Module 5 Self Assessments

_________ drivers are as important to a differentiation strategy as _____ drivers are to a cost leadership strategy. value, cost value, price scope, quality learning, experience cost, design

value, cost

Being "stuck in the middle" means a firm has tried to implement both a differentiation and low cost producer strategy concurrently but has not succeed in either. True/False

True

Competitive advantage is always judged relative to other competitors or to the industry average. True/False

True

Competitive advantage is more likely to be based on intangible resources. True/False

True

Influence costs are a source of costs for both Related and Unrelated Diversification. True/False

True

One reason for performing an external analysis is that the strategist can identify potential opportunities and threats used later for strategy formulation. True/False

True

If a firm has no single line of business that represents ________ or more of the firms total revenues the firm is considered to be undiversified. 70%, 50%, 75%, 80%, or 95%

70%

For questions 5 - 8 imagine that you are the CEO of Taco Rocket, a new and successful chain of 18 Mexican fast-food restaurants. The success that you have experienced in the last five years has you thinking of what to do with the business next. Up to now your success has been based on selling high-quality tacos and burritos at a price that others can't match. Your business is pursuing which of Porter's strategies? A differentiation/niche strategy A cost leadership/niche strategy A differentiation/broad market strategy A renewal strategy

A cost leadership/niche strategy

The intensity of competitive rivalry within an industry decreases in markets that are characterized by slow growth, high fixed costs, and significant barriers to entry. True/False

False

The major source of planning uncertainty stems from the firm's internal environment. True/False

False

The traditional approach to strategic management (top-down) works best in dynamic environments where the future is highly uncertain. True/False

False

Two assumptions are critical in the resource based model -- resource homogeneity and resource immobility. True/False

False

A Functional strategy is one that determines how capital will be allocated across various businesses (or strategic business units). True/False

False. Capital allocation across SBUs occurs at the Corporate level of strategy formulation

Which strategy is a potential result of a make vs. buy analysis? Horizontal integration Backward vertical integration Forward vertical integration Concentration None of the above are correct

Backward vertical integration

Consider both statements regarding combination strategies. Statement 1. Combination strategies are often difficult because they are inherently contradictory. Statement 2. The goals of a combination strategy is to provide unique value in an efficient manner. Both statements are trueOnly statement 1 is true Only statement 2 is true Both statements are false

Both statements are true

A ________ is the end results of decisions and tradeoffs made by management in formulating strategy. Business Model Business Strategy Business Blueprint Business Concept

Business Model

___________ are the organizational and management skills necessary to orchestrate a diverse set of resources to deploy them strategically. Activities Resources Capabilities Core competencies Domains

Capabilities

Which ONE of the following is an example of a tangible resource (asset)? Cash Patents Trade secrets Firm culture Firm reputation All of the above are intangible assets

Cash

Developing new product lines related to the core business, extending existing product lines, and marketing campaigns targeted towards existing customers are all examples of _________ strategies. Concentration Inorganic growth Vertical integration Horizontal integration Cost Leadership

Concentration

A measure of the aggregate market shares of the top competitors in an industry is called the: competitive density concentration ratio minimum efficient scale ideal target capacity

Concentration ratio

Which ONE of the following is not a potential benefit of a vertical integration strategy? Eliminating a direct competitor Securing critical supplies and distribution channels Lowering supply costs Capturing greater profits Facilitating scheduling and planning

Eliminating a direct competitor

These strategies address which businesses the firm will be in and how capital will be allocated among those businesses. Corporate Functional SBU (Strategic Business Unit) Operational Contingency Qualitative

Corporate

These strategies address which markets a firm will compete in and which markets that the firm is in but plans to Corporate Tactical Functional Strategic Business Unit

Corporate

Which ONE of the following is a correct match of a Porter Generic Strategy with a company's business model? Group of answer choices Price Leadership: A company that makes complex tax software products only for businesses in the oil and gas industry. Focus Niche: A toy manufacturer that is know for its creative and kid-friendly product designs suitable for kids of all ages and cultural backgrounds. Differentiation: A consumer products company that has good products but no clear advantages relative to its competitors. Retrenchment: A financial services company that has served the same local market with essentially the same financial products for over 30 years Cost Leadership: A clothing store that sells basic, no frills, practical items with a minimalistic customer experience and a limited clothing inventory.

Cost Leadership: A clothing store that sells basic, no frills, practical items with a minimalistic customer experience and a limited clothing inventory.

