MGT EXAM 2
Slow-cycle markets are markets in which the firm's
competitive advantages are shielded from imitation, commonly for long periods of time, and where imitation is costly
Which of the following may result if Bella's Eatery does not conduct a competitor analysis
formation of competitive blind spots
About six months ago, a mid-sized manufacturer of athletic shoes decided to pursue an integrated cost leadership/differentiation strategy. The company reduced its internal costs by consolidating the number of colors and variations it offers to customers, savings that the company passed on to consumers. At the same time, the research and development (R&D) team added a patented sole to all of its shoes. Which of the following represents the best argument for the company to continue pursuing its current business-level strategy
"It's true we've seen our net sales decline, but our gross profit has increased and our volumes are up year-over-year. Our patent for the sole has been approved, and the legal department says we're good to go on our advertising claims about the new sole."
How is a business model different from a business-level strategy
A business model describes what a firm does while a business-level strategy describes how it does it.
Which of the following scenarios represents a company that has selected a differentiation strategy
A grocery store chain is converting its local neighborhood stores to warehouses. The chain eliminates shopping in the aisles and instead has customers select items online or through an app. The customers can then pick up their items in a drive-through without having to leave their vehicles.
Which of the following might be an alternative definition of business-level strategy
A plan for how the company will compete in its industry against its rivals to achieve a competitive advantage
Which of the following relates to a firm's resources and the flexibility they provide
ABILITY
A software firm has chosen to implement a differentiation strategy, offering its product in a Software as a Service (SaaS) platform with a monthly subscription. Most of the firm's competitors are selling their products as a one-time purchase. Which of the following represents the greatest risk to the strategy
An established competitor has announced it will begin offering its programs in a SaaS model next quarter.
Typically, a diversification strategy is used to _____ the firm's value by _____ its overall performance.
increase; improving
Among firms utilizing a differentiation strategy, which of the following best exemplifies the typical relationship between consumers' brand loyalty and price sensitivity, and the effect it has on a brand's rivalry with competitors
Apple's customers tend to be extremely brand loyal and are thus more tolerant of price increases. However, as Samsung creates increasingly similar products, Apple will have to respond by improving the perceived value of its products.
Michelle opens a residential heating company dedicated to geothermal heating systems. She is pursuing a focused differentiation strategy, serving the needs of customers who are looking for environmentally friendly solutions to heat and cool their homes. Which of the following represents a risk to the company because Michelle is using a focus strategy rather than a broad strategy
As renewable energy continues to gain popularity, mainstream residential heating and cooling companies that are larger and have more resources decide to offer more geothermal options.
Which of the following is an example of multimarket competition
Company A makes tomato sauce sold to consumers in grocery stores and to restaurants. Company B sells tomato sauce to consumers in grocery stores
Car maker BAAS is known for its risky competitive behavior, including drastically changing its prices over short time spans. Based on this information, which of the following is the most likely competitor response
Competitors will be less likely to respond because of BAAS' risky behavior
Which of the following represents a risk for companies pursuing a differentiation strategy?
Competitors' imitation of a product at a lower price causing customers to purchase their product
Which of the following represents a risk for companies pursuing a cost leadership strategy
Competitors' innovations resulting in their ability to drive costs lower
Dan Jones, the owner of Harbor Home Remodeling, has been researching demographic information on homeowners in his area. He has learned that younger people are moving out of the region—a trend that's expected to continue—while middle-aged and older people are remaining in their homes. In order to differentiate his firm and better compete against rival, general remodeling firms in this environment, which strategy would best enable Dan to fulfill his purpose?
Dan should "perform activities differently" and pursue a focused differentiation strategy. He could specialize in remodeling homes to meet the unique needs of aging people, such as installing wheelchair ramps and low-threshold showers.
