Strategic Management Exam 2

Broad Differentiation Strategy

Differentiation strategies are attractive whenever buyers needs and preferences are too diverse to be fully satisfied by a standardized product or service.

Capability (or Competence)

The capacity of a firm to to competently perform some internal activity. Capabilities are developed and enabled through the development of a company's resources or some combination of its resources.

Cost Drivers Examples

-Striving to capture all available economies of scale -Taking full advantage of learning experience curves -Trying to operate facilities at full capacity -Substituting lower-cost inputs when there is so sacrifice to quality -Employing advanced product technology and process design to improve overall efficiency. -Using communication systems and information technology to achieve operating efficiencies. -Using the company bargaining power vis-a-vis suppliers to gain concessions. -Being alert to the cost advantages of outsourcing vertical integration. -Pursuing ways to boost labor productivity and lower overall compensation costs.

Improving Value Chain of Forward Channel Allies

1. Pressure dealers-distributors and other forward channel allies to reduce their costs and markups, 2. Work closely with forward channel allies to identify win-win opportunities to reduce costs, 3. Change to a more economical distribution strategy or perhaps integrate forward into company-owned retail outlets.

Improving internally performed value chain activities

1. implement the use of best practices throughout the company, particularly for high-cost activities 2. Try to eliminate some cost-producing activities by revamping the value chain. 3. Relocate high-cost activities to geographic areas where they can performed more cheaply. 4. Outsource certain internally performed activities to vendors or contractors if they can perform them more cheaply. 5. Invest in productivity-enhancing, cost saving technological improvements. 6. Find ways to detour around activities or items where costs are high. 7. Redesign the product and/or some of its components to facilitate speedier more economical manufacture or assembly. 8. Try to make up the internal cost disadvantage by reducing costs in the supplier or forward channel portions of the industry value chain

What are the company's competitively important resources and capabilities?

A company business model and strategy must be well matched. A company's competitive approach requires a tight fit with a company's internal situation and is strengthened when it exploits resources that are competitively valuable, rare, and hard to copy (not easily trumped by other rivals). Long going competitively advantage requires the ongoing development and expansion of resources and capabilities to pursuer emerging market opportunities and defend against threats.

Value chain for entire industry

A company's value chain is embedded in a larger system of activities that includes the value chain of its suppliers and the value chains of whatever distribution channel allies it utilizes in getting its product or services to end users. Accurately assessing the competitiveness of a company's cost structure and customer value proposition requires that company managers understand an industry entire value chain system for delivering a product or service to customers, not just the company's own value chain.

Which of the following is not an advantage of outsourcing the performance of certain value chain activities to outsiders? A) Being able to reduce distribution costs by eliminating the use of wholesale distributors and retail dealers and, instead, selling direct to end-users at the company's website. B) Allowing a company to reduce costs if the activity is not crucial to the firm's ability to achieve sustainable competitive advantage and won't hollow out its capabilities, core competencies, or technical know-how. C) Improving organizational flexibility and speeding time to market. D) Allowing a company to concentrate on its core business, leverage its key resources and core competencies, and do even better what it already does best. E) Being able to reduce the company's risk exposure to changing technology and/or buyer preferences.

A) Being able to reduce distribution costs by eliminating the use of wholesale distributors and retail dealers and, instead, selling direct to end-users at the company's website.

Which of the following is not a strategic disadvantage of vertical integration? A) It greatly reduces the opportunity for capturing maximum scale economies and achieving the lowest possible operating costs. B) Vertical integration increases a firm's capital investment in the industry. C) Integrating into more industry value chain segments increases business risk if industry growth and profitability sour. D) Vertically integrated companies are often slow to embrace technological advances or more efficient production methods when they are saddled with older technology or facilities. E) Integrating backward potentially results in less flexibility in accommodating shifting buyer preferences when a new product design doesn't include parts and components that the company makes in-house.

A) It greatly reduces the opportunity for capturing maximum scale economies and achieving the lowest possible operating costs.

In which of the following situations is being first to initiate a particular move not likely to result in a positive payoff? A) When potential buyers are skeptical about the benefits of a new technology or product being pioneered by a first mover. B) When pioneering helps build up a firm's image and reputation with buyers. C) When first-time buyers remain strongly loyal to a pioneering firm in making repeat purchases. D) When moving first can constitute a preemptive strike, making imitation extra hard or unlikely. E) When moving first can result in a cost advantage over rivals.

