MNGT 4800 Test 3

In the ______ quadrant of the core competence--market matrix, the focus is on leveraging current core competencies to improve current market position.

existing competence--existing market

During the decline stage of the industry life cycle, which strategic option requires firms to declare bankruptcy or undergo liquidation or divestment?

exit

The concept of a(n) ______ attempts to combine both learning effects and process improvements.

experience curve

Which of the following accurately describes the relationship between value and cost that would suggest that firm A has created a competitive advantage over firm B?

(V - C)A > (V - C)B

A real option gives a firm the right to continue making investments ______.

but does not obligate the firm to do so

Which customer segment enter the market in the growth stage of the industry life cycle?

early adopters

Knowledge that can be codified is also called ______ knowledge.

explicit

Non-equity alliances tend to share ______, which allows the firms to understand a certain process or product.

explicit knowledge

A firm must decide whether to build, borrow, or buy to answer the question of ______.

how it will achieve growth

Positive adjustments in product features, customer service, and complements may enable managers to ______.

improve the firm's strategic position

A firm's strategic position is determined by the relationship of which two variables?

value creation and cost

When companies get involved in a bidding war and the winner overpays for the acquisition, the acquiring company has fallen victim to the ______.

winner's curse

In order to build alliance management capabilities in small companies, it is recommended that firms take the ______ approach.

"learning-by-doing"

What are some advantages of strategic alliances?

- They might give companies a competitive advantage. - They help firms achieve goals faster than they would alone.

Why might a firm want to enter into an equity alliance instead of a short- or long-term contract?

- To signal greater commitment to the partnership. - To take partial ownership in the other partner by buying stock or assets.

What are the phases of alliance management?

- alliance design and governance - partner selection and alliance formation - post-formation alliance management

A firm with alliance management capability is able to effectively manage which of the following tasks?

- alliance design and governance - post-formation alliance management - partner selection and alliance formation

Eli Lilly, a company known for its alliance management, manages its alliances using a three-person team consisting of which of the following?

- an alliance manager - an alliance champion - an alliance leader

What are advantages of organizing economic activity inside of a firm?

- command-and-control decisions - the creation of a community of knowledge - transaction-specific investments

What are the costs associated with related-diversification strategies?

- coordination costs - influence costs

Which of the following are the four underlying strategic management concepts that determine the scope of a firm?

- core competencies - economies of scope - transaction costs - economies of scale

Which of the following forms of agreement do non-equity alliances typically take?

- distribution - licensing - supply

Amazon's explosive success is largely due to which of the following?

- diversification - vertical integration

Which of the following is true of firms' acquisition and integration capabilities?

Some firms can consistently use mergers and acquisitions to increase their competitive advantage.

Which statement about innovations is true?

Some innovations that initially fail can be put to use in other industries or for other purposes.

______ are unique assets with high opportunity cost.

Specialized assets

Why does Facebook acquire startups?

Strategic preemption

______ is a way of orchestrating value activities in which a firm is backwardly or forwardly integrated and relies on outside-market firms for supplies or distribution.

Taper integration

Which term is used for the customer segment in the introductory stage of the industry life cycle?

Technology enthusiasts

Which of the following statements about the make-or-buy continuum is true?

The "make" and "buy" choices anchor each end of the continuum.

A(n) ______ is a voluntary arrangement between firms that involves sharing of resources and capabilities with the intent of developing processes, products, or services.

strategic alliance

Long-term contracts are classified as ______.

strategic alliances

A state university hires an outside firm to develop and maintain their human resource system. This is called ______.

strategic outsourcing

A firm's strategic profile based on value creation and cost is called its ______.

strategic position

In a focused cost-leadership strategy, a firm provides ______.

low-cost products to a niche market

Furniture retailer IKEA has used the value innovation framework of ______ to successfully implement a blue ocean strategy.

eliminate-reduce-raise-create

When pursuing a differentiation strategy, a firm can achieve a competitive advantage by ______.

ensuring that its economic value exceeds that of its competitors

Marriott offers different hotels that cater to different types of travelers (e.g., Residence Inn, Marriott Courtyard, Marriott Fairfield Inn). What is this an example of?

how a firm can compete by offering more perceived value at a similar price

An auto manufacturer that has access to cheaper labor and raw materials than its rivals will have a competitive advantage regarding lower cost of ______ factors.

input

In the relationship between per-unit cost and output, the minimum efficient scale ______.

is where the per-unit cost is lowest

The persons responsible for forming corporate-level strategy are the ______.

executives

What is the main goal of corporate venture capital investments?

to create real options in terms of gaining access to new technologies

Why do incumbent companies enter into strategic alliances with startups?

to hedge against uncertainty

What is the purpose of the core competence-market matrix?

to provide guidance regarding how to diversify in order to grow the company

Which of the following is a reason why a firm needs to grow?

to reduce risk

______ costs are all of the costs associated with an economic exchange.

transaction

Which of the following is the term for the costs associated with an economic exchange?

transaction costs

Unlike short-term contracts, long-term contracts encourage firms to make ______ investments.

transaction-specific

What is an advantage of a firm in organizing economic activity?

transaction-specific investments

Google's choice to hire programmers in-house suggests that they decided that the ______ costs associated with this strategy are ______ than the costs associated with contracting in the open market.

transaction; lower

It can be riskier to own parts of the supply chain than to rely on external supply chains.