From an economic value creation perspective, the firm that does which ONE of the following achieves competitive advantage? Ensures that the value captured is evenly divided between producer and consumer Creates and captures more economic value than its rivals Concentrates on tangible assets available rather than intangible assets Formulates strategy based primarily on the balanced scorecard approach Makes significant investments in research and development

Creates and captures more economic value than its rivals

Which ONE of the following is NOT a macro-force in the PESTEL framework? Diffusion of technical knowledge Societal and demographics Economic Political and regulatory Environmental or ecological

Diffusion of technical knowledge

In forward vertical integration the company becomes its own: supplier distributor

Distributor

Which ONE of the following is NOT a growth strategy? Concentration Diversification Divestiture Vertical integration Horizontal integration

Divestiture

The ___________ PESTEL force primarily impacts disposable consumer and discretionary business income and spending (Note that some of the forces listed in the drop down may not actually be considered to be a PESTEL force). Diffusion of Technical Knowledge Economic Societal Political Legal Globalization Climate change

Economic

The firm that consistently charges the lowest price for a product/quality category relative to the competition will always be following a cost leadership strategy. True/False

FALSE, because the firm may be content to accept a consistently lower gross margin. To be a cos

A business sets a 10% per annum growth objective over a 5 year planning horizon. The CEO intends to accomplish this growth through taking additional market share from competitors by improving product packaging and aggressively advertising. This is an example of an inorganic growth strategy. True/False

False

A firm that under performs relative to other competitors in the same industry is said to have a temporary but not sustainable competitive advantage. True/False

False

A strategic group is a cluster of firms that produce complementary products that positively impacts a firm's growth strategy. True/False

False

According to Porter, being "stuck in the middle" is when a firm is growing at the same rate as the overall market and unable to develop a breakout strategy. True/False

False

An intangible resource is more likely to create a sustainable competitive advantage than a tangible resource. True/False

False

Operational plans address the "what ifs" of a business -- incorrect strategic planning assumptions and the realization of known risks. True/False

False

VRIO supports a careful analysis of firm activities that allows managers to obtain a more detailed and fine-grained understanding of how the firm's economic value creation breaks down into a distinct set of activities. True/False

False. The description is Value Chain Analysis not VRIO

Developing a marketing strategy based on product, price, place, and promotional considerations is an example of a ____________ plan. Corporate Functional Stability Strategic Business Unit Operational QualitativeContingency

Functional

Which of the following makes up the three main types of "grand" strategies? Typically grand strategies are driven by goals and objectives set at the corporate level. Growth, stability, renewal Growth, vertical integration, horizontal integration Vertical integration, horizontal integration, diversification Corporate, business unit, functional

Growth, stability, renewal

Which ONE of the following would not be considered to be a function of planning? HINT: Consider Fayol's functions of management when answering this question. Hire the senior executive responsible for strategic planning Define the organization's objectives or goals Establish an overall strategy for achieving the organizational goals and objectives Develop a hierarchy of plans to integrate and coordinate activities All of the above are functions of planning

Hire the senior executive responsible for strategic planning

Continuing with Taco Rocket... Recently Taco Rocket has considered buying a local competitor, Hacienda Joes. The two would combine under the Taco Rocket name. This is an example of which of the following: Stability strategy Horizontal integration strategy Organic strategy Related diversification Unrelated diversification

Horizontal integration strategy

The Coca-Cola brand is an example of a: Intangible resource Tangible resource Network effect Core capability Strategic activity

Intangible resource

A firm that focused on a cost leadership strategy would likely build a business model with all of the following characteristics except: Tight control over all production and overhead expenses Product design that stressed manufacturing simplicity Large marketing expenses to promote product differentiation Efficient sales facilities A focus on technology as a means of reducing operating costs

Large marketing expenses to promote product differentiation

The ______ provides a statement of how the organization intends to achieve its vision and the organizations' responsibilities towards its key stakeholders. Core Values Vision Statement Mission statement Mantra Corporate Credo

Mission statement

A diversified corporation is likely to have: Multiple competitive strategies A single competitive strategy A cost leadership strategy No more than two competitive strategies A focus strategy

Multiple competitive strategies

Statement 1. In a Porter Five Forces analysis as a rule of thumb the stronger the industry forces, the higher the profit potential. Statement 2. The higher the industry profit potential the more attractive the industry. Group of answer choices Only Statement 1 is True Only Statement 2 is True Both Statements are True Both Statements are False

Only Statement 2 is True

According to Henry Fayol, which function is considered to be the Primary function of management? Planning Organizing Leading Controlling