Which of the following statements about standard-cycle markets is true
Firms' competitive advantages are partially sustainable
Which of the following is an advantage of being part of a slow-cycle market as opposed to a fast-cycle market
In slow-cycle markets, firms can shield themselves from imitation
Sandra is developing a competitor analysis for two florists. Which of the following information in the analysis will be the basis for predicting the competitors' behavior in the form of their competitive actions and responses
Market commonality
Which of the following represents an example of an external incentive for value-neutral diversification?
an organization forced to pursue a new business unit because of changes in tax laws and regulations
Awareness, motivation, and ability are drivers of:
competitive behavior
An industry-leading technology firm utilizing a differentiation strategy has decided to increase prices on its patented product to bolster profit margins and deliver a higher return to investors. Consider the impact of this decision in light of the forces of competition. Which of the following situations should the firm prioritize?
Rivalry with existing competitors
Which of the following strategies could be implemented to improve a company's richness in its customer relationships
Satisfaction surveys following the arrival of a product
A construction company is pursuing a focused differentiation strategy, and after reviewing its core competencies, the leaders have decided to specialize in hospital construction. Which of the following is an example of how that strategy is addressing the bargaining power of buyers (customers)
The company participates in competitive bidding processes, and despite often submitting a higher bid than competitors, it is awarded the job based on its expertise.
Which of the following is an example of a subscription business model
We Craft Box, which delivers monthly craft supplies and instructions for children for about $25 per month
Which of the following statements regarding firms following a differentiation strategy is NOT true
When a firm succeeds at differentiating its products, it acts as a magnet attracting potential new entrants into the market.
Often a company's business-level strategy can be easily identified by reviewing its marketing materials. Consider the marketing slogans of the following companies and identify which one is pursuing a business-level strategy of differentiation
Whole Foods - America's Healthiest Grocery Store
By introducing Google Pay in response to Apple Pay, Google hopes to build and defend its competitive advantages and improve its market position through
competitive behavior
A cost leadership strategy is one in which:
a company uses process innovations, such as advanced production or distribution methods, to operate efficiently.
In which of the following ways does the availability of tangible and intangible resources affect a firm's ability to create value through diversification?
a resource has rarity and value
Ishanti owns the only yoga studio in town. However, a national gym is opening in a few months. Historically, businesses like hers have closed after the national chain opened nearby. Which of the following options should Ishanti implement
a strategic action
A business-level strategy is
an integrated and coordinated set of commitments and actions the firm uses to gain a competitive advantage by exploiting core competencies in a specific product market
A new family-owned organic grocery store has been successful since its grand opening nearly a year ago. With little competition in the area, the organic grocery store has been particularly successful in selling organic food to consumers. The grocer has just found out that Whole Foods will be starting construction on a new store nearby. The grocery store feels that its family ownership and locally grown food offerings give it a position in which to take action against the developing Whole Foods. However, as a small business, the organic grocery store does not have the financial means to launch a rivalry against Whole Foods. In this instance, the organic grocery store is missing which driver of competitive behavior?
ability
Corporate-level strategy is best described as:
actions a firm takes to gain a competitive advantage by selecting and managing a group of different businesses competing in different product markets.
How does diversification and firm size impact top managers of a firm?
as a firm diversifies, its size increases, as does executive compensation.
One constant improvement among smartphones of all brands is camera quality. As soon as Samsung, Google, or Apple introduces an updated phone, the others respond with equal or better quality in their next update. These competitive moves can be encompassed as the _____ of that market
competitive dynamics
Which of the following is an advantage of pursuing diversification by entering into a greenfield venture?
by taking advantage of intangible resources, such as experience and knowledge of a firm, a new business can be established independently with instant ability to create value using those resources.
Awareness affects the extent to which the firm understands the consequences of its
competitive actions and responses
Companies must effectively manage their relationships with customers because
companies must satisfy customers' needs to achieve a competitive advantage.
A fast-food chain, Bob's Bigger Burgers, has just launched a campaign to market its new pound-and-a-half burger against its competitor, Lou's Burgers, who previously sold the biggest burger at a pound and a quarter. Bob's Bigger Burgers' strategic move against Lou's Burgers is a
competitive action
The ongoing set of competitive actions and competitive responses that occurs among firms as they maneuver for an advantageous market position is
competitive rivalry
Rumor has it a new restaurant is coming to town called Italia Noodles. However, the owners are waiting to compare market commonalities and resource similarities to other local Italian restaurants. Italia Noodles is conducting a
competitor analysis
Firms operating in the same market, offering similar products, and targeting similar customers are
competitors
Which of the following is a reason(s) that keeps managers from selfishly diversifying the firm for higher compensation?