A) When potential buyers are skeptical about the benefits of a new technology or product being pioneered by a first mover

A competitive strategy of striving to be the low-cost provider is particularly attractive when _______________ A) a company pays particular attention to cost drivers such as number of products in the product line, capacity utilization, production technology and design, and labor productivity and compensation costs. B) most rivals are trying to differentiate their product offering from those of rivals. C) there are many ways to achieve higher product quality that have value to buyers. D) buyers are not swayed by advertising and are not very brand-loyal. E) most rivals are pursuing best-cost or broad differentiation strategies.

A) a company pays particular attention to cost drivers such as number of products in the product line, capacity utilization, production technology and design, and labor productivity and compensation costs.

Strategic actions to reduce the costs of internally performed value chain activities and improve a company's cost competitiveness _______________ A) can aim at lowering costs (1) in the suppliers' part of the industry value chain, (2) in a company's own internally performed activities, and/or (3) in the forward channel portion of the value chain. B) work best when they aim at lowering the costs of performing those tasks and activities where the company has core competencies and distinctive competencies. C) work best when aimed at increasing the amount of the company's low-cost competitive assets and decreasing the amount of its high-cost competitive assets. D) are likely to be most effective when they are aimed at lowering the costs of the value chain activities that a company performs internally. E) are most likely to be successful when they involve efforts to concentrate more company resources and talents on those value chain activities where the company already has the lowest costs.

A) can aim at lowering costs (1) in the suppliers' part of the industry value chain, (2) in a company's own internally performed activities, and/or (3) in the forward channel portion of the value chain.

Experience indicates that strategic alliances _______________ A) have a high "divorce rate." B) are generally successful. C) work well in cooperatively developing new technologies and new products but seldom work well in promoting greater supply chain efficiency. D) work best when they are aimed at achieving a mutually beneficial competitive advantage for the allies. E) are rarely useful in helping a company win the race for global industry leadership and in establishing positions in industries of the future.

A) have a high "divorce rate."

A firm pursuing a best-cost provider strategy _______________ A) seeks to offer more value-adding features than the industry's low-cost providers and lower prices than those pursuing differentiation. B) tries to have the best cost (as compared to rivals) for each activity in the industry's value chain. C) achieves competitive advantage because its operating activities are "best-in-industry" or "best-in-world." D) follows a hybrid strategy based upon superior resources and a narrow market niche. E) seeks a "middle of the road" strategic approach that attempts to satisfy the product or service needs of consumers with average household incomes.

A) seeks to offer more value-adding features than the industry's low-cost providers and lower prices than those pursuing differentiation.

What strategic issues and problems must be addressed by management?

The task is to get a clear fix on exactly what industry and competitive challenges confront the company, which of the company's internal weaknesses need fixing, what specific problems merit front-burner attention by company managers.

A company strategy should....

Aim squarely at capturing those market opportunities that are most attractive and suited to the company's collection of capabilities. How much attention to devote to defending against external threats to the company's future performance hinges on how vulnerable the company is, whether defensive moves can be taken to lessen their impact, and whether the costs of undertaking such moves represent the best use of company resources.

Value Chain

All the primary actives that a company performs internally to create customer value and related supported activities.

Which one of the following is not something that can be learned from doing a competitive strength assessment? A) Identifying the competitive factors where a company is strongest and weakest vis-à-vis key rivals and the kinds of offensive/defensive actions the company can use to exploit its competitive strengths and reduce its competitive vulnerabilities. B) The extent to which a company's customer value proposition is superior to its rivals. C) Which of the rated companies is competitively strongest and what size competitive advantage it enjoys. D) Whether a company has a net competitive advantage or a net competitive disadvantage relative to key rivals (as indicated by the differences among the companies' competitive strength scores). E) Which rival company is competitively weakest and the areas where it is most vulnerable to competitive attack.

B) The extent to which a company's customer value proposition is superior to its rivals.

A company's cost competitiveness is largely a function of _______________ A) whether it does a good enough job of benchmarking its value chain activities against the value chains of competitors so that it knows exactly how low to drive its costs to be cost-competitive. B) how efficiently it manages its internally performed value chain activities and the costs in the value chains of its suppliers and forward channel allies. C) whether it does a better job of building its resource strengths more cost effectively than rivals. D) whether it possesses more core competencies and competitive capabilities than rivals. E) how closely its internally performed activities are linked to the activities performed by suppliers and to the activities performed by forward channel allies.