true

True or false: Tesla's high stock market valuation is partly justified by the company's learning curve.

true

If an alliance between two firms succeeds, it is likely that the firms in the alliance ______.

trust each other

A conglomerate fits which type of corporate diversification model?

unrelated diversification

Which type of strategy is being used if a company offers a product at a lower cost than its competitors?

cost-leadership strategy

According to the ______ rule, increasing the surface area (size) of a storage unit or retail facility results in a disproportionate increase in volume (space).

cube square

A firm that offers a liberal return policy and free shipping on goods ordered online hopes to increase its perceived value by focusing on ______.

customer service

Managers can increase the perceived value of their firms' product or service offerings by focusing on ______.

customer service

The Ritz-Carlton provides a personalized customer experience based on sophisticated analysis of data gathered about each guest. This focus on ______ allows the hotel to increase its perceived value.

customer service

A(n) ______ strategy may fail when the focus of the competition shifts to price rather than unique product features

differentiation

Which of the following are business strategies JetBlue pursued in order to gain a competitive advantage?

differentiation and cost-leadership

A firm that increases its output of a given product and experiences a simultaneous decrease in per unit costs is taking advantage of Blank______.

economies of scale

Patti's Potato Chips is a national potato-chip manufacturer. Calpurnia's Crisps is a small-batch gourmet potato-chip maker. Based on just this information, which of the following is the greatest advantage Patti's has over Calpurnia's?

economies of scale

What is a true statement about strategic alliances?

They have a high failure rate.

A(n) ______ strategy attempts to increase the perceived value of a product while controlling costs.

differentiation

In the taper integration system, a firm has ______ reliance on outside markets.

some

Horizontal integration can reduce ___.

the threat of entry

What are the components of post-formation alliance management?

- Establish knowledge-sharing routines. - Make relation-specific investments. - Build inter-firm trust.

Which statements correctly describe the advantages commonly possessed by firms in licensing agreements?

- Established firms typically have an innovation advantage. - Startups often possess an invention advantage.

Which bodies regulate mergers and acquisitions?

- European Commission - Federal Trade Commission

What are some managerial advantages of building a firm into a large organization?

- Increased power - More job security - Greater prestige

What are the two main motivations behind restructuring?

- It allows higher-performing units to be more agile and pursue growth opportunities. - It enables the firm to spin out underperforming units.

Which of the following are true of alliance management capability?

- It involves alliance design and governance. - It involves partner selection and alliance formation.

How does horizontal integration affect Porter's Five Forces for the surviving firms?

- It reduces the threat of entry. - It reduces rivalry among existing firms.

Strategy scholars believe that firms should create a dedicated alliance function with which of the following features?

- It should have its own resources and support staff. - It should be led by a vice president or director of alliance management.

What are the components of post-formation alliance management?

- Make relation-specific investments. - Build inter-firm trust. - Establish knowledge-sharing routines.

Which of the following statements about the industry life cycle are true?

- Not all industries go through the entire life cycle. - Industries can be rejuvenated, even during the decline stage.

What are true statements about mergers and acquisitions?

- Some firms are able to successfully complete mergers and acquisitions. - There is an unequal distribution of acquisition and integration capabilities across firms.

What are common reasons a firm might pursue a merger?

- Superior acquisition and integration capability. - The desire to overcome competitive disadvantage. - Principal-agent problems.

What are downsides of equity alliances?

- The amount of investment involved - The time and effort for assembling the partnership

What are the three dimensions along which executives formulate corporate strategy?

- The degree of vertical integration - The geographic scope - The type of horizontal diversification

Which statements correctly describe licensing agreements?

- They are contractual alliances between firms. - Participants focus on their own comparative advantages. - Licensing agreement partners frequently exchange codified information.

Which statements about joint ventures are true?

- They involve the sharing of both explicit and tacit knowledge. - They are the least common of the three types of strategic alliances.

Corporate strategy needs to be dynamic over time in order to allow firms to do which of the following?

- diversify to capture growth opportunities - keep and maintain a competitive advantage - respond to the ever-changing external environment

What are the three mechanisms that alliances can be governed by?

- equity alliances - non-equity alliances - joint ventures

Which of the following are types of vertical integration along the industry value chain?

- forward - backward

Long-term contracts include which of the following forms?

- franchising - licensing

What does taper integration allows firms to do?

- gain knowledge from external sources - be more flexible when responding to market changes such as fluctuations in demand

Advantages of organizing economic activity at the market level include which of the following?

- high-powered incentives - increased flexibility

What are the risks of vertical integration?

- increased costs - reduced flexibility - reduced quality

Sources of costs in a horizontal integration strategy include which of the following?

- integration failure - reduced flexibility

Which of the following are the three choices in the Build-Borrow-Buy framework?

- internal development - acquisition of new resources - strategic alliances

Which of the following are alternatives on the make-or-buy continuum?

- joint ventures - equity alliances

What three of the following are the primary benefits of horizontal integration?

- lower costs - increased differentiation - a reduction in competitive intensity

Stages four and five of the industry value chain involve which of the following?

- marketing - after-sales service and support - sales

What are the most important core competencies for competitive advantage in the growth stage?

- marketing capabilities - manufacturing capabilities

What are the most expensive, complicated, and difficult to undo options used to grow a firm?