Planning

Henri Fayol's Functions of Management

Planning Organizing Commanding Coordinating Controlling

Planning is important for all of the following reasons except: Planning eliminates uncertainty Planning establishes organizational goals and standards Planning can improve employee engagement throughout the organization Planning provides direction that can align all of the activities of the organization All of the above are reasons why planning is important

Planning eliminates uncertainty

In performing a value chain analysis for a pharmaceutical firm which of the following would be considered to be Primary activities? Indicate by checking the activities in the list below. HINT: The other classification of activities is called support or indirect activities. Sales and Marketing Human Resources Accounting Manufacturing Customer Service

Sales and Marketing Manufacturing Customer Service

________ is a strategic planning methodology that is used to develop plans in an uncertain environment. Typically managers begin by identifying variables that can interact to significantly impact firm performance, then management develops alternative strategies for the most plausible future environments. Scenario Planning Strategy as Simple Rules Traditional Top-Down Planning Real Options Planning Strategy as planned Emergence

Scenario Planning

Strong brands and customer loyalty, the existence of powerful patents and other intellectual property, and asset specificity are factors that would typically result in An unattractive industry A high concentration ratio Significant barriers to entry Powerful customers (buyers) Weak suppliers

Significant barriers to entry

The IKEA "flat boxes" example used in this topic was an example of the __________ approach to strategic management. Strategy as Simple Rules Strategy as Planned Emergence Traditional Top-Down Strategic ManagementScenario Based PlanningGoal Based Planning

Strategy as Planned Emergence

Which ONE of the following would not be considered to be an economic factor when performing a PESTEL Analysis? Cost of capital Taxation policy Business cycles Currency exchange rates Inflation rates Employment levels All of the above are considered to be economic factors in a PESTEL Analysis

Taxation policy

Which ONE of the following US firms would likely not be considered to be in the same strategic group with the other four? McDonalds Hardees Wendys Five Guys Burgers and Fries The Cheesecake Factory

The Cheesecake Factory

What is the productivity frontier? The best possible strategic positions that a firm can take relating to value and low cost. The frontier is drawn as a convex line. The theoretical maximum of efficiency that a firm can reach. The frontier is drawn as a concave curve The theoretical maximum of effectiveness that a firm can reach. The frontier is drawn as a hyperbolic line The boundary between a blue ocean strategy and a red ocean strategy. The frontier is drawn as a sloped line The theoretical best tradeoff between quality and price. The frontier is drawn as a convex line

The best possible strategic positions that a firm can take relating to value and low cost. The frontier is drawn as a convex line.

In order for a firm to formulate an effective business level strategy, it is important to remember that competitive advantage is determined by: The characteristics of both the industry and the firm the characteristics of the firm's competition The characteristics of the firm itself The characteristics of the industry in which the firm competes The characteristics of the firm's customers

The characteristics of both the industry and the firm

An Internal Analysis, the 3rd step in the traditional top-down strategic management process helps identify _________. The products that the company makes The long term goals of the company The company's opportunities and threats The company's strengths and weaknesses The company's concern for the well-being of its employees

The company's strengths and weaknesses

Which ONE of the following would NOT be an output of a corporate strategy? The decision to exit a poorly performing market The decision to consolidate the IT function from various business units into a single common services group The decision to lower prices on a product that facing intense competition The reallocation of financial capital from the mature business unit to a business unit with higher growth potential The decision to acquire a new business unit in a a related industry

The decision to lower prices on a product that facing intense competition

Which ONE of the following is NOT a Force in the Porter Five Forces model? Threat of new entrants Threat of complementary products Bargaining power of customers (buyers) Bargaining power of suppliers All of the above are forces in the Porter Five Forces model

Threat of complementary products

A Blue Ocean Strategy is a business level strategy that successfully combines differentiation and cost leadership activities using value innovation to reconcile the inherent trade-offs. True/False

True

A big risk in pursuing a cost leadership strategy is that a firm's cost advantage may be jeopardized by a new production or distribution technology. True/False

True

The primary threat (or impact) that a substitute product has on an industry is that it can result in limits placed on the competitors abilities to raise prices. True/False

True

The resource based view is a model that sees types of resources as key to superior firm performance. True/False

True

The more substitutes a product has and the greater the propensity for a buyer to substitute, the more elastic its demand curve will be. True/False

True. The primary impact of substitutes is to reduce the pricing ceiling for industry competitors. The greater the elasticity of demand, the more sensitive demand is to price fluctuations. If a product's price increases, customers may look around for cheaper substitutes. The more substitutes, the greater the sensitivity.