B) how efficiently it manages its internally performed value chain activities and the costs in the value chains of its suppliers and forward channel allies.

The purposes of defensive strategies are to _______________ A) aggressively retaliate against rivals pursuing offensive strategies and prevent price wars. B) restrict a competitive attack by a challenger, weaken the impact of any attack that occurs, and influence challengers to aim their offensive efforts at other rivals. C) guard against adverse changes in the company's macro-environment and insulate the company from the impact of industry-driving forces. D) strengthen a company's competitive advantage and reduce its exposure to business risk. E) eliminate a company's resource weaknesses and competitive deficiencies, thereby making it invulnerable to competitive attack from would-be challengers.

B) restrict a competitive attack by a challenger, weaken the impact of any attack that occurs, and influence challengers to aim their offensive efforts at other rivals.

What sets focused (or market niche) strategies apart from low-cost leadership and broad differentiation strategies is _______________ A) the extra attention paid to establishing a distinctive competence. B) their concentrated attention on serving the needs of buyers in a narrow piece of the overall market. C) greater opportunity for brand loyalty. D) their suitability for market situations where technological change is fast-paced and continuous product innovation is a key success factor. E) their bold strategic intent of global market leadership via heavy advertising.

B) their concentrated attention on serving the needs of buyers in a narrow piece of the overall market.

Competitive Strategy

Deals exclusively with the specifics of managements game plan for competing successfully.

Which of the following is not one of the principal offensive strategy options? A) Adopting and improving on the good ideas of other companies. B) Launching preemptive strikes. C) Blocking the avenues open to challengers. D) Attacking competitors' weaknesses. E) Offering an equal or better product at a lower price.

C) Blocking the avenues open to challengers.

Which one of the following statements about merger and acquisition strategies is true? A) Merger and acquisition strategies are nearly always a superior strategic alternative to forming alliances or partnerships with these same companies. B) Merger and acquisition strategies tend to be far more successful than forming strategic alliances and cooperative partnerships with other companies. C) Mergers and acquisitions do not always produce the hoped for outcomes. Cost savings may prove smaller than expected. Gains in competitive capabilities may take substantially longer to realize or may never materialize. Efforts to mesh the corporate cultures can stall due to formidable resistance from organization members. D) Mergers and acquisition strategies are a very high-risk strategy because of the financial drain of using the company's cash resources to accomplish the merger or acquisition. E) Merger and acquisition strategies are one of the best ways for helping a company strengthen its brand image.

C) Mergers and acquisitions do not always produce the hoped for outcomes. Cost savings may prove smaller than expected. Gains in competitive capabilities may take substantially longer to realize or may never materialize. Efforts to mesh the corporate cultures can stall due to formidable resistance from organization members.

Which of the following is typically the strategic impetus for forward vertical integration? A) To charge lower retail prices and thereby attract a bigger, more loyal clientele of customers. B) To make it easier to expand the company's product line. C) To gain better access to end users and better market visibility. D) To achieve greater control over advertising and in-store retail merchandising. E) To gain better access to greater economies of scale.

C) To gain better access to end users and better market visibility.

Which of the following is not one of the hazards of pursuing a differentiation strategy? A) Trying to charge too high a price premium for the differentiating features. B) Over-differentiating so that the features and attributes incorporated exceed buyer needs and requirements. C) Trying to create strong brand loyalty rather than being content with weak brand loyalty (which usually means lower costs and higher profitability). D) Differentiating on features or attributes that rivals can easily copy. E) Overspending on efforts to differentiate the company's product offering.

C) Trying to create strong brand loyalty rather than being content with weak brand loyalty (which usually means lower costs and higher profitability).

Which of the following analytical tools are particularly useful for determining whether a company's prices and costs are competitive? A) SWOT analysis, strategy assessment, activity-based costing analysis, and key success factor analysis. B) SWOT analysis, competitive strength assessment, best practices analysis, and value chain analysis. C) Value chain analysis and benchmarking. D) Competitive position assessment, competitive strength assessment, strategic group mapping, SWOT analysis, and value chain analysis. E) SWOT analysis, best practices analysis, activity-based costing analysis, and competitive strength assessment.

C) Value chain analysis and benchmarking.

