Management 455 Chapter 6

A vertical integration strategy can expand the firm's range of activities: A. backward into sources of supply and/or forward toward end users. B. backward into other industry business-lines and/or forward to suppliers of raw materials. C. to enable the supply chain the opportunity for expansion. D. to complement the industry's horizontal value chain line of profitability. E. to establish full integration by participating in a tapered integration (without the outsourced and in-house activities).

A. backward into sources of supply and/or forward toward end users.

The range of product and service segments that the firm serves within its market is known as the firm's: A. horizontal scope. B. vertical integration. C. vertical scope. D. product outsourcing. E. joint venture partnership.

A. horizontal scope.

Challenging a struggling rival can do all of the following EXCEPT: A. sap the rival's financial strength and competitive position. B. weaken the rival's resolve. C. accelerate the rival's exit from the market. D. threaten the rival's overall survival in the market. E. strengthen the rival's loyal following.

E. strengthen the rival's loyal following.

Vertical integration strategies: A. extend a company's competitive scope within the same industry by expanding its operations across multiple segments or stages of the industry value chain. B. are one of the best strategic options for helping companies win the race for global market leadership. C. offer good potential to expand 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. area good strategy option for helping a company revamp its value chain and bypass low value-added activities.

A. extend a company's competitive scope within the same industry by expanding its operations across multiple segments or stages of the industry value chain.

The strategic impetus for forward vertical integration is to: A. gain better access to end users and better market visibility. B. achieve the same scale economies as wholesale distributors and/or retail dealers. C. control price at the retail level. D. bypass distributors and dealers and sell direct to consumers at the company's website. E. build a core competence in mass merchandising.

A. gain better access to end users and better market visibility.

Bypassing regular wholesale/retail channels in favor of direct sales and Internet retailing can have appeal if it: A. reinforces the brand, enhances consumer satisfaction, and results in lower prices to end users. B. can result in better coordination of the firm's direct sales activity to wholesalers and distributors C. can establish a retail frontal attack while efficiently managing its backward (defensive) sales orientation. D. combines the best of all sales channels and provides financial support to distribution allies. E. creates a channel conflict, thereby providing competitive improvisation.

A. reinforces the brand, enhances consumer satisfaction, and results in lower prices to end users.

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. Vertical integration backward into parts and components manufacturing can impair a company's operating flexibility when it comes to changing out the use of certain parts and components. C. Vertical integration reduces the opportunity for achieving greater product differentiation. 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. Vertical integration reduces the opportunity for achieving greater product differentiation.

Which 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 to focus on building competitive advantages B. Whether to employ the element of surprise as opposed to doing what rivals expect and are prepared for C. Whether to employ a market share leadership strategy D. Whether to display a strong bias for swift, decisive, and overwhelming actions to overpower E. Whether to create and deploy company resources to cause rivals to defend themselves

C. Whether to employ a market share leadership strategy

A good example of vertical integration is a: A. global public accounting firm acquiring a small local or regional public accounting firm. B. large supermarket chain getting into convenience food stores. C. crude oil refiner purchasing a firm engaged in drilling and exploring for oil. D. hospital opening up a nursing home for the aged. E. railroad company acquiring a trucking company specializing in long-haul freight.

C. crude oil refiner purchasing a firm engaged in drilling and exploring for oil.

Outsourcing the performance of value chain activities presently performed in-house to outside vendors and suppliers makes strategic sense EXCEPT when: A. an activity can be performed better or more cheaply by outside specialists. B. it allows a company to focus its entire energies on its core business. C. it restricts a company's ability to assemble diverse kinds of expertise speedily and efficiently. D. it reduces the company's risk exposure to changing technology and/or changing buyer preferences. E. it allows a company to leverage its key resources.

C. it restricts a company's ability to assemble diverse kinds of expertise speedily and efficiently.

The difference between a merger and an acquisition is that: A. a merger involves one company purchasing the assets of another company with cash, whereas an acquisition involves a company acquiring another company by buying all of the shares of its common stock. B. a merger is the combining of two or more companies into a single corporate entity, whereas an acquisition involves one company (the acquirer) purchasing and absorbing the operations of another company (the acquired). C. in a merger, the companies retain their original names, whereas in an acquisition the name of the company being acquired is changed to be the name of the acquiring company. D. a merger is a combination of three or more companies, whereas an acquisition is a pooling of interests of just two companies. E. a merger involves two or more companies deciding to adopt the same strategy, whereas an acquisition involves one company taking over the strategy-making function of another company.