- mergers - acquisitions

What are the four quadrants of the core competence-market matrix?

- new competencies with existing markets - existing competencies with existing markets - new competencies with new markets - existing competencies with new markets

What are three advantages of equity alliances?

- possible emergence of trust and commitment - a window into new technology (option value) - stronger ties

Which of the following are the types of general diversification strategies?

- product - product-market - geographic

During the growth stage of the industry life cycle, firms focus on process innovation in order to do which of the following?

- reduce per-unit production costs - increase production volume

Advantages of vertical integration include which of the following?

- reducing costs - bettering quality - facilitating scheduling

What are sources of value creation in a horizontal integration strategy?

- reduction in competitive intensity - lower costs

What are the main types of corporate diversification?

- related diversification - dominant business diversification - single business diversification - unrelated diversification

The Boston Consulting Group growth-share matrix locates a firm's individual SBUs in which of the following dimensions?

- relative market share - speed of market growth

The forms of specialized assets include which of the following?

- site specificity - physical-asset specificity - human-asset specificity

Which of the following are advantages of joint ventures?

- strong ties - trust - commitment

The two alternatives to vertical integration are which of the following?

- taper integration - strategic outsourcing

Which two customer segments make up the largest percentage of the market potential?

- the early majority - the late majority

The ______ is a corporate planning tool in which the corporation is viewed as a portfolio of business units.

Boston Consulting Group (BCG) growth-share matrix

First-mover disadvantages can include which of the following?

- the need to find distribution channels - the need to educate potential customers about the product's benefits - the need to continuously perfect a product

Why might a firm create a joint venture when entering a new geographic market?

- to access local contacts - to adhere to local law - to access local expertise

Which of the following are reasons to pursue horizontal integration as a corporate strategy?

- to enhance their economic value creation - to provide such benefits as complementary products in their offering - to lower costs

Which of the following are among the reasons firms need to grow?

- to motivate management - to increase profits

Which characteristics always change as the industry life cycle progresses?

- type of customer - capabilities of competitors - number and size of competitors

What can companies do to get the benefits of vertical integration without the accompanying risks?

- use taper integration - choose strategic outsourcing

What best describes a spinout?

A division is separated from the rest of the company and is turned into a new, stand-alone corporation.

How do mergers and acquisitions differ?

A merger describes the joining of two independent companies, while an acquisition describes the purchase or takeover of a firm.

What is a major problem for between 30% and 70% of all strategic alliances?

At least one partner in the alliance considers the venture to be a failure.

A conceptual model that helps strategists choose between seeking internal development, entering into an alliance, or acquiring new resources, capabilities, and competencies is called the "______ framework."

Build-Borrow-Buy

Which of the following best exemplifies a company that successfully uses a differentiation strategy?

Company X strengthens its brand by marketing a product with an innovative feature.

Which type of cost in a related-diversification strategy is a function of the number, size, and types of businesses that are linked?

Coordination

______ strategy involves the decisions that senior management makes and the goal-directed actions it takes to gain and sustain competitive advantage in several industries and markets simultaneously.

Corporate

What is one of the benefits of pursuing a differentiation strategy when it comes to the power of suppliers?

Differentiation provides protection against an increase in input prices.

______ refers to an increase in the variety of products and services a firm offers or markets and the geographic regions in which it competes.

Diversification

______ are partnerships in which at least one partner takes partial ownership in the other partner.

Equity alliances

True or false: According to studies, companies with taper integration tend to have inferior financial performance and lower levels of innovation than ones with more vertical integration.

False

True or false: Businesses evolve through each stage in the industry life cycle.

False

True or false: Firms tend to enter strategic alliances when they have no other choice.

False

True or false: Once an innovation has failed, it is a waste of time to try to apply it to other situations.

False

True or false: The industry value chain is also called the horizontal value chain.

False

How do foreign governments typically influence a firm's use of strategic alliances to enter new markets?

Governments may require that foreign firms have a local joint venture partner in order to conduct business within the country's borders.

Business-level strategy addresses which overarching question?

How should we compete?

______ is a situation in which one party has more knowledge than another due to the possession of private knowledge.

Information asymmetry

What is an important aspect of alliance success?

Inter-organizational trust

What is the shape of the relationship between the level of diversification and performance?

Inverted U

How does Lyft benefit from its strategic alliances with GM and Waymo?

It allows Lyft to more effectively compete against Uber.

Which of the following is true of tacit knowledge?

It can only be acquired through actively participating in the process.

In what way does the strategic alliance between GM and Lyft allow GM to hedge against uncertainty?

It gives GM access to the market of the future, in which private car ownership model is likely to shift in favor of fleet ownership and management.

Which of the following is a disadvantage of a joint venture?

Knowledge shared with the new partner could be misappropriated by opportunistic behavior.

Which of the following is true regarding the government and horizontal integration?

Large horizontal integration activity typically needs to be approved by government authorities.

Which of the following statements about the maturity stage of the industry life cycle is true?

Only a few large firms remain.

Peter's Pans makes cast-iron cookware. It decides to acquire another similar-sized cast-iron cookware company in the hope that its larger size will enable it to snag some market share away from Iron Maiden, the industry leader. What is Peter's Pans strategy?

Peter's Pans is trying to overcome competitive disadvantage.