In which one of the following market circumstances is a broad differentiation strategy generally not well suited? A) When buyer needs and preferences are too diverse to be fully satisfied by a standardized product. B) When few rivals are pursuing a similar differentiation approach. C) When most competitors are using eye-catching ads to set their product offerings apart and build a brand image that is differentiated. D) When there are many ways to differentiate the product or service and many buyers perceive these differences as having value. E) When technological change is fast-paced and competition revolves around rapidly evolving product features.

C) When most competitors are using eye-catching ads to set their product offerings apart and build a brand image that is differentiated.

Which one of the following is not a strategic choice that a company must make to complement and supplement its choice of one of the five generic competitive strategies? A) Whether and when to go on the offensive and initiate aggressive strategic moves to improve the company's market position. B) Which value chain activities, if any, should be outsourced. C) Whether to employ a low-end strategy or a middle-of-the-road strategy or a high-end strategy. D) Whether to integrate forward or backward into more stages of the industry value chain. E) Whether to enter into strategic alliances or collaborative partnerships.

C) Whether to employ a low-end strategy or a middle-of-the-road strategy or a high-end strategy.

For a best-cost provider strategy to be successful, a company must have _______________ A) excellent supply chain capabilities and product design expertise. B) economies of scope or greater scale economies than rivals. C) a superior value chain configuration and unmatched efficiency in managing essential value chain activities. D) superior product innovation skills and manufacturing capabilities. E) a short, low-cost value chain.

C) a superior value chain configuration and unmatched efficiency in managing essential value chain activities.

A blue ocean type of offensive strategy _______________ A) is a preemptive strike type of price-cutting offensive used by a market leader to steal customers away from higher-priced rivals. B) involves deliberately attacking those market segments where a key rival makes big profits. C) involves abandoning efforts to beat out competitors in existing markets and, instead, inventing a new industry or distinctive market segment that renders existing competitors largely irrelevant and allows a company to create and capture altogether new demand. D) involves using innovative advertising and deep price discounts to grab sales and market share from complacent or distracted rivals. E) employs highly creative, never-used-before strategic moves to attack the competitive weaknesses of rivals.

C) involves abandoning efforts to beat out competitors in existing markets and, instead, inventing a new industry or distinctive market segment that renders existing competitors largely irrelevant and allows a company to create and capture altogether new demand.

A company's biggest vulnerability in employing a best-cost provider strategy is _______________ A) relying too heavily on price discounting. B) adding features not needed by the majority of buyers. C) not having the needed efficiencies in managing value chain activities to add differentiating features without significantly increasing costs. D) being timid in cutting its prices far enough below high-end differentiators to win away many of their customers. E) relying excessively on outsourcing in an attempt to boost gross profit margins.

C) not having the needed efficiencies in managing value chain activities to add differentiating features without significantly increasing costs.

A focused differentiation strategy aims at securing competitive advantage by _______________ A) providing buyers in the target market niche with the best performance features at the best price. B) catering to buyers looking for a medium-quality product at an average price. C) offering carefully designed products or services to appeal to the unique preferences and needs of a narrow, well-defined group of buyers. D) developing unique product attributes. E) convincing buyers that the company is a true leader in product innovation.

C) offering carefully designed products or services to appeal to the unique preferences and needs of a narrow, well-defined group of buyers.

A company's competitive strategy deals with _______________ A) the specific actions management plans to take to develop a better value chain than rivals. B) how it plans to unify its functional and operating strategies into a cohesive effort aimed at successfully taking customers away from rivals. C) the specifics of management's game plan for competing successfully. D) its plans for underpricing rivals and achieving product superiority. E) the specific actions management intends to

C) the specifics of management's game plan for competing successfully.

hich of the following is not a typical reason that many alliances prove unstable or break apart? A) Inability to work well together. B) The emergence of more attractive technological paths. C) Changing conditions make the purpose of the alliance obsolete. D) Disagreement over how to divide the added market share and profits gained from joint collaboration. E) Diverging objectives and priorities.

D) Disagreement over how to divide the added market share and profits gained from joint collaboration.

Resources

Competitive assets that is owned or controlled by a company. Tangible Resources: plants, distribution centers, equipment, patents Intangible Resources: well known brand image, results-oriented organizational culture.