concerns for their reputation and strong managerial talent market
Turtlecreek owns a high-end grocery chain, a high-end outdoor gear chain, and a sporting goods chain. Its retail businesses are unrelated; however, the firm hopes to gain an advantage over its competitors by associating its perceived luxury brand with each business. By selecting and managing these various businesses, Turtlecreek is implementing a _____ strategy.
corporate-level
A popular TV network, QTV, wishes to gain a competitive advantage by managing several businesses from its corporate headquarters. Among its goals, QTV hopes to acquire its competitor, RTV, in the process. In this instance, QTV is using which type of strategy?
corporate-level strategy
An oil company develops an innovative refining process that reduces the time required to produce gasoline by 25 percent. The company has identified its unique process as a core competency. Which of the following strategies would be most beneficial for the company to pursue
cost leadership
What are economies of scope?
cost savings a firm creates by successfully sharing resources and capabilities or transferring one or more corporate-level core competencies that were developed in one of its businesses to another of its businesses.
A differentiation strategy is one in which a firm
creates products that have features that customers value and are willing to pay a higher price for.
To be successful, a firm utilizing an integrated cost leadership/differentiation strategy must
increase the number of primary value chain activities and support functions in which it becomes competent.
Intangible resources are more flexible than tangible physical assets in facilitating
diversification
What are the two ways an unrelated diversification strategy can create value through financial economies?
efficient internal capital allocations and the restructuring of acquired assets
Apple quickly launches its next wave of innovative iPhones in order to keep up with competitors, such as Samsung and Microsoft. Imitation is rapid and inexpensive in the smartphone industry. Apple is a part of a _____ market
fast-cycle
As part of its selection of a business-level strategy, a firm will decide which customers it will serve, what needs those customers have that it will satisfy, and
how it will satisfy those customers' needs using its core competencies to implement value-creating strategies.
Which of the following firms is more likely to take competitive action?
if not medium than small??
Which of the following would be a motive for top-level executives to diversify their firm beyond value-creating and value-neutral levels?
increased compensation and reduced managerial risk
A secondhand computer retailer is often mistaken for an IT-help business. As a result, tech-savvy employees of the retailer are often fixing the customers' computer issues when they come into the store. The firm that owns the secondhand computer retailer has decided to diversify and open computer repair shops selling IT services. The retailer is diversifying on the basis of employee knowledge, which is considered a(n) _____ resource.
intangible
What type of financial economy is undertaken to reduce risk among a firm's businesses?
internal capital market allocation
Many companies pursue an integrated cost leadership/differentiation strategy, working to lower cost structures while also enhancing their products and services. To successfully pursue this strategy, companies could
invest in developing total quality management (TQM) systems and improving marketing effectiveness.
A company is looking to diversify as a way to reduce risk and protect against uncertain future cash flow from its core business. These efforts would most likely have which of the following impacts on the firm's value?
it would be value-neutral
External investors allocate capital by taking stakes in businesses with high growth and profitability potential. Which of the following is a disadvantage for external investors?
limited access to information
A single-business diversification strategy and a dominant-business diversification strategy are both examples of what level of diversification?
low level
The number of markets with which a firm and a competitor are jointly involved and the degree of importance of the individual markets to each is referred to as
market commonality
FreeForAll is an online retailer for graphic T-shirts and hats. Previously, it was the only mass retailer for such goods. Hatz, an in-store retailer that sells predominantly baseball hats, has just launched an e-commerce site that also features T-shirts for sale. FreeForAll has decided to respond quickly to Hatz's competitive action. This decision is based on FreeForAll's
market dependence
Apple has been known to sell its products at higher rates than competitors, such as Microsoft, as it has been successful at convincing consumers that Apple products are special and more luxurious in comparison. By accomplishing this, Apple has gained:
market power
As soon as United Parcel Service (UPS) moved into overnight delivery, FedEx's strong point, FedEx bought trucking and ground shipping assets to gain advantage over UPS's strong point. These activities between UPS and FedEx are referred to as:
multi-point competition
Sports Inc. has developed a shoe to compete with Air Jordans. In order to keep up with competitors and minimize competitor market power, the firm decides to sell branded sports equipment as well. By introducing another new business so soon outside of its shoe products, the firm stands to lose value. Sports Inc.'s reason for diversifying itself is to _____ by acquiring a _____.