B. a merger is the combining of two or more companies into a single corporate entity, whereas an acquisition involves one company (the acquirer) purchasing and absorbing the operations of another company (the acquired).

Vertical integration can lower costs by: A. expanding supplier power. B. facilitating the coordination of production flows and avoiding bottlenecks. C. establishing the framework for operating. D. creating control factors across the value chain. E. accommodating shifting buyer preferences.

B. facilitating the coordination of production flows and avoiding bottlenecks.

Mergers and acquisitions: A. are nearly always successful in achieving their desired purpose. B. frequently do not produce the hoped-for outcomes. C. are generally less effective than forming alliances or partnerships with these same companies. 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 achieving cost reductions than in expanding a company's market opportunities.

B. frequently do not produce the hoped-for outcomes.

Which of the following is NOT a potential advantage of backward vertical integration? A. Reduced vulnerability to powerful suppliers (who may be inclined to raise prices at every opportunity) B. Reduced risks of disruptions in obtaining crucial components or support services C. Reduced costs D. Reduced business risk because of controlling a bigger portion of the overall industry value chain E. Increase in a company's differentiation capabilities and perhaps achieving a differentiation-based competitive advantage

D. Reduced business risk because of controlling a bigger portion of the overall industry value chain

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 expand a company's geographic coverage D. To facilitate a company's shift from a broad differentiation strategy to a focused differentiation strategy E. To extend a company's business into new product categories

D. To facilitate a company's shift from a broad differentiation strategy to a focused differentiation strategy

The difference between a merger and an acquisition relates to: A. strategy and competitive advantage. B. the presence of available resources and competitive capabilities. C. whether the end result is related to horizontal or vertical scope. D. creating a more cost-efficient operation out of the combined companies. E. the details of ownership, management control, and the financial arrangements.

E. the details of ownership, management control, and the financial arrangements.

Outsourcing strategies can offer such advantages as: A. increasing a company's ability to strongly differentiate its product and be successful with either a broad differentiation strategy or a focused differentiation strategy. B. obtaining higher quality and/or cheaper components or services, improving a company's ability to innovate, and reducing its risk exposure. C. speeding a company's entry into foreign markets. D. permitting greater use of strategic alliances and collaborative partnerships. E. giving a firm more direct control over the costs of value chain activities.

B. obtaining higher quality and/or cheaper components or services, improving a company's ability to innovate, and reducing its risk exposure.

The two big drivers of outsourcing are: A. an increased ability to cut R&D expenses and an increased ability to avoid the problems of strategic alliances. B. that outsiders can often perform certain activities better or more cheaply, and outsourcing allows a firm to focus its entire energies on those activities that are at the center of its expertise (its core competencies). C. a desire to reduce the company's investment in fixed assets and the need to narrow the scope of the company's in-house competencies and competitive capabilities. D. the ability to avoid capital investments that accompany vertical integration and a desire to reduce the company's risk exposure to changing technology and/or changing buyer preferences. E. that a smaller in-house workforce and a low investment in intellectual capital will produce cost savings.

B. that outsiders can often perform certain activities better or more cheaply, and outsourcing allows a firm to focus its entire energies on those activities that are at the center of its expertise (its core competencies).

Which of the following ways are employed by defending companies to fend off a competitive attack? A. Remain steadfast to current product features and models to ensure resources are not diverted toward unproductive efforts. B. Exclude volume discounts or better financing terms from the strategic response in order to maintain current profitability levels. C. Gain product line exclusivity to force competitors to use other distributors. D. Trimming the length of warranties to save money. E. Stay away from competitor's clients since their loyalty will not allow them to switch.