The most long-lasting strategic alliances _______________ A) aim at teaming up with world-class suppliers or else companies with world-class know-how in product innovation. B) are those whose purpose is helping a company master a new technology. C) are those formed to enable the partners to be consistent first movers or fast followers. D) (1) involve collaboration with suppliers or distribution allies, or (2) conclude that continued collaboration is in their mutual interest, perhaps because new opportunities for learning are emerging. E) aim at insulating the partners against the impacts of the five competitive forces and industry driving forces.

D) (1) involve collaboration with suppliers or distribution allies, or (2) conclude that continued collaboration is in their mutual interest, perhaps because new opportunities for learning are emerging.

Which of the following are distinguishing features of a best-cost provider strategy? A) The strategic target is price-conscious buyers. B) A marketing emphasis on charging a slightly higher price than rival brands having comparable features and attributes. C) A product line that stresses wide selection, many product variations, and emphasis on differentiating features. D) A competitive advantage based on more value for the money. E) Using constant product innovation, excellent R&D skills, and periodic technological breakthroughs to sustain the strategy.

D) A competitive advantage based on more value for the money.

Which of the following is not a potential advantage of backward vertical integration? A) Adding to a company's differentiation capabilities and perhaps achieving a differentiation-based competitive advantage. B) Lessening a company's vulnerability to powerful suppliers inclined to raise prices at every opportunity. C) Spares a company the uncertainty of being dependent on suppliers for crucial components or support services. D) Enhanced R&D capability, better opportunity to establish a core competence in supply chain management, more flexibility in incorporating state-of-the-art parts and components, and better overall product quality. E) Contributes to a better-quality product/service offering.

D) Enhanced R&D capability, better opportunity to establish a core competence in supply chain management, more flexibility in incorporating state-of-the-art parts and components, and better overall product quality.

Which one of the following is not a good type of rival for an offensive-minded company to target? A) Market leaders that are vulnerable. B) Runner-up firms with weaknesses in areas where the challenger is strong. C) Small local and regional companies with limited capabilities. D) Other offensive-minded companies with a sizable war chest of cash and marketable securities. E) Struggling enterprises that are on the verge of going under.

D) Other offensive-minded companies with a sizable war chest of cash and marketable securities.

Which of the following is not a distinguishing feature of a low-cost provider strategy? A) The product line consists of a few basic models having minimal frills and acceptable quality. B) The production emphasis is on continuously searching for ways to reduce costs without sacrificing acceptable quality and essential features. C) The marketing emphasis is on making virtues out of product features that lead to low cost. D) The strategic target is value-conscious buyers and sustaining the strategy depends on frequent advances in technology and occasional product innovations. E) Sustaining the strategy revolves around managing costs down year-after-year and delivering good value at economical prices.

D) The strategic target is value-conscious buyers and sustaining the strategy depends on frequent advances in technology and occasional product innovations.

In which of the following cases are first-mover disadvantages not likely to arise? A) When the costs of pioneering are much higher than being a follower and only negligible buyer loyalty or cost savings accrue to the pioneer. B) When new infrastructure is needed before market demand can surge. C) When the pioneer's skills, know-how, and products are easily copied or even bested by late movers. D) When customer loyalty to the pioneer is low. E) When technological change is rapid and following rivals find it easy to leapfrog the pioneer with next-generation products of their own.

D) When customer loyalty to the pioneer is low.

Which one of the following is not a good indicator of how well a company's present strategy is working? A) Whether it is achieving its stated financial and strategic objectives. B) Whether it is an above-average industry performer. C) Whether the firm's sales and earnings are increasing or decreasing. D) Whether the company's resource strengths and competitive capabilities outnumber its resource weaknesses and competitive vulnerabilities. E) The rate at which new customers are acquired and whether the company's overall financial strength is improving or on the decline.

D) Whether the company's resource strengths and competitive capabilities outnumber its resource weaknesses and competitive vulnerabilities.

A low-cost provider's basis for competitive advantage is _______________ A) using an everyday low pricing strategy to gain the biggest market share. B) bigger profit margins than rival firms. C) high buyer switching costs because of the company's differentiated product offering. D) meaningfully lower overall costs than competitors. E) a reputation for charging the lowest prices in the industry

D) meaningfully lower overall costs than competitors.