______ refers to the assets whose physical and engineering properties are designed to satisfy a particular customer.

Physical-asset specificity

The development of most industries follows a(n)

S-curve

The development of most industries follows a(n) ______.

S-curve

Baby Buggy Baby sells high-end baby strollers. In an attempt to maintain its competitive advantage, the firm began adding additional features to its strollers. Customers liked these features and sales increased, but the company's profit margins shrank. Which of the following is the likely reason for this?

The firm neglected to control costs.

Which of the following best defines economies of scope?

They are the savings that come from producing two or more outputs at less cost than producing each output individually.

In terms of productivity, which of the following is true of learning curves?

They go down.

Which of the following statements about equity alliances is true?

They require larger investments than non-equity alliances.

______ is a theoretical framework that helps explain and predict the boundaries of the firm.

Transaction cost economics

True or false: A horizontal integration strategy leads to industry consolidation.

True

True or false: A major reason why a firm may choose a related diversification strategy is to take advantage of both economies of scale and of scope.

True

True or false: According to the make-or-buy continuum, strategic alliances are more integrated than short-term contracts.

True

True or false: Because the size of organizations is typically positively correlated with prestige, power, and pay, principal-agent problems might be a reason to pursue M&As.

True

True or false: Firms can use strategic alliances to strengthen their competitive advantage when competing in battles to control industry standards.

True

True or false: Industries often tend to follow a predictable industry life cycle.

True

True or false: Once a standard is reached, process innovations occur more often than product innovations.

True

True or false: Related diversification is more likely to generate incremental value than unrelated diversification.

True

True or false: The chasm separating the early adopters from the early majority is the largest.

True

Which framework can companies use to assess whether their internal resources are superior to those of competitors in the targeted area?

VRIO framework

Which of the following is a fundamental corporate-level strategic decision?

What products and services should the firm offer?

Firms that pursue an unrelated diversification strategy and are unable to create additional value tend to experience which of the following?

a diversification discount

Olivia's, an olive oil company, grows and harvests olives, makes olive oil, and distributes its olive oil to its retail shop. Olivia's is an example of Blank______.

a fully vertically integrated company

Which of the following occurs when a targeted firm is unwillingly acquired?

a hostile takeover

Kava Botanicals, a boutique retailer that sells high-end makeup and accessories, is owned by two makeup manufacturers. Kava Botanicals is an example of which type of strategic alliance?

a joint venture

Which of the following is an example of the principal-agent problem even when the principal's goal is to create shareholder value?

a manager flying first class on all business trips

Which approach to strategic decision making takes a larger investment decision and divides it into multiple smaller decisions that happen over time?

a real-options perspective

What allows firms to manage both strategic alliances and mergers and acquisitions?

a relational capability

Which of the following did Kraft see as an advantage of integration with Cadbury?

access to new markets

Strategists can grow their firms by growing organically through internal development or externally through alliances and ______.

acquisitions

During the shakeout stage of the industry life cycle, profits degrade for ______.

all but the most efficient firms

In a fully vertically integrated organization, ___.

all stages of the industry value chain are conducted within the firm

In a fully vertically integrated organization, ______.

all stages of the industry value chain are conducted within the firm

Which term refers to a company's ability to handle the three specific tasks related to an alliance concurrently and effectively?

alliance management capability

What type of arrangement did Coca-Cola form with Monster in 2014?

an equity alliance

At which level of the corporation should strategic alliances and mergers and acquisitions be managed?

at the corporate level

During the shakeout stage of the industry life cycle, process innovation ______.

becomes more important

Process

biotechnology

In general, if a resource is highly tradable, then it should be ______ using a license or contractual agreement.

borrowed

Internal development should occur when the firm's resources are ______ to those of competitors in the targeted area.

both similar and superior

How can horizontal integration increase product differentiation?

by filling the empty spaces in a firm's offerings

The introductory stage of the industry life cycle is often a ______-intensive process.

capital

A firm might want to use a strategic alliance to ___.

change the industry structure

A firm might want to use a strategic alliance to ______.

change the industry structure

Transaction cost economics help managers do which of the following?

choose which activities to carry out within the firm

When competitors enter strategic alliances and become collaborators, ______ ensues and can result in learning races.

co-opetition

Which of the following terms is used to describe cooperation by competitors?

co-opetition

During the decline stage of the industry life cycle, product innovation efforts ______.

come to a halt

How willing the firms in an alliance are to share necessary resources and make sacrifices in the name of long-term rewards is referred to as partner ______.

commitment

How well the firms in an alliance fit together culturally is referred to as partner ______.

compatibility

According to the Boston Consulting Group matrix, cash cows are SBUs that do which of the following?

compete in a low-growth market but have high market share

The explosive growth of the Apple iPhone was due in part to the network effects created by ___.

complementary apps

Benny's Baos is in a declining industry, but Benny thinks he can still survive by buying his competitors. Which strategic option is he planning to use?

consolidate

The four strategic options that managers have in the decline stage are: exit, harvest, maintain, or ______.

consolidate

"Which national markets should the firm compete in?" is an example of a ______-level strategic question.

corporate

The key question of where to compete is addressed by ______.

corporate strategy

When an established firm makes an equity investment in an entrepreneurial venture it is known as a(n) ______ investment.

corporate venture capital

A firm has a core competency in R&D but little else, so it enters into a strategic alliance with a larger firm to gain distribution channels and marketing expertise. In this case, distribution channels and marketing expertise would be examples of ______.

