Strategy Ch6
Merger and acquisition strategies A. are nearly always a superior strategic alternative to forming alliances or partnerships with these same companies. B. may offer considerable cost-saving opportunities and can also be beneficial in helping a company try to invent a new industry and lead the convergence of industries whose boundaries are being blurred by changing technologies and new market opportunities. C. are a particularly effective way of pursuing a blue ocean strategy and outsourcing strategies. D. seldom are a superior strategic alternative to forming alliances or partnerships with these same companies because of the financial drain of using the company's cash resources to accomplish the merger or acquisition. E. are one of the best ways for helping a company strongly differentiate its product offering and use a differentiation strategy to strengthen its market position.
B.
A good example of vertical integration is A. a producer of organic vegetables deciding to expand into the production of organic fruits. B. a supermarket chain acquiring a distributor of fresh fruits and vegetables. C. a crude oil refiner purchasing a railroad company. D. a hospital opening a nursing home for the aged. E. a maker of prescription drugs acquiring a chain of hospitals.
B.
Which of the following is not among the principal offensive strategy options that a company can employ? A. Leapfrogging competitors by being the first adopter of next-generation technologies or being first to market with next-generation products B. Offering an equally good or better product at a lower price C. Blocking the avenues open to challengers D. Attacking the competitive weakness of rivals E. Capturing unoccupied or less contested territory by maneuvering around
C.
Which of the following is not a typical reason that many alliances prove unstable or break apart? A. Diverging objectives and priorities B. An inability to work well together C. The emergence of more attractive technological paths D. Disagreement over how to divide the profits gained from joint collaboration E. Changing conditions that make the purpose of the alliance obsolete
D.
A vertically integrated firm is one that performs value chain activities along more than one stage of the industry's overall value chain and such integration is not considered to be A. backward integration (industry value chain activities performed previously by buyers). B. either partial integration (building positions in selected stages of the value chain) or tapered integration, which is a strategy that involves both outsourcing and performing the activity internally. C. tapered forward (e.g., engaged directly in the sales operating activity to end users at the same time selling to third parties). D. full integration (participating in all stages of the industry vertical chain). E. forward integration (value chain activities performed by distributors) or forward toward end users.
A.
Backward integration involves A. performing industry value chain activities previously performed by suppliers or other companies engaged in earlier stages of the value chain. B. Linking with businesses within the array of value chain activities to eliminate competition and broaden the product offering. C. capitalizing on company's underutilized managerial capabilities for achieving greater synergistic cost advantages. D. reducing the opportunity for achieving greater product differentiation. E. developing new skills and business capabilities.
A.
Market conditions and factors that tend not to favor first movers include A. growth in demand that depends on the development of complementary products or services that are not currently available and new industry infrastructure that is needed before buyer demand can surge. B. quick market penetration and strong loyalty among first-time customers. C. buyer behavior that is readily attracted to new technology or product features. D. conditions that make imitation difficult and absolute cost advantages that accrue to those who make early commitments to new technologies, components, or distribution channels. E. All of the above.
A.
Strategic alliances are more likely to be long-lasting when A. they involve collaboration with suppliers or distribution allies or when both parties conclude that continued collaboration is in their mutual interests. B. the alliance involves partners based in countries with distinctly different cultures and consumer buying habits and preferences. C. both partners are experienced with strategic alliances and routinely enter into collaborative agreements with firms in peripheral industries. D. the alliance involves joining forces in R&D to develop new technologies cheaper than a company could develop the technology on its own. E. each partner has considerable resource weaknesses in the marketplace.
A.
Vertical integration strategies A. extend a company's competitive and operating scope because its operations extend across more parts of the total industry value chain. B. are one of the best strategic options for helping companies win the race for global market leadership. C. are a cost effective means of expanding a company's lineup of products and services. D. are particularly effective in boosting a company's ability to expand into additional geographic markets, particularly the markets of foreign countries. E. are a good strategy option for improving a company's supply chain management capabilities, pursuing efforts to remodel a company's value chain, achieving direct control over the costs of performing value chain activities, and gaining access to buyers.
A.
For backward vertical integration into the business of suppliers to be a viable and profitable strategy, a company must A. have considerable expertise in supply chain management, transportation logistics, and inventory control techniques. B. be able to achieve the same scale economies as outside suppliers and also match or beat suppliers' production efficiency with no drop in quality. C. have large state-of-the-art production facilities so that it can fully capture all economies of scale in producing parts and components. D. have core competences in R&D, product design and engineering, and distribution logistics so that it will have adequate capabilities to produce and distribute parts and components in a timely and cost-effective manner. E. have a distinctive competence in production process technology and at least a core competence in manufacturing R&D.