A distinctive competence _______________ A) is a more important competitive asset than a core competence. B) is a competitively valuable capability that is performed with a very high level of proficiency. C) resides in people and in a company's intellectual capital and not in its assets on the balance sheet. D) is knowledge-based. E) All of the above

E) All of the above

Identifying the strategic issues that company managers need to address _______________ A) involves using the results of both industry and competitive analysis and evaluations of the company's internal situation using the VRIN tests. B) is facilitated by analysis of the company's cost structure and customer value proposition relative to its rivals. C) sets the agenda for deciding what actions to take next to improve the company's performance and business outlook. D) entails locking in on what challenges the company has to overcome in order to be financially and competitively successful in the years ahead. E) All of the above.

E) All of the above.

The industry or market opportunities that are most relevant to a company and those that its strategy should aim at capturing include _______________ A) opportunities that are well-matched to the company's competitive capabilities and resource strengths. B) opportunities that the company has the financial resources to pursue. C) opportunities that offer important avenues for growth. D) opportunities where the company has the greatest potential for competitive advantage. E) All of the above.

E) All of the above.

Being first to initiate a particular move can have a high payoff when _______________ A) pioneering helps build up a firm's image and reputation with buyers. B) early commitments to new technologies, new-style components, new or emerging distribution channels, and so on, can produce an absolute cost advantage over rivals. C) first-time customers remain strongly loyal to pioneering firms in making repeat purchases. D) moving first constitutes a preemptive strike, making imitation extra hard or unlikely. E) All of these.

E) All of these.

Companies are motivated to enter into strategic alliances or cooperative arrangements _______________ A) to expedite the development of promising new technologies or products. B) to overcome deficits in their own technical and manufacturing expertise. C) to bring together the personnel and expertise needed to create desirable new skill sets and capabilities. D) to acquire or improve market access. E) All of these.

E) All of these.

Strategic actions to eliminate an internal cost disadvantage include _______________ A) implementing the use of best practices. B) trying to eliminate some cost-producing activities by revamping the value chain. C) outsourcing high-cost activities to vendors capable of performing the activity more cheaply. D) investing in productivity-enhancing, cost-saving technology. E) All of these.

E) All of these.

A broad differentiation strategy _______________ A) is an attractive competitive approach whenever buyers' needs and preferences are too diverse to be satisfied by a product that is essentially identical from seller to seller. B) can produce sustainable competitive advantage if the differentiating features possess strong buyer appeal and can't be copied or easily matched by rivals. C) works best when the basis for differentiation is superior performance features and buyer switching costs are low. D) offers a better chance for gaining market share than low-cost or best-cost provider strategies, and typically allows a firm to charge the highest price in the industry. E) Both A and B.

E) Both A and B.

triving to be the industry's low-cost provider and achieving lower costs than rivals entails _______________ A) eliminating or curbing nonessential activities. B) having a smaller labor force than rivals, paying lower wages than rivals, locating all facilities in countries where labor costs are low, and outsourcing many value chain activities to suppliers with world-class technological capabilities. C) doing a better job than rivals in performing essential activities. D) aggressive use of activity-based costing, utilizing more best practices than rivals, and having a narrower product line than rivals. E) Both A and C.

E) Both A and C.

Successful differentiation allows a firm to _______________ A) gain buyer loyalty to its brand (because some buyers are strongly attracted to the differentiating features and bond with the company and its products). B) earn the highest profit margins of any company in the industry. C) attract many more buyers by charging a lower price than rivals and thereby take sales and market share away from rivals. D) command a premium price for its product and/or increase unit sales (because additional buyers are won over by the differentiating features). E) Both A and D.

E) Both A and D.

Mergers and acquisitions are a popular strategy because they are an effective means of _______________ A) revamping a company's value chain. B) facilitating the employment of both offensive and defensive strategies. C) creating a more cost-efficient operation, expanding a company's geographic coverage, and extending a company's business into new product categories. D) gaining quick access to new technologies or other resources and competitive capabilities and leading the convergence of industries whose boundaries are being blurred by changing technologies and new market opportunities. E) Both C and D.

E) Both C and D.

Strategic alliances _______________ A) are the cheapest means of developing new technologies and getting new products to market quickly. B) are a proven means of reducing the costs of performing value chain activities. C) are best used to insulate a company from the impact of the five competitive forces. D) help insulate a firm from the adverse impacts of industry driving forces. E) are formal agreements between two or more companies to work cooperatively toward some common objective.

E) are formal agreements between two or more companies to work cooperatively toward some common objective.