critical complementary assets

Marketing, manufacturing, and after-sale service are examples of ___.

critical complementary assets

Marketing, manufacturing, and after-sale service are examples of ______.

critical complementary assets

Which of the following would be as a result of information asymmetry?

crowding out of desirable goods and services by inferior ones

In order to assess whether ______ is working, managers can ask if the individual businesses are worth more under the firm's management or if they are worth more under individual management.

diversification

A struggling retailer seeking to implement a blue ocean strategy is likely to experience difficulty with ______.

cutting costs and increasing value at the same time

Demand falls most rapidly in the ______ stage of the industry life cycle.

decline

Economies of scale are ______.

decreases in cost per unit as output increases

On average, mergers and acquisitions ______ shareholder value.

destroy

Zipster is a local manufacturer of athletic shoes. Zipster has decided it wants to expand to global markets and to offer a larger selection of items. It plans to offer not just athletic shoes but also luggage and car accessories. Zipster is engaging in ______.

diversification

A(n) ______ is a situation in which the stock price of a highly diversified firms is valued as less than the sum of their individual business units.

diversification discount

In the Boston Consulting Group matrix, ______ hold the small market share in a low-growth market.

dogs

It is challenging for firms to "cross the chasm" because ______.

each stage of the industry life cycle features a different group of customers with different preferences and demands

According to the crossing-the-chasm framework, the largest difference in consumer expectations is between ___.

early adopters and the early majority

According to the crossing-the-chasm framework, the largest difference in consumer expectations is between ______.

early adopters and the early majority

A significant difference between technology enthusiasts and early adopters is that ______.

early adopters are interested in how a new technology will improve their lives, rather than in the details of the technology itself

The customers coming into the market in the shakeout stage are called ___.

early majority

How to compete on a business level is defined by the variables value and cost. Together they define the ______.

economic value created

Firms are motivated to grow so that they achieve ___ of ___, which is when their average costs decrease as their output increases.

economies of scale

One reason why firms pursue growth is to lower their costs, which they achieve through ______, which drives down average costs as output increases.

economies of scale

Product

electric vehicle

Which of the following is the best option if a company wants to show strong commitment to a partner firm without acquiring that firm?

equity alliance

The key objective for firms in the growth stage of the industry life cycle is ______.

establish a strong strategic position so that rivals cannot imitate it easily

The primary objective of firms during the introductory stage of the industry life cycle is to ______.

establish themselves as a market participant and position themselves for future growth

What is a component of post-formation alliance management?

establishing knowledge-sharing routines

Companies that transact in the open market incur ______.

external transaction costs

In the maturity stage of the industry life cycle, industry growth ______.

flattens or even declines

An advantage of using a non-equity alliance to govern a strategic alliance is its ______.

flexibility and ease of initiation

What must strategic alliances do in order to create the foundation for a competitive advantage?

form unique resource combinations that obey the VRIO criteria

If a company moves ownership of activities closer to the end customer, such as providing after-sales support, it is engaging in ______ vertical integration.

forward

Kurtis loves Benicio's Burritos and wants to open a branch in his hometown. Benicio's Burritos grants Kurtis the right to use its trademark and name, and Kurtis agrees to follow Benicio's Burritos guidelines. This is an example of ______.

franchising

A firm that is active in several different countries is pursuing a(n) ______ diversification strategy.

geographic

At which stage of the industry life cycle does the size of the market expand rapidly?

growth

During which stage does a standard develop?

growth

Establishing a solid strategic position that competitors cannot easily imitate is the key objective of a company in the ______ stage.

growth

The stage during which a new product has gained some acceptance, thus causing first-time buyers to eagerly acquire the product and accelerate demand, is the ______ stage.

growth

The cube-square rule makes it ______ for smaller stores to compete with larger retailers.

harder

Firms that pursue a(n) ______ strategy minimize the amount of resources devoted to product support in order to maximize cash flow.

harvest

One reason why a firm might enter into a strategic alliance is to ______.

hedge against uncertainty

Horizontal integration can ______.

help a firm improve its strategic position in an industry

The tendency of customers to enter the market in large numbers during the growth stage of the industry life cycle is known as the ___ effect.

herding

In 2010 Kraft Foods bought UK-based Cadbury PLC in a hostile takeover. Kraft felt that a ______ with Cadbury would help Kraft break into emerging countries because of the strong position Cadbury had in India, Egypt, Thailand. and other countries.

horizontal integration

When two competitors merge, leading to industry consolidation, they are engaging in ___.

horizontal integration

Chao's Coffee is a large chain of coffee shops. It wants to join with Rigoberto Roasters, a large coffee roasting company. Rigoberto Roasters wants to stay independent, but Chao's is able to purchase Rigoberto. This describes a(n) ______.

hostile takeover

The customer segment known as the early majority tends to enter the market ______.

in large numbers

The acquisition of PeopleSoft enabled Oracle to offer its customers expertise in human resource management systems (PeopleSoft's core competency) in addition to database management systems (Oracle's core competency). This is an example of which source of value creation of M&As?

increased differentiation

Disadvantages of organizing economic activity in the open market include all of the following except ______.

increased flexibility

The risks of vertical integration are increased costs, reduced quality, reduced flexibility, and ___.

increased potential for legal repercussions

What drives the learning curve effect?