B.
In which of the following instances 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 rivals are employing offensive strategies rather than defensive strategies C. When the products of an innovator are somewhat primitive and do not live up to buyer expectations D. When buyers are skeptical about the benefits of a new technology or product being pioneered by a first mover E. When rapid market evolution (due to fast-paced changes in technology or buyer preferences) gives fast followers and maybe even cautious late movers the opening to leapfrog a first mover's products with more attractive next-version products
B.
Launching a preemptive strike type of offensive strategy entails A. cutting prices below a weak rival's costs. B. moving first to secure an advantageous competitive assets that rivals can't readily match or duplicate. C. using hit-and-run tactics to grab sales and market share away from complacent or distracted rivals. D. attacking the competitive weaknesses of rivals. E. leapfrogging into next-generation products and technologies, thus forcing rivals to play catch-up.
B.
A company's menu of strategic choices to supplement its decision to employ one of the five basic competitive strategies does not include A. whether and when to employ defensive strategies to protect the company's market position. B. whether to integrate backward or forward into more stages of the industry value chain. C. whether to employ a preemptive strike type of green ocean strategy. D. whether and when to go on the offensive and initiate aggressive strategic moves to improve the company's market position. E. whether to bolster the company's market position via acquisition or merger and/or whether to enter into strategic alliances or partnership arrangements with other enterprises.
C.
A strategic alliance A. is a collaborative arrangement where companies join forces to defeat mutual competitive rivals. B. involves two or more companies joining forces to pursue vertical integration. C. is a formal agreement between two or more companies in which there is strategically relevant collaboration of some sort, joint contribution of resources, shared risk, shared control, and mutual dependence. D. is a partnership between two companies that is typically intended to eliminate the need to engage in outsourcing. E. is usually a cheaper and more effective way for companies to join forces than is merger.
C.
When the race among rivals for industry leadership is a marathon rather than a sprint, A. it is best to be a fast follower rather than a first mover or a slow mover. B. fast followers find it easy to leapfrog the pioneer with even better next-generation products of their own. C. a slow mover may not be unduly penalized and first-mover advantages can be fleeting. D. being a first mover generally entails relatively low risk and carries a potentially big advantage. E. there are nearly always big advantages to being a slow mover rather than an early mover, especially as concerns avoiding the "mistakes" of first or early movers.
C.
Which of the following is not a strategic disadvantage of vertical integration? A. Vertical integration boosts a firm's capital investment in the industry, thus increasing business risk if the industry becomes unattractive later. B. Integrating backward into parts and components manufacture can impair a company's operating flexibility when it comes to changing out the use of certain parts and components. C. Vertical integration limits a company's ability to achieve greater product differentiation and to exercise direct control over the costs of performing value chain activities. D. Forward or backward integration often calls for radically different skills and business capabilities than the firm possesses. E. Vertical integration poses all kinds of capacity-matching problems.
C.
Which of the following is typically the strategic impetus for forward vertical integration? A. Being able to control the wholesale/retail portion of the industry value chain B. Fewer disruptions in the delivery of the company's products to end users C. Gaining better access to end users and better market visibility D. Broadening the company's product line E. Allowing the firm access to greater economies of scale
C.
Which one of the following is an example of an offensive strategy? A. Blocking the avenues open to challengers B. Signaling challengers that retaliation is likely C. Pursuing continuous product innovation to draw sales and market share away from less innovative rivals D. Introducing new features or models to fill vacant niches in its overall product offering and better match the product offerings of key rivals E. Maintaining a war chest of cash and marketable securities
C.
Which one of the following is not a good example of a defensive strategy to protect a company's market share and competitive position? A. Adding new features or models and otherwise broadening the product line to close off vacant niches and gaps to opportunity-seeking challengers B. Thwarting the efforts of rivals to attack with lower prices by maintaining economy-priced options of its own C. Engaging in a preemptive strike strategy in an effort to discourage rivals from being aggressive D. Signaling challengers that retaliation is likely in the event that they launch an attack E. Making early announcements about impending new products or price changes to induce potential buyers to postpone switching
C.