C. Gain product line exclusivity to force competitors to use other distributors.

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. Experiencing 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. Gaining better access to end users and better market visibility

Which of the following signals would NOT warn challengers that strong retaliation is likely? A. Publicly announcing management's commitment to maintain market share B. Publicly committing to a company policy of matching competitors' terms or pricing C. Maintaining a war chest of cash and marketable securities D. Making a strong counter-response to the moves of weak competitors E. Announcing strong quarterly earnings potential to financial analysts

E. Announcing strong quarterly earnings potential to financial analysts

Which of the following rivals make the best targets for an offensive attack? A. Firms with weaknesses in areas where the challenger is strong B. Companies that are financially strong and possess favorable competitive market positioning C. Large national firms with vast capabilities and intermittent trivial resource deficiencies D. Strong and financially secure market leaders E. Small local and regional firms with unrestrained capabilities

A. Firms with weaknesses in areas where the challenger is strong

Which of the following is NOT a purpose of a defensive strategy? A. To increase the risk of having to defend an attack B. To weaken the impact of any attack that occurs C. To pressure challengers to aim their efforts at other rivals D. To help protect a competitive advantage E. To decrease the risk of being attacked

A. To increase the risk of having to defend an attack

The formation of a new corporation, jointly owned by two or more companies agreeing to share in the revenues, expenses, and control, is known as: A. a joint venture. B. a limited liability company. C. a partnership. D. sole proprietorship. E. an S corporation.

A. a joint venture.

For every emerging opportunity there exists: A. a market penetration curve, and this typically has an inflection point where the business model falls into place. B. an opportunity to achieve first-mover status, which depends on analyzing the competitive status curve where all the potential rivals are encoded. C. an emerging pitfall that is a counterpoint to the intended growth. D. a normal curve scenario which signifies the average growth curve will be opportunistic. E. an intense competition that constrains the company's prospects for rapid growth and superior profitability.

A. a market penetration curve, and this typically has an inflection point where the business model falls into place.

The best strategic alliances: A. are highly selective, focusing on particular value chain activities and on obtaining a particular competitive benefit. B. are those whose purpose is to create an industry key success factor. C. are those which help a company move quickly from one strategic group to another. D. involve joining forces in R&D to develop new technologies, cheaper than a company could develop the technology on its own. E. aim at raising an industry's barriers to entry.

A. are highly selective, focusing on particular value chain activities and on obtaining a particular competitive benefit.

An offensive to yield good results can be short if: A. buyers respond immediately (to a dramatic cost-based price cut or imaginative ad campaign). B. competition creates an appealing new product. C. the technology needs debugging. D. new production capacity needs to be installed. E. consumer acceptance of an innovative product takes time.

A. buyers respond immediately (to a dramatic cost-based price cut or imaginative ad campaign).

Alliance management is considered an organizational capability and: A. develops over time, out of effort and learning. B. decreases a company's knowledge assets. C. creates successful strategic alliances. D. decreases a company's knowledge capabilities. E. rapidly transfers assets into the strategic alliance.

A. develops over time, out of effort and learning.

Mergers and acquisitions are often driven by such strategic objectives as: A. expanding a company's geographic coverage or extending its business into new product categories. B. reducing the number of industry key success factors. C. reducing the number of strategic groups in the industry. D. facilitating a company's shift from a low-cost leadership strategy to a focused low-cost strategy. E. lengthening a company's value chain and thereby putting it in a better position to deliver superior value to buyers.

A. expanding a company's geographic coverage or extending its business into new product categories.

Strategic offensives should, as a general rule, be based on: A. exploiting a company's strongest competitive assets—its most valuable resources and capabilities. B. instigating and executing the chosen strategy efficiently and effectively. C. scoping and scaling an organization's internal and external situation. D. molding an organization's character and identity. E. satisfying the buyer's needs that the company seeks to meet.

A. exploiting a company's strongest competitive assets—its most valuable resources and capabilities.

A primary reason for why mergers and acquisitions sometimes fail is due to the: A. misinterpretation of the cultural differences, like employee disenchantment and low morale, differences in management styles and operating procedures, and operations integration decision mistakes. B. execution of functional and integration activity, while sustaining and capitalizing on the combined sources of revenue. C. development of effective integration plans conducive to employee satisfaction. D. advertising message detailing the merger announcement. E. creation of management-employee programs in order to foster better communication.

A. misinterpretation of the cultural differences, like employee disenchantment and low morale, differences in management styles and operating procedures, and operations integration decision mistakes.

