Bus 479 Exam 1

During the decline stage of the industry life cycle, __________ refers to obtaining as much profit as possible and requires that costs be decreased quickly.

Harvesting... Four basic strategies are available in the decline phase: maintaining, harvesting, exiting or consolidating. Harvesting involves obtaining as much profit as possible and requires that costs be reduced quickly.

Firms are most likely to face intense rivalry with competitors when they:

Have fixed costs, and are in a slow growth industry with high exit barriers

The income (salary plus bonus) of a recent CSU COB graduate employed by Firm XYZ is higher than her/his colleagues; i.e., s/he captures a proportionately high level of the Firm XYZ's profits. Which of the following factors is the best explanation for why this might be?

The cost to the firm of replacing her/him is high.

he resource based view (RBV) of the firm combines two per perspectives:

The internal analysis of the firm as well as the external analysis of the industry and competitive environment.

Strategic management must become both a process and a way of thinking:

Throughout the organization

Strategic groups are (comprise)

A group of firms within an industry that follow similar strategies... While no two firms are exactly the same, it is also true that no two firms are completely different. Strategic groups are clusters of firms that share similar strategies. Strategic groupings help a firm identify barriers to mobility that protect a group from attacks by other groups. They also help chart the future directions of firms' strategies and are helpful in thinking through the implications of each industry trend for the strategic group as a whole. Rivalry tends to be greater among firms that are alike.

A firm controls a resource that is valuable and rare but the potential exists for competitors to either build a capability that imitates it or to develop viable substitutes. This provides a firm with __________________.

A temporary competitive advantage... For a resource to provide a firm with the potential for a temporary competitive advantage, it must have two attributes. First, the resource must be valuable in the sense that it exploits opportunities and/or neutralizes threats in the firm's environment. Second, it must be rare among the firm's current and potential competitors.

A firm can achieve differentiation through:

Adding additional product features, improving brand image, better customer service.

Supplier power tends to be highest in industries with all of the following attributes: (1) the supplier's product is vital to buyers; (2) switching from one supplier to another is very costly, and; (3) there are many suppliers. True or False?

False

The power of a buyer group is increased if the buyer group has less concentration than the supplier group. True or False?

False... A buyer group is powerful when it is concentrated or purchases large volumes relative to seller sales. If a large percentage of a supplier's sales are purchased by a single buyer, the importance of the buyer's business to the supplier increases.

Focus, by itself, often constitutes a competitive advantage. True or False?

False... A focus strategy is based on the choice of a narrow competitive scope within an industry. A firm following this strategy selects a segment or group of segments and tailors its strategy to serve them. The essence of focus is the exploitation of a particular market niche. As you might expect, narrow focus itself (like merely "being different" as a differentiator) is simply not sufficient for above-average performance.

A successful differentiation strategy lowers entry barriers because of customer loyalty and the firm's ability to provide uniqueness in its products and services. True or False?

False... Differentiation provides protection against rivalry since brand loyalty lowers customer sensitivity to price. By increasing a firm's margins, differentiation also avoids the need for a low-cost position. Higher entry barriers result because of customer loyalty and the ability to provide uniqueness in its products or services.

The concept of "shared value" redefines the purpose of the corporation as creating shared value in order to create a more even distribution of the profits to all employees, not just the top-level executives. True or False?

False... Shared value can be defined as policies and operating practices that enhance the competitiveness of a company while simultaneously advancing the economic and social conditions in which it operates. It is not about personal values, nor "sharing" the value created by firms, a redistribution approach. Instead, it is about expanding the total pool of economic and social value.

Examples of tangible resources (in the resource-based view of the firm) include:

Financial resources, physical resources, and technological resources.

Threat of substitute products comes from:

Firms in other industries that produce products or services that satisfy the same customer need.

Many organizations have a large number of functional areas with very diverse, and sometimes competing, interests. Such organizations will be most effective if:

Functional areas work together to attain overall goals... Strategic management requires managers to take an integrative view of the organization and assess how all of the functional areas and activities fit together to help an organization achieve its goals and objectives. This cannot be accomplished if only the top managers in the organization take an integrative, strategic perspective of issues facing the firm and everyone else "fends for themselves" in their independent, isolated functional areas. Instead, people throughout the organization must strive toward overall goals.