AMBAC Financial has been forced into bankruptcy primarily because of credit risks taken in the sub-prime market and loan origination costs that are higher than the industry average. AMBAC hopes to emerge from bankruptcy as a smaller but more financially sound firm, with a redesigned and less costly set of business processes. AMBAC's strategy is an example of a: Turnaround strategy Liquidation strategy Stability strategy Cost leadership strategy Harvest strategy

Turnaround strategy

Continuing with Taco Rocket... Your brother-in-law approaches you about buying his solar panel installation business. If you proceeded with his proposal this would be an example of: Unrelated diversification Vertical integration Concentration Related diversification Horizontal integration

Unrelated diversification

Which ONE of the following industry characteristics would likely NOT result in fierce competitive rivalry? Very high fixed costs required for business infrastructure The industry's products are highly perishable Very high barriers to exit Very high market growth rates Brand loyalty is low

Very high market growth rates

You are thinking of buying a tortilla factory in a nearby state. This action would be an example of: a retrenchment strategy a forward vertical integration strategy a backward vertical integration strategy a horizontal integration strategy a penetration strategy strategy

a backward vertical integration strategy

Traditional top-down strategic planning can best be described as: a process in which top management envisions different what-if scenarios that anticipate plausible futures a rational data driven process in which top management attempts to program future success a combination of intended and emergent strategies to create a realized strategy the use of simple rules to guide operational managers in formulating strategic initiatives

a rational data driven process in which top management attempts to program future success

A resource must be VRIO if it can help drive a sustainable competitive advantage. One condition of VRIO is costly to imitate (the "I"). In the video lesson we discussed why resources can be costly to imitate. Which ONE of the following is NOT a reason discussed. Historical condition Causal ambiguity Social complexity Cultural dependancy

cultural dependency

Using the terminology of Porter's positioning strategies, Apple Inc. would be said to be pursuing a ________________ positioning strategy in its markets. focus differentiation cost leadership harvesting defensive offensive

differentiation

Firms that have 1) access to leading scientific research, 2) a highly skilled and creative product development team, 3) a strong sales team and creative marketing, and 4) a reputation for quality and innovation are likely to be pursuing a _________ strategy. Note that more than one answer may be correct. Consider only Porter generic strategies. low cost producer strategy across the market low cost producer in a niche market differentiation strategy broadly across the market differentiation strategy in a niche market horizontal integration strategy vertical integration strategy

differentiation strategy broadly across the market differentiation strategy in a niche market

Firms that have 1) access to leading scientific research, 2) a highly skilled and creative product development team, 3) a strong sales team and creative marketing, and 4) a reputation for quality and innovation are likely to be pursuing a _________ positioning strategy. If there are more than one correct answer, check all the answers you believe are right. differentiation strategy broadly across the market low cost leadership in a niched market segment low cost leadership broadly across the market differentiation strategy focused in a niche market

differentiation strategy broadly across the market differentiation strategy focused in a niche market

In forward vertical integration a company becomes its own: customer distributor supplier competitor integrator

distributor

business blueprint

is a strategic plan that tells those operating the business the productivity requirements, the necessary jobs, the milestones, the targets, and the expected outcomes.

Ratios that reflect whether or not a firm is efficiently using its resources are known as liquidity perfromance profitability operational effectiveness

operational effectiveness

An early Vision Statement for Intel was "to be the preeminent building-block supplier of the PC industry". This is an example of a __________ oriented vision statement. customer product

product

ou are preparing a SWOT analysis for a global franchisor of health oriented fast food restaurants. Your firm is different from many fast food franchises in that the menu is focused on healthy options rather than high carbohydrate and fatty foods. Your manager has just instructed you on the proper way to construct a SWOT (think back to the video lesson). You have developed a list of positives you have gleamed from external and internal analysis. Look over the list below and identify those positives that should be classified as a STRENGTH. You must successfully identify all of the Strengths to get credit for this question. HINT: The objective of the Question for to Determine if the Student Can recognize Strengths vs. Opportunities. outstanding brand experienced and successful management team few relevant competitors customer tastes and preferences trending towards healthier foods well financed with substantial cash reserves efficient, well designed operating procedures

outstanding brand experienced and successful management team well financed with substantial cash reserves efficient, well designed operating procedures

Which characterization of industry structure would have the lowest concentration ratio? pure competition oligopoly monopoly monopolistic competition

pure competition

Which one of the following is not one of the 3 critical factors used to evaluate economic value creation and competitive advantage? value stock price price costs

stock price