The principal advantages of strategic alliances over vertical integration or horizontal mergers/acquisitions are: A. resource pooling and risk sharing, more adaptive response capabilities, and greater speed of deployment. B. potential profitability of the alliance and related experience-curve economics. C. the facilitation of best practices, more production capacity, and relevant synergistic savings. D. the transactional and relational concept of operating practices and competencies. E. E)material additions to a company's technological capabilities, strengthening of the firm's competitive position, and boosting of its profitability.

A. resource pooling and risk sharing, more adaptive response capabilities, and greater speed of deployment.

When firms are involved in a mix of in-house and outsourced activity in any given stage of the vertical chain, it is called: A. tapered integration. B. partial integration. C. full integration. D. forward integration. E. backward integration.

A. tapered integration.

The Achilles heel (or biggest disadvantage/pitfall) of relying heavily on alliances and cooperative strategies is: A. that partners will not fully cooperate or share all they know, preferring instead to guard their most valuable information and protect their more valuable know-how. B. becoming dependent on other companies for essential expertise and capabilities. C. the added time and extra expenses associated with engaging in collaborative efforts. D. having to compromise the company's own priorities and strategies in reaching agreements with partners. E. the collaborative arrangements will not live up to expectations.

B. becoming dependent on other companies for essential expertise and capabilities.

Strategic alliances are: A. the cheapest means of developing new technologies and getting new products to market quickly. B. collaborative formal arrangements where two or more companies join forces and agree to work cooperatively toward some strategically relevant objective. C. a proven means of reducing the costs of performing value chain activities. D. best used to insulate a company from the impact of the five competitive forces. E. the best way to help insulate a firm from the adverse impacts of industry driving forces.

B. collaborative formal arrangements where two or more companies join forces and agree to work cooperatively toward some strategically relevant objective.

Entering into strategic alliances and collaborative partnerships can be competitively valuable because: A. working closely with outsiders is essential in developing new technologies and new products in virtually every industry. B. cooperative arrangements with other companies are very helpful in racing against rivals to build a strong global presence and/or racing to seize opportunities on the frontiers of advancing technology. C. they represent highly effective ways to achieve low-cost leadership and capture first-mover advantages. D. they are a powerful way for companies to build loyalty and goodwill among customers with diverse needs and expectations. E. they are quite effective in helping a company transfer the risks of threatening external developments to other companies.

B. cooperative arrangements with other companies are very helpful in racing against rivals to build a strong global presence and/or racing to seize opportunities on the frontiers of advancing technology.

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. 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.

Merger and acquisition strategies: A. are nearly always superior alternatives 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. C. are a particularly effective way of pursuing a blue-ocean strategy and an outsourcing strategy. D. seldom are superior alternatives to forming alliances 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. may offer considerable cost-saving opportunities and can also be beneficial in helping a company try to invent a new industry.

For backward vertical integration into the business of suppliers to be a viable and profitable strategy, a company: A. must first be a proficient manufacturer. B. must be able to achieve the same scale economies as outside suppliers and match or beat suppliers' production efficiency with no drop-off in quality. C. must have excess production capacity so that it has an ample in-house ability to undertake additional production activities. D. needs to have a wide product line, so it can supply parts and components for many products. E. should have a distinctive competence in production process technology and at least a core competence in manufacturing R&D.

B. must be able to achieve the same scale economies as outside suppliers and match or beat suppliers' production efficiency with no drop-off in quality.

The extent to which a firm's internal activities encompass one, some, many, or all of the activities that make up an industry's entire value chain system is known as: A. horizontal scale. B. vertical scope. C. outsourcing scope. D. cooperative scaled scope. E. focal scope.