Which one of the following is not a strategically beneficial reason a company may enter into strategic partnerships or cooperative arrangements with key suppliers, distributors, or makers of complementary products? A. To acquire or improve access to new markets B. To expedite the development of promising new technologies or products C. To enable greater vertical integration D. To improve supply chain efficiency E. To overcome deficiencies in technical and manufacturing expertise and to create desirable new skill sets and capabilities
C.
A blue ocean strategy A. is an offensive attack used by a market leader to steal customers away from unsuspecting smaller rivals. B. involves a preemptive strike to secure an advantageous position in a fast-growing market segment. C. works best when a company is the industry's low-cost leader. D. offers growth in revenues and profits by discovering or inventing a new industry or distinct market segment that allows a company to create and capture altogether new demand. E. involves the use of highly creative, never-used-before strategic moves to attack the competitive weaknesses of rivals.
D.
A blue ocean type of offensive strategy A. refers to initiatives by a market leader to steal customers away from unsuspecting smaller rivals. B. involves a preemptive strike to secure an advantageous position in a fast-growing market segment. C. entails attacking rivals head-on with deep price discounts and continuous product innovation. D. involves abandoning efforts to beat out competitors in existing markets and, instead, inventing a new industry or new market segment that renders existing competitors largely irrelevant and allows a company to create and capture altogether new demand. E. involves the use of surprise hit-and-run guerrilla tactics to harass money-losing rivals and drive them into bankruptcy.
D.
Bypassing regular sales channels in favor of Internet retailing can have strong appeal if it A. raises distribution costs and ignores channel conflicts. B. provides a relative cost disadvantage over rivals. C. offers lower margins resulting in higher selling prices to end users. D. includes partnering rather than competing with existing distributors. E. All of these.
D.
Experience indicates that strategic alliances A. are generally successful. B. work well in cooperatively developing new technologies and new products but seldom work well in promoting greater supply chain efficiency. C. work best when they are aimed at achieving a mutually beneficial competitive advantage for the allies. D. stand a reasonable chance of helping a company reduce competitive disadvantage, but very rarely form the basis of a durable competitive advantage over rivals. E. are usually a company's best approach to building a distinctive competence.
D.
The two best reasons for investing company resources in vertical integration (either forward or backward) are to A. speed entry into foreign markets and/or exercise stronger control over operating costs. B. broaden the firm's product line and/or enable the company to charge a premium price for its product/service. C. gain a first-mover advantage in adopting new production technologies and/or employ potent defensive strategies. D. strengthen the company's competitive position and/or boost its profitability. E. achieve greater product differentiation and/or gain better access to prospective buyers.
D.
Mergers and acquisitions are often driven by such strategic objectives as to A. expand a company's geographic coverage, extend its business into new product categories, or gain quick access to new technologies or other resources and capabilities. B. weaken the bargaining power of either key suppliers or key customers. C. reduce the company's vulnerability to industry driving forces. D. facilitate a company's shift from one type of competitive strategy to another. E. secure a higher credit rating and better access to additional financial capital.
A.
The competitive attraction of entering into strategic alliances and collaborative partnerships is A. in allowing companies to bundle resources and competencies that are more valuable in a joint effort than when kept separate. B. reducing costs, transferring skills, and expanding the product line. C. enabling greater vertical integration. D. in allowing the partners to transfer intellectual property rights and proprietary information. E. in helping the partners to increase their respective market shares.
A.
The strategic impetus for forward vertical integration is to A. gain better access to end users, improve market awareness, and/or include the end user's purchasing experience as a differentiating feature. B. the opportunity to capture the profits being earned by forward distribution allies (and thereby increase the company's own profits). C. reduce or eliminate disruptions in the delivery of the company's products to end users. D. avoid channel conflict. E. expand a company's geographic coverage.
A.
Which one of the following statements about backward vertical integration is false? A. What makes backward vertical integration such an attractive strategic option is the opportunity to capture the profit margins of suppliers and thereby increase the company's own profitability. B. Backward vertical integration can produce a differentiation-based competitive advantage when a company, by performing activities internally rather than utilizing outside suppliers, ends up with a better-quality product/service offering, improves the caliber of its customer service, or in other ways enhances the performance of its final product. C. For backward integration to be a viable and profitable strategy, a company must be able to (1) achieve the same scale economies as outside suppliers and (2) match or beat suppliers' production efficiency with no drop in quality. D. The best potential for being able to reduce costs via a backward integration strategy exists in situations where suppliers have outsized profit margins, where the item being supplied is a major cost component, and where the requisite technological skills are easily mastered or can be gained by acquiring a supplier with the desired technological know-how. E. Potential advantages of backward integration include sparing a company the uncertainty of being dependent on suppliers for crucial components or support services and lessening a company's vulnerability to powerful suppliers inclined to raise prices at every opportunity.