increases in cumulative output within the existing technology

In the introductory stage of the industry life cycle, an innovator can achieve market acceptance by ___.

increasing the number of users to encourage network effects

Each stage of the vertical value chain represents a distinct ______ in which a number of different firms are competing.

industry

A firm's competitive advantage is determined jointly by ______ and firm effects.

industry effects

Amazon's continued focus on ______ is key to its ongoing success.

innovation

In general, related diversification leads to high levels of performance because ___.

it accesses numerous areas of value creation, such as economies of scale and scope

A firm should consider using mergers and acquisitions only when ______.

it is important to be extremely close to the resource partner in order to understand underlying information

A(n) ______ is a standalone organization created and jointly owned by two or more parent companies.

joint venture

The three mechanisms to govern alliances are non-equity alliances, equity alliances, and ___.

joint venture

Some foreign countries require companies to be structured as ______ in order to enter that foreign market. The companies gain access to the market, while the country gains advanced technology and know-how.

joint ventures

Tomas recently acquired a cell phone but only because his company insisted that he do so. Tomas likely belongs to which of the following consumer segments?

laggards

Which of the following is an option for formulating strategy via core competencies?

leverage existing core competencies to improve current market position

Using a ______ strategy, a firm continues to market its products at the same level despite a decline in consumer demand.

maintain

Gaining new capabilities or competencies is one of the three main reasons companies ___

make acquisitions

One way to overcome the principal-agent problem is to ______.

make managers owners through stock options

When managers of acquiring companies incorrectly convince themselves that they are able to manage the business of the target company more effectively than its current managers, they are engaging in ______.

managerial hubris

Zoe is a manager at a large company engaged in the acquisition of a smaller company. The smaller company has operated at a loss for the last three years under three different managers, but Zoe is convinced that she can turn the company around despite the evidence to the contrary. Zoe is engaging in ______.

managerial hubris

Of the following competencies, which one is the most important in the introductory stage of the industry life cycle?

marketing

A(n) ______ is when two firms agree to join and create a combined entity, and a(n) ______ is when one firm buys or takes over another firm. Multiple choice question.

merger; acquisition

The ______ is the range of output needed to minimize the cost per unit as much as possible.

minimum efficient scale

What level of diversification leads to the highest levels of performance?

moderate

Increases in the value of a product or service that result from a corresponding increase in the number of users are known as ___.

network effects

When Apple launched the iPhone, it quickly became popular because many companies created apps that worked exclusively on the iPhone. Which of the following did Apple leverage to create a competitive advantage?

network effects

The most common type of alliance is a(n) ___.

non-equity alliance

Most firms consider laggards to be ______.

not worth the effort of pursuing

______ refers to the act of outsourcing some of the firm's activities outside of the home country to another nation.

offshoring

What is a related-linked diversification strategy?

one in which executives pursue various businesses opportunities that share only a limited number of linkages

Wheels on the Go! is a company that manufactures tires for semitrucks. The company is entirely owned by North American Haulers, a large company in the semitruck industry. The two companies have formed a(n) ______.

parent-subsidiary relationship

Although the three tasks of alliance management capability often occur at the same time, in general what is the first phase of alliance management?

partner selection and alliance formation

non-equity alliance

partnership based on contracts between firms

equity alliance

partnership in which at least one partner takes partial ownership in the other

After a standard is established in an industry, firms tend to focus more on ______ innovations.

process

New methods for producing existing products or delivering existing services are known as ______.

process innovations

A company that pursues both a product and a geographic diversification strategy simultaneously follows a ______ diversification strategy.

product-market

During the decline stage of the industry life cycle, some firms choose to consolidate, meaning that they ______.

purchase rival firms in order to achieve near-monopolistic control of the industry

A firm that successfully leverages network effects can ______.

push its industry into the growth stage

The first stage of the industry value chain is typically which of the following?

raw materials

When a company makes incremental investments as part of a larger investment and takes the time to analyze the information gained following each incremental investment, the company is taking a ______.

real-options perspective

A voluntary arrangement between firms to share knowledge, resources, and capabilities to develop products, processes, or services is known as a ______.

strategic alliance

A firm follows a(n) ______ diversification strategy when it derives less than 70% of its revenues from a single business activity and obtains revenues from other lines of business that are linked to the primary business activity.

related

Which type of diversification is most likely to lead to superior performance?

related diversification

To figure out if a firm's type of diversification is ______, one can ask questions about the degree to which the corporation's business units share core competencies.

related or unrelated

Which diversification strategy involves executives pursuing various business opportunities that share only a small number of similarities?

related-linked

During the introductory stage of the industry life cycle, innovators will likely devote most of their time, money, and effort to ___.

research and development

What term refers to the process of reorganizing and divesting business units and activities to refocus a firm to leverage its core competencies?

restructuring

In which stage of the industry life cycle does competition become more intense, forcing weaker firms out of the industry?

shakeout

Which type of alternative on the make-or-buy continuum involves competitive bidding by external companies hoping to acquire a temporary arrangement with a firm?

short-term contracts

Why did Coca-Cola enter into a strategic alliance with Monster?

so that it could gain private information to determine whether an acquisition might be beneficial

Which of the following have significantly more value in their intended use than in their next-best use?

specialized assets

What term describes the separation or sale of a strategic business unit to form a new, stand-alone corporation?