B. vertical scope.

Which of the following is NOT one of the factors that affects whether a strategic alliance will be successful and realize its intended benefits? A. Picking a good partner B. Recognizing that the alliance must benefit both sides C. Minimizing the amount of resources that the partners commit to the alliance D. Ensuring that both parties live up to their commitments E. Structuring the decision-making process so actions can be taken swiftly when needed

C. Minimizing the amount of resources that the partners commit to the alliance

Which of the following is defined as a formal agreement between two or more separate companies in which they agree to work cooperatively toward some common objective? A. Joint venture B. Vertical integration C. Strategic alliance D. Forward integration E. Outsourcing

C. Strategic alliance

What is the goal of signaling a challenger that strong retaliation is likely in the event of an attack? A. To alleviate their fears by committing to reduce the costs of value chain activities B. To cause the challenger to begin the attack instead of waiting C. To dissuade challengers from attacking or diverting them into using less threatening options D. To create collaborative relationships with challengers E. To insulate other firms from adverse impacts resulting from the challenge

C. To dissuade challengers from attacking or diverting them into using less threatening options

Which of the following is NOT a strategically beneficial reason why a company may enter into strategic partnerships or cooperative arrangements with key suppliers, distributors, or makers of complementary products? A. To improve access to new markets B. To expedite the development of promising new technologies or products C. To enable greater opportunities for employee advancement D. To improve supply chain efficiency E. To overcome disadvantages of small production volumes that limit scale economies and low production costs

C. To enable greater opportunities for employee advancement

Backward vertical integration can produce a: A. full integration when activities remain the domain of key suppliers. B. tapered integration if the firm consolidates all activities in-house. C. differentiation-based competitive advantage when activities enhance the performance of the final product. D. focused differentiation strategy when the market is broad and the product is a commodity. E. lower degree of flexibility in accommodating shifting buyer preferences.

C. differentiation-based competitive advantage when activities enhance the performance of the final product.

Companies racing against rivals for global market leadership need strategic alliances and collaborative partnerships with companies in foreign countries to: A. combat the bargaining power of foreign suppliers and help defend against the competitive threat of substitute products produced by foreign rivals. B. help raise needed financial capital from foreign banks and use the brand names of their partners to make sales to foreign buyers. C. get into critical country markets quickly, gain inside knowledge about unfamiliar markets and cultures, and access valuable skills and competencies that are concentrated in particular geographic locations. D. help wage price wars against foreign competitors. E. exercise better control over efforts to revamp the global industry value chain.

C. get into critical country markets quickly, gain inside knowledge about unfamiliar markets and cultures, and access valuable skills and competencies that are concentrated in particular geographic locations.

A company racing to seize opportunities on the frontiers of advancing technology often utilizes strategic alliances and collaborative partnerships to: A. discourage rival companies from merging with or acquiring the very companies that it is partnering with. B. reduce overall business risk and raise entry barriers into the newly emerging industry. C. help master new technologies and build new expertise and competencies, establish a stronger beachhead for participating in the target industry, and open up broader opportunities in the target industry. D. help defeat competitors that are employing broad differentiation strategies. E. enhance its chances of achieving global low-cost leadership.

C. help master new technologies and build new expertise and competencies, establish a stronger beachhead for participating in the target industry, and open up broader opportunities in the target industry.

Relying on outsiders to perform certain value chain activities offers such strategic advantages as: A. ensuring more costly components or services. B. improving the company's inability to innovate by allying with "best-in-class" suppliers. C. reducing the company's risk exposure to changing technology and/or changing buyer preferences. D. increasing the firm's inability to assemble diverse kinds of expertise speedily and efficiently. E. reducing its information technology and operational costs so that organizational flexibility is maintained.

C. reducing the company's risk exposure to changing technology and/or changing buyer preferences.

A strategy of vertical integration can have substantial drawbacks, including: A. whether horizontal integration can limit the performance of strategy-critical activities in ways that increase cost, build expertise, protect proprietary know-how, or increase differentiation. B. raising the firm's capital investment in the industry and increasing business risk, as well as providing less flexibility in accommodating shifting buyer preferences by locking the firm into relying on its own in-house activities. C. the environmental costs of coordinating operations across vertical chain activities. D. loss of technological know-how. E. the difficulties faced in entering outside vertical and horizontal markets.

C. the environmental costs of coordinating operations across vertical chain activities.

The race among rivals for industry leadership is more likely to be a marathon rather than a sprint when: A. new industry or market segments are yet to be developed and create altogether new consumer demand. B. fast followers find it easy to leapfrog the pioneer with even better next-generation products of their own. C. the market depends on the development of complementary products or services that are currently not available, buyers have high switching costs, and influential rivals are in position to derail the efforts of a first-mover. D. entry barriers are high, substitute products or services are readily available, and buyers are prone to negotiate aggressively for better terms and lower prices. E. there are nearly always big advantages to being a slow mover rather than an early mover, especially in regards to avoiding the "mistakes" of first or early movers.

