Strategic Management Exam 2

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."

Which of the following scenarios represents a company that has selected a differentiation strategy? a. 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. b. A company is developing a tablet device that sells features, such as speed and memory, as add-ons to produce a base model of its device that is below the typical market cost. c. A tool manufacturer is investing in research and development (R&D) to develop modifications to existing tools so that they can be used more effectively and safely in the oil and gas industry. d. A restaurant entrepreneur announces a new fast-food chain where every item on the menu is just $1.

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 may result if Bella's Eatery does not conduct a competitor analysis? a. Creation of a competitive advantage b. Discovery of market commonality c. Formation of competitive blind spots d. Discovery of resource similarity

Formation of competitive blind spots

Which of the following might be an alternative definition of business level strategy? A. A picture of what the firm wants to be in broad terms and what it hopes to achieve B. A plan for how the company will complete in its industry against its rivals to achieve a competitive advantage C. The inputs into a firm's production process, including physical, human, and organizational capital D. The source of competitive advantage for a firm to deliver above average returns

A plan for how the company will complete in its industry against its rivals to achieve a competitive advantage

Which of the following firms is more likely to take competitive action? a. A large firm b. A medium-sized firm c. A small firm d. Size is not a good predictor of the likelihood a firm will take competitive action

A small firm

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. Whatshould Ishanti implement?

A strategic action

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

Which of the following relates to a firm's resources and the flexibility they provide? a. Ability b. Awareness c. Incentive d. Motivation

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? a. There's a shortage of technical workers to maintain the software platform, causing human resources to increase wages to attract quality employees. b. An established competitor has announced it will begin offering its programs in a SaaS model next quarter. c. As the number of users increases, the company will need to invest resources to scale the SaaS platform. d. The biggest competitor in this software market is slashing its prices to below the company's annual rate.

An established competitor has announced it will begin offering its programs in a SaaS model next quarter.

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? a. Company A makes only sedans and SUVs. Company B makes semi-trailer trucks that transport products to retailers. b. Company A prints coloring books. Company B makes crayons and markers. c. Company A makes tomato sauce sold to consumers in grocery stores and to restaurants. Company B sells tomato sauce to consumers in grocery stores. d. Company A sells property insurance in Ohio. Company B sells property insurance in California.

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? a. Competitors will be more likely to respond because of BAAS' risky behavior. b. Competitors will be less likely to respond because of BAAS' risky behavior. c. Competitors will be more likely to respond because of BAAS' stability in the market. d. Competitors will be less likely to respond because of BAAS' stability in the market.

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? a. Competitors' imitation of a product at a lower price causing customers to purchase their product b. Failing to meet customers' minimal level of acceptable service c. Competitors' imitation of the value chain activities that make up the company's strategy d. Competitors' innovations resulting in their ability to drive costs lower

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? a. Failure to provide crisp and identifiable differentiation to customers in the form of a firm's product b. Counterfeit versions of a company's products c. Pricing that is higher than customers' perceived value of a quality product d. Competitors' innovations resulting in their ability to drive costs lower

Competitors' innovations resulting in their ability to drive costs lower

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

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? a. Firms often obtain patents to protect, maintain, and extend a competitive advantage. b. There is a high velocity of change. c. Firms' competitive advantages are partially sustainable. d. Customer loyalty is less important.

Firms' competitive advantages are partially sustainable.

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 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

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

Which of the following characteristics best describes tactical actions? a. Relatively easy to implement and reverse b. Involve significant resources c. Difficult to implement and reverse d. Fully counter the effects of a competitor's actions

Relatively easy to implement and reverse

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? a. A radio and billboard advertising campaign featuring a celebrity endorsing the company's product b. A customer loyalty program with multiple fine-print requirements c. A baby products sale is announced through a mailed postcard to the company's entire database of customers d. Satisfaction surveys following the arrival of a product

Satisfaction surveys following the arrival of a product

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? a. Competitive action b. Strategic response c. Strategic action d. Tactical action

Tactical action

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 NOT a reason for a firm to respond to a competitor's action? a. The action leads to better use of the competitor's capabilities to develop a stronger competitive advantage or an improvement in its market position. b. The action damages the firm's ability to use its core competencies to create or maintain an advantage. c. The firms have resource dissimilarity. d. The firm's market position becomes harder to defend.

The firm's market position becomes harder to defend.

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 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? a. Although a firm that has successfully differentiated its products typically develops a loyal following that is less price sensitive, it must always be aware of rival products and respond by continuing to improve the value of its own products. b. A firm that has successfully differentiated its products may have to pay higher costs for high-quality components, but these costs are offset by the firm's higher margins. c. When a firm succeeds at differentiating its products, it acts as a magnet attracting potential new entrants into the market. d. When a firm has successfully differentiated its products from other competing products, it decreases the likelihood that consumers will opt for product substitutes.

When a firm succeeds at differentiating its products, it acts as a magnet attracting potential new entrants into the market. d. When a firm has successfully

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

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.

A cost leadership strategy is one in which:

a company uses process innovations, such as advanced production or distribution methods, to operate efficiently.

Awareness, motivation, and ability are drivers of:

competitive behavior.

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

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 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.

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.

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

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.

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.

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.

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.

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.

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; inexpensive

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

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.

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.