which of the following is most likely to lack national brand loyalty and thus offer a low entry barrier?

Landscaping services

The _____ are the customers who purchase a new technology or product only when many of their peers have already done so.

Late majority

Which of the following describes the strategy by which a company seeks to become the dominant player in a declining industry by picking up the market shares of companies that are leaving the industry?

Leadership

Which of the following strategies does Carson Corp. implement when it charges a price that is lower than that required to maximize profits in the short run to signal to new entrants that it has a low-cost structure that the entrant likely cannot match?

Limit price

In industries lacking scale economies and national brand loyalty, the result is often:

Low barriers to entry

To manage rivalries, HFS Inc. is seeking new market segments for its products. Which of the following strategies is HFS Inc. using?

Market development

Backstreet Inc. is engaging in _____ when it concentrates on expanding market share in its existing market products.

Market penetration

Hagan Co. operates in a declining industry. The company focuses on pockets of demand that are declining more slowly than the industry as a whole. Hagan Co. is using a _____ strategy.

Niche

Hi-Tech Co. is using product differentiation to deter potential entrants and manage rivalry within the industry. What strategy is Hi-Tech Co. using?

Nonprice competition

Bingham, Inc. is implementing _____ when it considers the degree to which the results of using and enjoying a new product can be seen and appreciated by other people.

Observability

Which of the following statements regarding price leadership is true?

One of the dangers of price leadership is that it allows companies with high cost structures to survive without needing to implement strategies to become more efficient.

Which of the following statements about operating in a declining industry is true?

Operating in a declining industry can still be profitable if managers can figure out the right strategy.

Which of the following describes the first group to enter a market?

People who have greater resources to spare

To _____ rivals as a capacity-control measure, a company must forecast a large increase in demand in the product market and then move rapidly to establish large-scale operations that will be able to satisfy the predicted demand.

Preempt

Gonzalez Industries assumes the responsibility for determining the pricing strategy that maximizes industry profitability. What strategy is Gonzalez using to manage rivalry?

Price leadership

Arturo Industries uses which of the following strategies to communicate that it will vigorously fight hostile competitive moves?

Price signaling

Several large landscaping services operate within affluent suburbs in a metropolitan area. Which strategy allows these companies to exchange information in order to better understand each other's services and improve industry profitability?

Price signaling

To manage rivalry, Thurston Co. uses which of the following strategies when it creates new or improved products to replace existing ones?

Product development

As a way to manage rivalries, Stanton Electronics, a large company in the industry, has a product in each market segment (niche). If a new niche develops, Stanton will get a first-mover advantage. Which of the following strategies is Stanton using?

Product proliferation

In a mature industry, PhysEdCo should use which of the following strategies to forestall the entry of new competitors by making sure every niche or segment in the marketplace is well served?

Product proliferation

_____, one way companies try to enter a mature industry and deter entry by competitors, is the strategy of "filling the niches" or catering to the needs of customers in all market segments.

Product proliferation

Which of the following statements regarding product proliferation is not true?

Product proliferation allows the development of stable industry competition based on product price, not on the development of new products.

Congo, Inc. is creating a new product that is perceived as being better at satisfying customer needs than the existing product. Which of the following factors is Congo implementing?

Relative advantage

Which of the following statements regarding strategic commitment is not true?

Running afoul of antitrust laws is not a concern when making strategic commitments.

Meyer Corporation has invested in a new production facility while keeping the current production facility in operational readiness. This strategy suggests to potential entrants that Meyer has excess production capacity, which is a barrier to those potential entrants, and is known as:

Strategic committment

Regarding factors that cause excess capacity, which of the following statements is not true?

The age of a company's physical assets cannot contribute to excess capacity.

Which of the following does not describe laggards?

They appreciate the uses of new technology.

Which of the following is descriptive of the early majority?

They are practical and generally understand the value of new technology.

Which of the following is descriptive of the late majority?

They enter the market when the mass market reaches a critical mass.

Which of the following is characteristic of the second group of people to enter a market?

They understand that the technology may have important future applications.

Which of the following statements regarding market development is true?

Through market development, a company can leverage the product differentiation advantages of its brand name.

Which of the following statements regarding capacity control is true?

To prevent costly excess capacity, companies must devise strategies that enable them to control (or at least benefit from) capacity-expansion programs.

Many retailers that counted on having a physical presence in the form of local stores are now under intense pricing pressure from online retailers. Which of the following stores has responded by investing heavily in an online presence?

Wal-Mart

Which of the following statements about mergers and acquisitions is true?

When companies consolidate fragmented industries through mergers and acquisitions, a clash between the culture of the acquiring and acquired enterprises may make anticipated gains difficult to realize.

All of the following statements regarding market penetration are true except:

a company uses this strategy when it concentrates on expanding market share in new product markets.

Early demand for products of embryonic industries typically comes from:

a small set of technologically savvy customers willing and able to tolerate the imperfections in a new product.

Mass markets emerge when all of the following occur except:

potential customers express a need for a product.

When pursuing a leadership strategy to become a dominant player in its declining industry, Hasselback Co. might do all of the following EXCEPT:

significantly raise its prices.

The best way for WDM Inc., a company that is limited in its pricing strategies, to deter new entrants would be to engage in:

technology upgrading

All of the following were factors in a limited customer demand for the first cars EXCEPT:

the competition

The highest market demand and industrial profits arise when:

the early and late majority groups enter the market.

Customer demand for the products of an embryonic industry is initially limited because of:

the limited performance and poor quality of the first products.

______ are companies who have figured out a way to offer more value to their customer set and to do so at a lower cost.

value innovators