neutralize another firm's advantage; similar distribution outlet
Southwest Airlines' decision to "perform activities differently" has allowed the organization to differentiate itself from competitors and made it a low-cost leader. Which of the following activities is NOT contributing to the firm's ability to fulfill the purpose of this business strategy?
offering free in-flight meals
Firms use corporate-level strategies for several reasons, including to:
pursue development of a market
Fast-cycle markets are markets in which the firms' capabilities that contribute to competitive advantages aren't shielded from imitation and where imitation is often _____ and _____
rapid and inexpensive
Glow Makeup is a moderately-diversified firm, as it has three main related businesses, including a skin care business, nail polish business, and facial cosmetic business. Its divisions are composed of different products, but they are all related to cosmetics. As a result, the firm maintains many of the same resources and certain activities within each of its operations. Based on this information, Glow Makeup uses a(n) _____ diversification strategy.
related constrained
Which of the following characteristics best describes tactical actions
relatively easy to implement and reverse
FedEx and United Parcel Service (UPS) compete in many of the same markets and have similar types of truck and airplane fleets, similar levels of financial capital, and other similarities. These tangible and intangible resources between the two firms describe the
resource similarity
Cost leadership strategies can be attractive to companies looking to address the competitive force of rivalry with existing competitors because:
rivals are hesitant to slash their own prices to compete with a low-cost leader.
A firm that responds to the first mover's competitive action, typically through imitation, is called a
second mover
With a focus strategy, a company
selects a more narrow group, or niche, of customers on which to concentrate its efforts.
A pharmaceutical company has a patented antidepressant that has few side effects and dominates the market. The company has been conducting research and development (R&D) to improve this drug for several years. The pharmaceutical company would be categorized as part of a _____ market
slow-cycle
Research indicates that a competitive advantage in logistics is a primary strategy that creates the most value for a cost leadership strategy. Which of the following value-creating activities should be a focus for a company pursuing a cost leadership strategy
supply-chain management
Which of the following is a market-based move that firms take to fine-tune a strategy
tactical action
Which of the following is NOT a reason for a firm to respond to a competitor's action
the action damages the firm's ability to use its core competencies to create or maintain an advantage
Differentiation strategies are successful in addressing the competitive force of the bargaining power of suppliers because
the higher margins of the firm can reduce the influence of increases in supplier costs.
A top-level executive of a tire manufacturer is considering diversifying and expanding operations into China, where labor and materials are cheaper. The firm has already diversified itself to double its original number of locations. All of its newest locations have been implemented by the same executive. So far, the return on investment for each of the newer locations is negative. Why might the executive want to open yet another location?
the larger the firm gets, the more compensation the executive will receive, even if no value has been created yet.
The effectiveness of a business-level strategy is contingent on
the opportunities and threats in a firm's external environment and the strengths and weaknesses of a firm's resources.
DOS, a leader in the computer industry, implemented a new strategic action to offer a video streaming service to consumers. The move has proven to be successful. How are competitors likely to respond?
they are likely to imitate the action quickly
Which of the following is a reason why firms with a low level of diversification are often able to earn positive returns?
they can provide superior customer service.
A firm owns several businesses, including a personal loan office and a furniture store. Another standalone personal loan office is suffering financially because of the allocation of its assets. The furniture business decides to buy the standalone personal loan business, restructure its assets, and then sell it as operations resume more successfully. This is an example of:
unrelated diversification
What is the distinction between value-neutral reasons and value-creating reasons for a firm to diversify?
value-neutral reasons seek to help the firm establish a more competitive position, whereas value-creating reasons seek to improve the firm overall.
Steeler Manufacturing uses an unrelated diversification strategy throughout its operations. For instance, Steeler has five core businesses, all of which are unrelated. Each of its businesses is large and indicates Steeler's success in implementing an unrelated diversification as a _____ firm.
very highly diversified