C. the market depends on the development of complementary products or services that are currently not available, buyers have high switching costs, and influential rivals are in position to derail the efforts of a first-mover.

Sometimes it makes sense for a company to go on the offensive to improve its market position and business performance. The best offensives tend to incorporate the following EXCEPT: A. focusing relentlessly on building a competitive advantage. B. applying resources where rivals are least able to defend themselves. C. using a strategic offense to allow the company to leverage its weaknesses to strengthen operating vulnerabilities. D. employing the elements of surprise as opposed to doing what rivals expect and are prepared for. E. displaying a strong bias for swift, decisive, and overwhelming actions to overpower rivals.

C. using a strategic offense to allow the company to leverage its weaknesses to strengthen operating vulnerabilities.

Which of the following is NOT one of the benefits of outsourcing value chain activities presently performed in-house? A. Streamlines company operations in ways that improve organizational flexibility and cuts the time it takes to get new products into the marketplace B. Allows a company to concentrate on its core business, leverage its key resources, and do even better what it already does best C. Helps the company assemble diverse kinds of expertise speedily and efficiently D. Enables a company to gain better access to end users and better market visibility E. Improves a company's ability to innovate

D. Enables a company to gain better access to end users and better market visibility

Which of the following is NOT a typical reason that many outsourcing alliances prove unstable or break apart? A. Anticipated gains may fail to materialize due to an overly optimistic view of the synergies. B. Anticipated gains may fail to materialize due to a poor fit in terms of the combination of resources and capabilities. C. A partner can gain access to a company's proprietary knowledge base, technologies, or trade secrets. D. The partners may disagree over how to divide the profits gained from joint collaboration. E. There is a risk of becoming dependent on other companies.

D. The partners may disagree over how to divide the profits gained from joint collaboration.

What does the scope of the firm refer to? A. The range of activities the firm performs externally and its social responsibility activities B. To gain competitive advantage based on where it locates its various value chain activities C. The firm's capability to employ vertical integration strategies D. The range of activities the firm performs internally and the breadth of its product offerings, the extent of its geographic market, and its mix of businesses E. To prevent foreign competition from affecting the market

D. The range of activities the firm performs internally and the breadth of its product offerings, the extent of its geographic market, and its mix of businesses

In which of the following instances is being a first-mover NOT particularly advantageous? A. When moving first with a preemptive strike makes imitation difficult or unlikely B. When first-time buyers remain strongly loyal to pioneering firms in making repeat purchases C. When early commitments to new technologies, types of components, or emerging distribution channels produce an absolute cost advantage over rivals D. When markets are slow to accept the innovative product offering of a first-mover, and fast followers possess sufficient resources and marketing muscle to overtake a first mover E. When being a pioneer helps build a firm's image and reputation with buyers

D. When markets are slow to accept the innovative product offering of a first-mover, and fast followers possess sufficient resources and marketing muscle to overtake a first mover

In which of the following cases are late-mover advantages (or first-mover disadvantages) NOT likely to arise? A. When the costs of pioneering are much higher than being a follower and only negligible learning/experience benefits accrue to the pioneer B. When the marketplace is skeptical about the benefits of a new technology or product being pioneered by a first-mover C. When the pioneer's products are somewhat primitive and are easily bested by late movers D. When opportunities exist for a blue-ocean strategy to invent a new industry or distinctive market segment that creates altogether new demand E. When technological change is rapid and fast-following rivals find it easy to leapfrog the pioneer with next-generation products of their own

D. When opportunities exist for a blue-ocean strategy to invent a new industry or distinctive market segment that creates altogether new demand

The best reason for investing company resources in vertical integration (either forward or backward) is 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. gain a first-mover advantage over rivals in revamping the industry value chain. D. add materially to a company's technological capabilities, 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 a greater ability to reduce internal operating costs.

D. add materially to a company's technological capabilities, strengthen the company's competitive position, and/or boost its profitability.