A hit-and-run or guerrilla warfare type of offensive strategy involves _______________ A) random offensive attacks used by a market leader to steal customers away from unsuspecting smaller rivals. B) undertaking surprise moves to secure an advantageous position in a fast-growing and profitable market segment; usually the guerrilla signals rivals that it will use deep price cuts to defend its newly won position. C) tactics that work best if the guerrilla is the industry's low-cost leader. D) pitting a small company's own competitive strengths head-on against the strengths of much larger rivals. E) surprising moves by small challengers that have neither the resources nor the market visibility to mount a full-fledged attack on industry leaders.

E) surprising moves by small challengers that have neither the resources nor the market visibility to mount a full-fledged attack on industry leaders.

Which one of the following groups of characteristics is least likely to represent valuable company resources or competitive capabilities? A)Physical resources — state-of-the-art manufacturing plants and equipment, efficient distribution facilities, attractive real estate locations, or ownership of valuable natural resource deposits. B)Larger workforce, longer time in business, lower profit margins, and smaller capital investment spend than rivals. C)Intangible resources such as a well-known brand name. D)Organizational resources — information and communication systems (servers, workstations, etc.), proven quality control systems, and strong network of distributors or retail dealers. E)Company culture — the norms of behavior, business principles, and ingrained beliefs within the company.

E)Company culture — the norms of behavior, business principles, and ingrained beliefs within the company.

Benchmarking

Entails comparing how different companies perform various value chain activities and then making cross-company comparisons of the costs and effectiveness of these activities.

Support Activities

Facilitate and enhance the performance of primary activities. -Product R&D, Technology, and Systems Development. -Human Resource Management -General Administration

Cost Drivers

Factors that have an especially strong effect on the costs of a company value chain activities

Primary Activities

Foremost in creating value for customers -Supply chain management -Operations -Distribution -Sales and Marketing -Service

SWOT

Intern Strengths and Weaknesses, Market Opportunities, and External Threats. A company internal strengths should always serve as the basis of its strategy-placing heavy reliance on a company's best competitive assets is the soundest route to attracting customers and competing successfully against rivals.

Are the company cost structure and customer value proposition competitive?

One of the most telling signs of whether a company business structure is strong or precarious is whether its cost structure and customer value proposition are competitive with those of industry rivals.

Sustaining Competitive Advantage

Resources and capabilities must be continually strengthen and nurtured to sustain their competitive power, and at times, may need to be broadened and deepened to allow the company to position itself to pursue emerging market opportunities.

Revamping the Value Chain

Selling directly to consumers and cutting out the activities and costs of distribution and dealers by 1. creating its own direct sales force and 2. conduct sales operations at the company's website.

Resource and Capability Analysis

Sizing up the company's collection of resources and capabilities and determining whether they can provide the foundation for competitive success. Two Step Process: 1. identify the company's resources and capabilities 2. examine them more closely to ascertain which are the most competitively important and whether they can support a sustainable competitive advantage over rival firms.

Low Cost Provider

Striving to achieve lower overall costs than rivals and appealing to a broad spectrum of customers, usually by underpricing rivals.

Dynamic Capability

The ability to modify, deepen, or reconfigure the company's existing resources and capabilities in response to its changing environment or market opportunities.

How well is the company's strategy working?

Two best indicators: 1. Whether the company is recording gains in financial strength and profitability. 2. Whether the company's competitive strength and marketing standing are improving.

VRIN tests for sustainable competitive advantage

Valuable. Rare. Inimitable. Non substitutable. 1. Is the resource of capability competitively valuable? 2. Is the resource or capability rare? 3. Is the resource or capability inimitable or hard to copy? 4. Is the resource or capability non substitutable or is vulnerable to the threat of substitution from different types of resources and capabilities?

Core competence

is a capability that passes the "competitively valuable" test.

What is the company's competitive strength relative to key rivals?

step 1: list the industry key success factors step 2: assign a weight to each measure of competitive strength based on its perceived importance in shaping competitive success. step 3: calculate weighted strength ratings by scoring each competitor on each strength measure and multiplying the assigned ratings to get an overall strength step 4: sum the weighted strengths ratings on each factor step 5: use the overall strength ratings to draw conclusions. Provide useful conclusions about a company's competitive situation. They show how a company compares against rivals, factor by factor capability, thus where its strongest and weakest. It indicates whether a company is at net competitive advantage or disadvantage over each rival and provides guidelines for designing wise offensive and defensive strategies.