Which statement regarding competitive advantages is true?

If several competitors pursue similar differentiation tactics, they may all be perceived as equals in the mind of the consumer... Potential pitfalls of a differentiation strategy include the idea that perceptions of differentiation may vary between buyers and sellers. The issue here is that "beauty is in the eye of the beholder." Companies must realize that although they may perceive their products and services as differentiated, their customers may view them as commodities.

__________ such as trust and effective work teams are typically embedded in unique routines and practices that have evolved and accumulated over time.

Intangible resources... Intangible resources are typically embedded in unique routines and practices that have evolved and accumulated over time. These include human resources (e.g., experience and capability of employees, trust, and effectiveness of work teams).

A marketing department that promises delivery faster than the production department's ability to produce is an example of a lack of understanding of the ____________________.

Interrelationships among functional areas and firm strategies.

Which of these statements regarding the industry life cycle is correct?

It has important implications for a firm's generic strategies, functional areas, value-creating activities, and overall objectives... Industry life cycles are important because the emphasis on various generic strategies, functional areas, value-creating activities, and overall objectives varies over the course of an industry life cycle.

Buyer power will be greater when:

It is concentrated or purchases large volumes relative to seller sales

An advantage based on inimitability won't last forever. Competitors will eventually discover a way to copy the most valuable resources. However, managers can forestall competitors and sustain profits for a while by developing strategies around resources that have at least one of the following four characteristics: _________________________.

Physical uniqueness, path dependency, causal ambiguity, and social complexity.

In the value-chain analysis, the activities of an organization are divided into two major categories of value activities: primary and support. Which of the following is a primary activity?

Repairing the product for the consumer.

Which is considered a force in the "Five-Forces" model?

Rivalry among competing firms... The "five-forces" model describes the competitive environment in terms of five basic competitive forces: the threat of new entrants, the bargaining power of buyers, the bargaining power of suppliers, the threat of substitute products and services, and the intensity of rivalry among competitors in an industry.

Which of the following statements about a company's strategic objectives are correct?

Strategic objectives should be: -SPECIFIC and MEASURABLE -Defined time-frame -Challenging but also REALISTIC -Resolve conflicts that arise -Yardstick for rewards and incentives

The four key attributes of strategic management include the idea that

Strategy must be directed toward overall organizational goals and objectives.

The same environmental trend can often have very different effects on firms within the same industry. True or False?

True... An example would be the rising levels of affluence in many developed countries. This bodes well across the board for brokerage services as well as for upscale pets and supplies. However, this trend may adversely affect fast-food restaurants and economy motels more than fancy bistros and luxury hotels because people can afford to dine and stay at these higher-priced establishments.

Michael Porter argues that: "constant improvement in operational effectiveness is necessary to achieve superior productivity. However, it is not usually sufficient." True or False?

True... Operational effectiveness, performing similar activities as well or better than rivals, is not a strategy. enough to create a unique and valuable position, involving a different set of activities. Strategy involves the creation of a unique and valuable position, involving a different set of activities.

With a focus strategy, creating a niche by differentiating one's product or service often allows small firms to compete successfully with market leaders. True or False?

True... Several firms have successfully implemented focus strategies to compete with larger rivals. For example, Network Appliance (NA) has developed a more cost-effective way to store and distribute computer files. It makes less expensive devices for particular storage jobs such as caching (temporary storage) of Internet content. Focusing on such narrow segments has certainly paid off for NA; it has posted a remarkable 20 straight quarters of revenue growth. Note: This is the fundamental underpinning of a Blue Ocean Strategy.

The more attractive the price/performance ratio of substitute products, the more tightly it constraints an industry's ability to charge high prices. True or False?

True... Substitutes limit the potential returns of an industry by placing a ceiling on the prices that firms in that industry can profitably charge. The more attractive the price/performance ratio of substitute products, the tighter the lid on an industry's profits.