A.
Mergers and acquisitions A. are nearly always successful in achieving their desired purpose (unlike strategic alliances and collaborative partnerships). B. all too frequently do not produce the hoped-for outcomes. C. are generally more effective in securing a new competitive advantage than in protecting an existing competitive advantage. D. are highly risky because of the financial drain that comes from using the company's cash resources to pay for the costs of the merger or acquisition. E. are usually more successful in helping a company's shift from one competitive strategy to another than in improving a company's competitive strength and resource capabilities.
B.
The Achilles' heel (or biggest danger/pitfall) of relying heavily on alliances and cooperative strategies is A. that partners will not divide profits from the alliance in an equitable manner. B. becoming dependent on other companies for essential expertise and capabilities. C. incurring excessive administrative expenses associated with engaging in collaborative efforts. D. having to compromise the company's own priorities and strategies in reaching agreements with partners. E. that strategic allies frequently become rivals in the marketplace.
B.
The big risk of employing an outsourcing strategy is A. causing the company to become partially integrated instead of being fully integrated. B. hollowing out a firm's own capabilities and losing touch with activities and expertise that contribute fundamentally to the firm's competitiveness and market success. C. hurting a company's R&D capability. D. putting the company in the position of being a late mover instead of an early mover. E. increasing the firm's risk exposure to both supply chain management failures and shifts in the composition of the industry value chain.
B.
The big risk of employing an outsourcing strategy is A. the increased time it takes to respond effectively to the fresh strategic moves of rival firms. B. hollowing out the competitive capabilities a company needs to be a master of its own destiny. C. impairing a company's capability to be a leader in product innovation. D. increased vulnerability to shifts in buyer demand. E. increased costs of differentiating the company's product/service from those of competitors.
B.
The difference between a merger and an acquisition is A. that a merger involves one company purchasing the assets of another company with cash, whereas an acquisition involves one company becoming the owner of another company by buying all of the shares of its common stock. B. that a merger is the combining of two or more companies into a single corporate entity (with the newly created company often taking on a new name) whereas an acquisition is a combination in which one company, the acquirer, purchases and absorbs the operations of another, the acquired. C. basically a play on words—in both instances, two companies become one. D. that the brands of both companies are retained in a merger whereas with an acquisition there is only one surviving brand name. E. that a merger involves two or more companies deciding to adopt the same strategy whereas an acquisition involves one company becoming the owner of another company but with each company still pursuing its own separate strategy.
B.
The purposes of defensive strategies include A. discouraging deep price discounting on the part of ambitious rivals seeking to capture additional sales and market share. B. lowering the risk of being attacked by rivals, weakening the impact of any attack that occurs, and influencing challengers to aim their offensive efforts at other rivals. C. insulating a company from the impact of competitive pressures and industry driving forces. D. weakening competitors in ways that make them largely irrelevant. E. widening a company's competitive advantage over rivals.
B.
Which one of the following is not an offensive strategy option? A. Adopting or improving on good ideas of other companies (rivals or otherwise) B. Deliberately attacking those market segments where key rivals make big profits C. Launching a preemptive strike to capture a rare opportunity D. Offering an equally good or better product at a lower price E. Introducing new features or models to fill vacant niches in its overall product offering and better match the product offerings of key rivals
B.
The two most compelling reasons for a company to pursue vertical integration (either forward or backward) are to A. expand into foreign markets and/or control more of the industry value chain. B. broaden the firm's product line and/or avoid the need for outsourcing. C. enable use of offensive strategies and/or gain a first-mover advantage over rivals in revamping the industry value chain. D. strengthen the company's competitive position and/or boost its profitability. E. achieve product differentiation and/or lengthen the company's value chain to include more activities performed in-house and thereby gain greater ability to reduce internal operating costs.
D.