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. can suffer culture clash and integration problems due to different management styles and business practices. E. are rarely useful in helping a company win the race for global industry leadership.

D. can suffer culture clash and integration problems due to different management styles and business practices.

A blue-ocean strategy: A. is an offensive strike employed by a market leader that is directed at pilfering customers away from unsuspecting rivals to boost profitability. B. involves an unexpected (out-of- the-blue) 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. involves abandoning efforts to beat out competitors in existing markets and instead invent 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 highly creative, never-used-before strategic moves to attack the competitive weaknesses of rivals.

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

Which of the following is NOT a principal offensive strategy option? A. Leapfrogging competitors by being first to market with next-generation products B. Using hit-and-run or guerrilla warfare tactics to grab sales and market share C. Launching a preemptive strike to secure an advantageous position that rivals are prevented or discouraged from duplicating D. Pursuing continuous product innovation to draw sales and market share away from rivals E. Being the final competitor to market a next-generation product so as to guarantee the product is operationally sound

E. Being the final competitor to market a next-generation product so as to guarantee the product is operationally sound

Any company that seeks competitive advantage by being a first-mover must ask several hard questions prior to executing its strategy. Which question would it NOT ask? A. Does market takeoff depend on the new development of complementary products? B. Is a new infrastructure required before buyer demand can surge? C. Will buyers encounter high switching costs to move? D. Are there influential competitors in a position to delay or derail the efforts? E. Did the company pour too many resources into getting ahead of the market opportunity?

E. Did the company pour too many resources into getting ahead of the market opportunity?

All firms are subject to offensive challenges from rivals. Which of the following is NOT among the intent of the best defensive move? A. Lower the risk of being attacked B. Weaken the impact of any attack that occurs C. Pressure challengers to aim their efforts at other rivals D. Help protect a competitive advantage E. Harm the firm's competitive position

E. Harm the firm's competitive position

Which of the following is NOT among the intended outcomes of horizontal merger and acquisition strategies? A. Expanding a company's geographic coverage B. Gaining quick access to new technologies or complementary resources and capabilities C. Leading the convergence of industries whose boundaries are being blurred by changing technologies and new market opportunities D. Extending the company's business into new product categories E. Suppressing a rival's breakthroughs in management or technology

E. Suppressing a rival's breakthroughs in management or technology

Which of the following is NOT a factor that makes an alliance "strategic" as opposed to just a convenient business arrangement? A. The alliance is critical to the company's achievement of an important objective. B. The alliance helps block a competitive threat. C. The alliance helps open up important new market opportunities. D. The alliance helps build, enhance, or sustain a core competence or competitive advantage. E. The alliance helps the company obtain additional financing on better credit terms.

E. The alliance helps the company obtain additional financing on better credit terms.

Which of the following is NOT an example of a company that uses blue-ocean market strategy? A. eBay's online auction industry B. NetJets' fractional jet ownership C. Drybar's hair blowouts D. Cirque de Soleil's live entertainment E. Walmart's logistics and distribution

E. Walmart's logistics and distribution

An alliance becomes "strategic" as opposed to just a convenient business arrangement when it serves all of the following strategic purposes EXCEPT: A. builds, sustains, or enhances a core competence or competitive advantage. B. blocks a competitive threat. C. increases the bargaining power of alliance members over suppliers or buyers. D. opens up important new market opportunities. E. contracts out certain value chain activities that are normally performed in-house to outside vendors.

E. contracts out certain value chain activities that are normally performed in-house to outside vendors.

A company that has greater success in managing its strategic alliance can credit all of the following, EXCEPT: A. establishing strong interpersonal relationships to facilitate communication. B. incorporating contractual safeguards. C. making opportunities for learning a routine management process. D. establishing a system to manage alliances in a systematic fashion. E. creating organizational learning barriers across boundaries.

