Business Policy Quiz 1

A company's resources and capabilities represent

the firm's competitive assets that determine its competitiveness and ability to succeed in the marketplace

The most powerful and widely used conceptual tool for diagnosing the principal competitive pressures in a market is

the five forces framework.

A vertical integration strategy can expand the firm's range of activities

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

Managers of all types of business organizations must develop a clear answer for which of the following questions?

What is the set of actions that we need to take to outperform competitors and achieve superior profitability?

Identify the company with a low-cost provider strategy.

A baby products retailer sells unassembled baby furniture produced in China.

The four tests of a resource's competitive power are often referred to as the

VRIN test, which asks if a resource is valuable, rare, inimitable, and nonsubstitutable.

Everlane (Illustration Capsule 4.1) is a manufacturer and online marketer of slim-fit denim jeans. When Everlane's managers engage in the process of developing a list of questions to evaluate their company's internal situation, which question should be asked first regarding Everlane's resources and competitive position?

How well is Everlane's present strategy working?

A company's strategic vision concerns

a company's directional path and future product-customer-market-technology focus.

The difference between a merger and an acquisition is that

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

Resource and capability analysis is designed to

ascertain which of a company's resources and capabilities are competitively valuable

A company's competitive strategy should

be well matched to its internal situation and predicated on leveraging its collection of competitively valuable resources and competencies.

Using the five forces model of competition to determine the character and strength of the competitive forces within a given industry involves

building the picture of competition in three steps: (1) identify the different parties involved, along with specific factors that bring about competitive pressures; (2) evaluate how strong the pressures stemming from each of the five forces are (strong, moderate or weak); and (3) determine whether the collective impact of the five competitive forces is conducive to earning attractive profits in the industry.

One of the important benefits of a well-conceived and well-stated strategic vision is to

clearly communicate management's aspirations for the company to stakeholders and help steer the energies of company personnel in a common direction

Successful broad differentiation allows a firm to

command a premium price for its product, and/or increase unit sales, and/or gain buyer loyalty to its brand

In evaluating how well a company's strategy is working, the two best indicators are

competitive strength and financial ratio analyses.

A resource of a firm is considered to be

deployed to develop and enable a firm's capabilities.

As a rule, the collective impact of competitive pressures associated with the five competitive forces

determines the extent of the competitive pressure on industry profitability

Strategy, at its essence, is about

developing lasting success that can support growth and secure the company's future over the long term.

A company's mission statement does not

explain "where we are headed."

Strategic offensives should, as a general rule, be based on

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

Clinícas del Azúcar is addressing diabetes, a major health issue in Mexico, by using a generic strategy that is known as

focused low cost: using proprietary technology and a streamlined care system

A sustainable competitive advantage is gained when a company

has durable competitive assets that are central to its strategy and superior to those of rival firms.

Low-cost leaders who have the lowest industry costs are likely to

have outmanaged rivals in finding ways to perform value chain activities more cost effectively.

Tangible resources do not include

human assets.

The primary difference between a company's mission statement and the company's strategic vision is that a

mission statement typically concerns a company's present business scope and purpose, whereas a strategic vision sets forth "where we are going and why."

A blue-ocean strategy

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

The difference between a resource and a capability is a resource

is a productive input or competitive asset, whereas a capability is the capacity of the firm to perform some internal activity competently.

A competitive environment characterized by moderate-to-weak rivalry among sellers, high entry barriers, moderate-to-weak competition from substitute products, and moderate-to-low bargaining leverage on the part of both suppliers and customers

is considered to be competitively attractive from the standpoint of earning good profits.

Market maneuvering among industry rivals

is ongoing and dynamic, with moves and countermoves of rivals producing a continually evolving competitive landscape that delivers winners and losers.

You have been asked to evaluate Kampus Kombucha's mission statement, "To heal and refresh everyone we touch." You would most likely observe that Kampus Kombucha's mission statement

is vague, fairly uninformative, and blurs the essence of this company's business activities.

The lower the user's switching costs, the

more intense the competitive pressures posed by substitute products

All other things being equal, the "best" generic competitive strategy for a company to employ is a strategy that

is well matched to a company's internal situation; underpinned by an appropriate set of resources, know-how, and competitive capabilities; and difficult for rivals to match.

A company's strategy stands a better chance of succeeding when

it is predicated on competitive moves aimed at appealing to buyers in ways that set the company apart from rivals.

The generic types of competitive strategies include

low-cost provider, broad differentiation, best-cost provider, focused low-cost, and focused differentiation strategies.

What separates a powerful strategy from a run-of-the-mill or ineffective one?

management's ability to forge a series of actions, both in the marketplace and internally, that sets the company apart from rivals and produces sustainable competitive advantage

Managers of every company should be willing and ready to modify their strategies because

market conditions and circumstances are changing over time or the current strategy is clearly failing.

The five generic competitive strategies include

narrow differentiation.

In crafting a company's strategy, managers

need to come up with a sustainable competitive advantage that draws in customers and produces a competitive edge over rivals.

Teresa is CFO of a company that sells prescription eyeglasses online. Key financial ratios that could help her measure her company's profitability include

operating profit margin, return on stockholders' equity, and return on assets.

The worst targets for an offensive-minded company to target are

other offensive-minded companies that possess a sizable war chest of cash and marketable securities.

A company's strategy is not concerned with management's choices about how to

stake out the same market position as successful rival companies.

Business strategy concerns

strengthening the market position and building competitive advantage for a single line of business

The five forces of competitive pressures do not include

the power and influence of social/demographic trends.

What sets focused (or market niche) strategies apart from low-cost leadership and broad differentiation strategies is

their concentrated attention on serving the needs of buyers in a narrow piece of the overall market.

The best test of whether potential entry is a strong or weak competitive force is

to ask if the industry's growth and profit prospects are strongly attractive to potential entry candidates.

The spotlight in analyzing a company's resources, internal circumstances, and competitiveness includes such questions/concerns as

what the company's resource strengths and weaknesses are in relation to the market opportunities and external threats.

Being a first mover is not particularly advantageous under which circumstance?

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

The biggest and most important differences among the competitive strategies of different companies boil down to

whether a company's market target is broad or narrow and whether the company is pursuing a competitive advantage linked to low cost or differentiation.

The strength of competitive pressures that suppliers can exert on industry members is MAINLY a function of

whether needed inputs are in short supply and whether suppliers provide differentiated input that enhances performance of the product

When strategic managers assess the competitive power of company resources, what matters is

whether the resource is really competitively valuable, if it is rare and something competitors lack, how hard it is to copy or imitate, and how easily it can be trumped by the substitute resource strengths and competitive capabilities of rivals.