Which of the following is not a typical strategic objective or benefit that drives mergers and acquisitions? A. To gain quick access to new technologies or other resources and capabilities B. To create a more cost-efficient operation out of the combined companies C. To fundamentally alter a company's trajectory and improve its business outlook D. To expedite shifting from one strategy to another and gain better access to additional financial capital E. To extend a company's business into new product categories and/or expand a company's geographic coverage
D.
A hit-and-run or guerrilla warfare type offensive strategies involve 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. 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. unexpected attacks (usually by a small competitor) to grab sales and market share from complacent or distracted rivals.
E.
Being first to initiate a strategic move can have a high payoff in all but which one of the following instances? A. When pioneering helps build a firm's image and reputation with buyers B. When first-time customers remain strongly loyal to pioneering firms in making repeat purchases C. When early commitments to new technologies, new-style components, new or emerging distribution channels, and so on can produce an absolute cost advantage over rivals D. When moving first can constitute a preemptive strike, making imitation extra hard or unlikely E. When pioneering leadership is more costly than followership
E.
First-mover advantages are unlikely to be present in which one of the following instances? A. When pioneering helps build a firm's image and reputation with buyers B. When first-time customers remain strongly loyal to pioneering firms in making repeat purchases C. When early commitments to new technologies, new-style components, new or emerging distribution channels, and so on can produce an absolute cost advantage over rivals D. When moving first can constitute a preemptive strike, making imitation extra hard or unlikely E. When rapid market evolution (due to fast-paced changes in technology or buyer preferences) presents opportunities to leapfrog a first mover's products with more attractive next-version products
E.
Once a company has decided to employ one of the five basic competitive strategies, then it must also consider such additional strategic choices as A. whether and when to go on the offensive and initiate aggressive strategic moves to improve the company's market position. B. whether to outsource certain value chain activities or perform them in-house. C. whether to form strategic alliances and collaborative partnerships to add to its accumulation of resources and competitive capabilities. D. whether to integrate forward or backward into more stages of the industry value chain. E. All of the above.
E.
Outsourcing strategies A. are nearly always a more attractive strategic option than merger and acquisition strategies. B. carry the substantial risk of raising a company's costs. C. carry the substantial risk of making a company overly dependent on its suppliers. D. increase a company's risk exposure to changing technology and/or changing buyer preferences. E. involve farming out value chain activities presently performed in-house to outside specialists and strategic allies.
E.
Outsourcing the performance of value chain activities presently performed in-house to outside vendors and suppliers makes strategic sense when A. an activity can be performed better or more cheaply by outside specialists. B. it allows a company to focus on its core business and leverage its key resources. C. outsourcing won't adversely hollow out the company's technical know-how, competencies, or capabilities while it improves organizational flexibility and speeds time to market. D. it improves organizational flexibility and speeds time to market. E. All of these.
E.
The reasons firms enter into strategic alliances is to A. expedite the development of new technologies. B. overcome deficits in their operation. C. improve supply chain efficiency. D. acquire or improve market access. E. All of these.
E.
Which of the following is a potential defensive move to ward off challenger firms? A. Granting volume discounts or better financing terms to dealers/distributors and providing discount coupons to buyers to help discourage them from experimenting with other suppliers/brands B. Signaling challengers that retaliation is likely in the event they launch an attack C. Making an occasional strong counter-response to the moves of weak competitors to enhance the firm's image as a tough defender D. Maintaining a war chest of cash and marketable securities E. All of these
E.
Which of the following is not an example of a defensive move to protect a company's market position and restrict a challenger's options for initiating competitive attack? A. Granting volume discounts or better financing terms to dealers/distributors and providing discount coupons to buyers to help discourage them from experimenting with other suppliers/brands B. Signaling challengers that retaliation is likely in the event they launch an attack C. Publicly committing the company to a policy of matching a competitors' terms or prices D. Maintaining a war chest of cash and marketable securities E. Challenging struggling runner-up firms that are on the verge of going under
E.
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 offensive-minded challenger is strong C. Small local and regional companies with limited capabilities D. Struggling enterprises that are on the verge of going under E. Other offensive-minded companies with a sizable war chest of cash and marketable securities
E.
Why do mergers and acquisitions sometimes fail to produce anticipated results? A. They do not produce the hoped for outcomes and changes to existing operations may not eventuate. B. Cost savings may prove smaller than expected. C. Gains in competitive capabilities may take substantially longer or never materialize. D. Efforts to mesh corporate cultures can stall due to formidable resistance from organization members and key employees can become disenchanted and leave. E. All of the above.
E.