An important advantage of first movers or "pioneers" in a market is that they may establish brand recognition that may later serve as an important switching cost. True or False?

True... There's an advantage to being the "first mover" in a market. It led to Coca-Cola's success in becoming the first soft-drink company to build a recognizable global brand and enabled Caterpillar to get a lock on overseas sales channels and service capabilities.

The primary aim of strategic management at the business level is _______________.

achieving competitive advantage(s)... How firms compete with each other and how they attain and sustain competitive advantages go to the heart of strategic management. In short, the key issue becomes why some firms outperform others and enjoy such advantages over time.

Research has consistently shown that firms that achieve both cost leadership and differentiation advantages tend to perform

higher than firms that achieve either a cost or a differentiation advantage... Research supports the notion that firms that identify with one or more of the forms of competitive advantage outperform those that do not. There has been a rich history of strategic management research addressing this topic. One study found that businesses combining multiple forms of competitive advantage (differentiation and overall cost leadership) outperformed businesses that used only a single form.

The experience curve suggests that cutting prices is a good strategy ____________

if it can induce greater demand and thereby help a firm progress down the experience curve faster... A product's sensitivity to price strongly affects a firm's ability to exploit the experience curve. Cutting the price of a product with high demand elasticity, where demand increases when price decreases, rapidly creates consumer purchases of the new product. So by decreasing price and increasing demand, a firm gains manufacturing experience in that particular product, which drives down per unit production costs.

In the __________ stage of the industry life cycle, the emphasis on product design is very high, the intensity of competition is low, and the market growth rate is low.

introduction... In the introduction stage, products are unfamiliar to consumers. Market segments are not well defined, and product features are not clearly specified. The early development of an industry typically involves low sales growth, rapid technological change, operating losses, and the need for strong sources of cash to finance operations. Since there are few players and not much growth, competition tends to be limited.

Buyer power will be greater when:

it is concentrated or purchases large volumes relative to seller sales... A buyer group is powerful when it is concentrated or purchases large volumes relative to seller sales, the products it purchases from the industry are standard or undifferentiated, the buyer faces few switching costs, or the industry's product is unimportant to the quality of the buyer's products or services.

A differentiation strategy helps a business to address the five competitive forces by

lessening competitive rivalry by distinguishing itself... Differentiation provides protection against rivalry since brand loyalty lowers customer sensitivity to price and raises customer switching costs.

To illustrate interrelationships among different segments of the general environment: The persistence of large U.S. trade deficits (__________) has led to greater demand for protectionist measures, such as trade barriers and quotas (__________). These measures lead to higher prices for U.S. consumers and fuel inflation (__________).

macroeconomic, political/legal, economic... The general environment is divided into six segments: demographic, sociocultural, political/legal, technological, economic, and global.

In the __________ stage of the industry life cycle, there are many segments, competition is very intense, and the emphasis on process design is high.

maturity... In the maturity stage of the industry life cycle, there are many segments, competition is very intense, and the emphasis on process design is high.

A firm following a focus strategy ______________________

must focus on a market segment or group of segments... A focus strategy is based on the choice of a narrow competitive scope within an industry. A firm following this strategy selects a segment or group of segments and tailors its strategy to serve them. The essence of focus is the exploitation of a particular market niche.

A firm can achieve differentiation through all of the following means EXCEPT

offering lower prices to frequent customers... A differentiation strategy consists of creating differences in the firm's product or service offering by creating something that is perceived industry wide as unique and valued by customers. Differentiation can take many forms, including prestige or brand image, technology, innovation, features, customer service, or a dealer network.

All of the following are important elements of the political/legal segment of the general environment

the Americans with Disabilities Act (ADA) increases in the federally mandated minimum wage the deregulation of utilities... Political processes and legislation influence environmental regulations with which industries must comply. Some elements of the political/legal arena include the Americans with Disabilities Act (ADA) of 1990, deregulation of utilities, and increases in the federally mandated minimum wage.