spinout

joint venture

standalone organization created and owned by two or more parent companies

An agreed-upon solution about a common set of engineering features and design choices is known as a ___.

standard

The lemons problem suggests that information asymmetries can cause ___.

superior goods to be replaced by inferior ones

Equity alliances allow for the sharing of ______, which involves information that cannot be codified for completing tasks.

tacit knowledge

Which type of knowledge cannot be codified and can only be gained through active participation in the task?

tacit knowledge

Shaniqua's Shirts uses both in-house and outside suppliers and also sells its shirts through its own retail stores and through independent retailers. Shaniqua's Shirts uses ___.

taper integration

The customer segment known as ______ enjoy testing product prototypes and providing voluntary feedback that companies use to perfect their products.

technology enthusiasts

The partners in non-equity alliances can have weak ties because such alliances are often ______ in nature, which can cause lack of trust and commitment.

temporary

Winners in the shakeout stage are generally ______.

the cost leaders

Simone was the first among her peers to try the new unicorn hair dye. For months she was the only person with unicorn hair. After some time, though, the product became available everywhere, and nearly every other person began sporting unicorn hair, even Simone's mom. This situation describes which of the following?

the crossing-the-chasm framework

DaShawn likes to do a lot of research before he buys a new product and relies on the endorsement by others. He also wants to be sure the product will be practical. DaShawn is likely a member of which type of customer?

the early majority

One of the largest customer segments of the market that includes customers who research the product, wait until new-product kinks have been resolved, and purchase from well-established companies is ______.

the late majority

A significant difference between the early majority and the late majority is that ______.

the late majority is not confident in using new technologies

The degree of vertical integration corresponds to ______.

the number of industry value chain stages in which a firm directly participates

The most integrated alternative to vertical integration is ______.

the parent-subsidiary relationship

Which of the following states that important resources and capabilities are commonly embedded in strategic alliances that cross firm boundaries?

the relational view of competitive advantage

A firm should use an equity alliance, a joint venture, or an outright acquisition in order to gain use of a resource when ______.

the resource is not easily traded

A disadvantage of a short-term contract as an alternative on the make-or-buy continuum is that ______.

the supplying firm has little reason to perform transaction-specific investments

How can firms build alliance management capability?

through repeated experiences over time

An advantage of ______ is that it helps ensure that materials and distribution channels are available when needed.

vertical integration

What term refers to the firms' ownership of the inputs it needs for production or of the channels by which it distributes its outputs?

vertical integration

What happens when the markets along the industry value chain are too risky and alternatives too costly in time or money?

vertical market failure

When a firm is more efficient in organizing economic activity than markets are, the firm should ___.

vertically integrate

A firm pursuing a blue ocean strategy can increase its profit margins by implementing which of the following pricing options?

- Charge a higher price than the cost leader. - Charge a lower price than the differentiator.

Which of the following competitive forces can result in the erosion of margins for both differentiation and cost-leadership business strategies?

- Power of buyers - Threat of entry - Power of suppliers

Which of the following are pricing options offered by a blue ocean strategy?

- The firm can charge a lower price than differentiators. - The firm can charge a higher price than the cost leader.

Which of the following are components of a cost-leadership strategy?

- acceptable value - lowest costs in the industry

What are the three most important value drivers that managers can use to create a competitive advantage?

- complements - customer service - product features

Which of the following determine a firm's competitive advantage?

- cost position relative to competitors - value position relative to competitors

Which of the following are considered the two generic business-level strategies?

- differentiation - cost-leadership

What are the four most important cost drivers that managers can manipulate?

- economies of scale - learning curve effects - cost of input factors - experience curve effects

Larger output allows firms to invest in more specialized systems such as which of the following?

- enterprise resource planning software - manufacturing robots

In order for a firm to successfully implement a business-level strategy, it must limit the impact of which of the following?

- external threats - its own internal weaknesses

Which of the following are input factors?

- labor - information technology services - capital - raw materials

Which of the following are examples of ways that a large retailing firm can increase the perceived value of its offerings by focusing on customer service?

- maintaining a domestic call center that is open 24 hours per day - offering a "no questions asked" return policy

Which of the following are stages of the industry life cycle?

- shakeout - growth - introduction - decline - maturity

A producer of consumer headphones that successfully differentiates its products with a patented noise-canceling technology and celebrity endorsements will enjoy which of the following benefits?

- the ability to charge a premium price - less intense competition from imitators

What are the two factors upon which the success of strategy of either cost leadership or differentiation is built?

- the firm's internal strengths - external opportunities in the market

In terms of business strategy, blue oceans represent which of the following?

- untapped market space - increased demand

Which of the following are significant threats to a firm pursuing a cost-leadership strategy?

- value falling below the acceptable threshold - competitors adopting similar business strategies - replacement by innovative substitutes

Which of the following are questions that managers must answer when pursuing value innovation?

- which new product factors to create - which product factors to raise above the industry standard - which product factors to reduce below the industry standard - which product factors to eliminate

Why does the learning curve go down when productivity is considered?

As workers repeatedly engage in an activity, they become more efficient, driving down costs.

True or false: Formulating a business strategy is a relatively easy task because only a few strategic options are available.

False

Which capability is required to create superior product features?

R&D

What is the relationship between fixed costs and economies of scale?

The amount of fixed costs allocated to each unit of output decreases as output increases.