E. creating organizational learning barriers across boundaries.

Capturing the benefits of strategic alliances is not easy, but success generally is a function of all of the following factors, EXCEPT: A. being sensitive to cultural differences B. managing the learning process and allowing for emerging circumstances C. picking a good partner with good chemistry D. recognizing that the alliance must benefit both sides E. ensuring the division of work is directly apportioned to appropriate skill sets

E. ensuring the division of work is directly apportioned to appropriate skill sets

The principal offensive strategy options include all of the following EXCEPT: A. using a cost advantage to attack competitors on the basis of lower price or better product value. B. using hit-and-run or guerrilla warfare tactics to grab sales and market share from complacent or distracted rivals. C. launching a preemptive strike to secure an advantageous position that rivals are prevented or discouraged from duplicating. D. pursuing continuous product innovation to draw sales and market share away from less innovative rivals. E. initiating a market threat and counterattack simultaneously to effect a distraction.

E. initiating a market threat and counterattack simultaneously to effect a distraction.

An outsourcing strategy: A. is nearly always a more attractive strategic option than merger and acquisition strategies. B. carries the substantial risk of raising a company's costs. C. carries the substantial risk of making a company overly dependent on its suppliers. D. increases a company's risk exposure to changing technology and/or changing buyer preferences. E. involves farming out certain value chain activities presently performed in-house to outside vendors.

E. involves farming out certain value chain activities presently performed in-house to outside vendors.

Being first to initiate a particular strategic move can have a high payoff in all of the following EXCEPT when: A. pioneering helps build up a firm's image and reputation and creates strong brand loyalty. B. buyers remain strongly loyal to pioneering firms because of incentives and switching costs barriers. C. there is a steep learning curve and when learning can be kept proprietary. D. moving first can constitute a preemptive strike, making imitation extra hard or unlikely. E. market uncertainties make it difficult to ascertain what will eventually succeed.

E. market uncertainties make it difficult to ascertain what will eventually succeed.

Once a company has decided to employ a particular generic competitive strategy, then it must make the following additional strategic choices, EXCEPT whether to: A. focus on building competitive advantages. B. employ the element of surprise as opposed to doing what rivals expect and are prepared for. C. display a strong bias for swift, decisive, and overwhelming actions to overpower rivals. D. create and deploy company resources to cause rivals to defend themselves. E. pay special attention to buyer segments that a rival is already serving.

E. pay special attention to buyer segments that a rival is already serving.

A company that fails to manage its strategic alliance probably has: A. incorporated contractual safeguards. B. made opportunities for learning a routine management process. C. created a system to manage alliances in a systematic fashion. D. established strong interpersonal relationships and established trust. E. refrained from making commitments to its partners and ensured they do the same.

E. refrained from making commitments to its partners and ensured they do the same.

First-mover disadvantages (or late-mover advantages) rarely ever arise when: A. the costs of pioneering are much higher than being a follower and only negligible learning/experience curve benefits accrue to the pioneer. B. rapid market evolution gives fast followers an opening to leapfrog the pioneer with next-generation products of their own. C. the pioneer's products are somewhat primitive and do not live up to buyer expectations, allowing clever followers to win disenchanted buyers with better-performing products. D. the marketplace is skeptical about the benefits of a new technology or product being pioneered by a first-mover. E. the market response is strong and the pioneer gains a monopoly position that enables it to recover its investment.

E. the market response is strong and the pioneer gains a monopoly position that enables it to recover its investment.

Because when to make a strategic move can be just as important as what move to make, a company's best option with respect to timing is: A. to be the first mover. B. to be a fast follower. C. to be a late mover (because it is cheaper and easier to imitate the successful moves of the leaders and moving late allows a company to avoid the mistakes and costs associated with trying to be a pioneer—first-mover disadvantages usually overwhelm first-mover advantages). D. to be the last-mover—playing catch-up is usually fairly easy and almost always is much cheaper than any other option. E. to carefully weigh the first-mover advantages against the first-mover disadvantages and act accordingly.

E. to carefully weigh the first-mover advantages against the first-mover disadvantages and act accordingly.

A strategy of vertical integration can have both important strengths and weaknesses depending on all of the following, EXCEPT: A. whether it can limit the performance of strategy-critical activities in ways that increase cost, build expertise, protect proprietary know-how, or increase differentiation. B. the impact on investment costs, flexibility, and response times. C. the administrative costs of coordinating operations across more vertical chain activities. D. how difficult it will be for the company to acquire the set of skills and capabilities needed to operate in another stage of the vertical chain. E. whether competitors outsource any of their value chain activities.

E. whether competitors outsource any of their value chain activities.