What must strategic leaders keep in mind if they are going to achieve successful strategic positioning?

To achieve strategic positioning, firms must make important trade-offs.

A differentiation strategy can be threatened when ______.

a product becomes commoditized, and the focus of the competition shifts to price

By using a differentiation strategy, a firm aims to ______.

add unique features that will increase the perceived value of a product

A ______ strategy requires achieving the lowest costs in the industry while maintaining a level of value that is acceptable to customers.

cost-leadership

If two firms produce very similar products at the same rate of output, and firm A is able to achieve lower per-unit costs than firm B by taking advantage of a new manufacturing technology, firm A is benefiting from ______.

an experience-curve effect based on process innovation

Which of the following situations would justify the use of manufacturing robots by a producer of packaged foods?

an increase in demand from the market

For a differentiation strategy to strengthen a company's strategic position and boost its competitive advantage, ______.

an increase in value creation must exceed the increase in costs

Why do many firms fail to successfully implement a blue ocean strategy?

because they end up being "stuck in the middle," unable to increase value and lower costs at the same time

Diseconomies of scale often appear when a firm ______.

becomes too large and complex to manage efficiently

A ______ outlines the steps a manager will take to achieve competitive advantage in a single product market.

business-level strategy

Unique features and attributes that differentiate a product from competitors' offerings allow the firm to ______.

charge premium pricing

A tablet manufacturer that includes a free stylus with every purchase is using ______ to enhance users' experiences and increase the perceived value of its tablets.

complements

Bundling of products and services that are consumed in tandem to create value is an example of ______.

complements

A firm that pursues a differentiation strategy will often find that the added expense of offering new or unique product features offsets the increase in perceived value, and profit margins begin to erode. This underscores the importance of ___ control for firms pursuing a differentiation strategy.

cost

Cost of input factors and economies of scale are ______ that managers can manipulate to keep costs in check.

cost drivers

The goal of a ______ strategy is to achieve expenses below those of competitors while maintaining similar value. A firm with this strategy could or could not achieve differentiation parity.

cost leadership

Raoul is starting a new cosmetics company. His focus is on what he believes is a game-changing lipstick. He wants the lipstick to be accessible to everyone, but the manufacturing costs are higher than he had anticipated. If Raoul wants to achieve his desired strategic position of value creation at an affordable cost, he will need to ______.

make strategic trade-offs

High-end pen manufacturer Mont Blanc pursues a differentiation strategy pursuing only those who need or want an expensive writing instrument. What scope of competition does this represent?

narrow

In a focused differentiation strategy, the competitive scope is ______ than in a traditional differentiation strategy.

narrower

If Tesla has an 80% learning curve, ______.

per-unit cost drops 20% whenever output doubles

Rodney is making decisions about his newly formed business. He wants to focus on producing the highest-quality product in the market so he can maximize the product's value to customers. This will cause his product to have higher costs than others already in the market, but Rodney believes customers will pay more for the higher-quality product. Rodney's choice to use a differentiation business-level strategy is determining his company's strategic ______.

position

A differentiation strategy is typically associated with ______ pricing.

premium

Two important features that managers can adjust in an effort to improve the firm's strategic position are ______.

product features and customer service

The most significant challenge JetBlue faced in implementing its business strategy was ___

reconciling the trade-offs between cutting costs and providing superior service

Products in the affordable "business-casual" clothing market have largely become commoditized, and most retailers have begun to compete mainly on price rather than product features. In this environment, it is impossible for one retailer to gain market share without another losing it. This is an example of a ______ ocean.

red

A cost leader can achieve a competitive advantage by ______.

reducing costs below those of competitors while maintaining a similar value

A manufacturer of electronic components can use its manufacturing machines to produce many different components such as semiconductors, sensors, and capacitors. In this case, the firm benefits from an economy of ___, reducing overall production costs by finding multiple uses for its components and facilities.

scope

The ______ determines whether to pursue a specific narrow part of the market or to go after the broader market.

scope of competition

Economies of scale present an opportunity to increase profits because as the number of units within the relevant range increases, fixed costs ______.

stay the same

In the learning curve, the ______ the learning curve, the more learning has taken place.

steeper

Choosing a business-level strategy helps to define a firm's ______ in a given product market.

strategic position

A(n) ______ requires making a choice between a cost position and a value position.

strategic trade-off

One way that a company can try to avoid problems resulting from diseconomies of scale is to ______.

structure the company into smaller units

A company with a cost-leadership strategy faces significant difficulties when ______.

the focus of competition shifts from price to non-price attributes

Different value drivers contribute to competitive advantage only if ______.

the increase in perceived value exceeds the corresponding cost increase

The horizontal connection of the points of each value on the strategy canvas is known as ___.

the value curve

Which two of the following variables can managers primarily manipulate in order to answer the question, "How should we compete?"

value and cost

The ______ is simply a graphic representation of a firm's relative performance across different competitive factors in an industry.

value curve

A firm that manages to avoid competition entirely by offering a product or service that creates an uncontested market space is engaging in

value innovation

Implementing a blue ocean strategy requires making competition irrelevant and creating a new market space, otherwise known as ______.

value innovation

Determining the products the customer wants and needs answers the ______ question of competition.

what

To formulate an appropriate business-level strategy, managers must answer the ______ questions of competition.

who, what, why, and how