Ch:5 Mqm 220
Identify whether each statement in the following table is true or false. Businesses that do not adopt a differentiation, low-cost leadership, or focus strategy tend to be more successful than businesses that do adopt these strategies.
False Explanation: Differentiation, cost leadership, and focus strategies can all give companies a competitive advantage under the right circumstances, but Porter's research shows that a company without a strategy is not likely to be successful.
Uniqlo's biggest competitor right now is GAP stores. As the video points out, GAP has recently closed 200 stores. This action most likely indicates that:
Industry growth has slowed
Companies that focus on reducing costs by making large quantities of product are looking for ___
economies of scale Explanation: Economies of scale are decreased costs achieved by producing a large volume of product or supplying a large volume of service. Economies of scale can permit a firm to pursue a cost leadership strategy. Differentiation is a strategy that involves providing customers unique value for which they are willing to pay more.
When conducting a SWOT analysis, information about turnover, profit margins, and staff quality can be used to identify:
Company strengths and weaknesses Explanation: A SWOT analysis is a critical review of the organization and its environment that takes place during the strategy formulation process. SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. Strengths and weaknesses are internal to the organization, while opportunities and threats are external to the organization. Any information about finances or staff that comes from within the organization can be used to identify strengths and weaknesses.
Identify the type of value chain activity being described Sonic managers work with an outside vendor to test a new program that allows customers to order products online and via mobile devices.
Technological development Explanation: The program Sonic managers are testing is a technological development, designed to improve the company's processes for product delivery. Note that this is a support activity, as the company is already delivering its products at local drive-in restaurants.
Nordstrom, Bergdorf Goodman, and Bloomingdale's all sell very high-end clothing. People are willing to pay high prices because these stores use a ___ strategy to provide luxury goods and excellent service.
differentiation Explanation: Nordstrom, Bergdorf Goodman, and Bloomingdale's use differentiation, a strategy in which a firm seeks to be unique in its industry along a dimension or a group of dimensions that is valued by consumers. A focus strategy would involve marketing to a select group of customers, while a cost leadership strategy would mean selling goods and services for the least amount of money.
The company Proctor & Gamble gained _______ by creating a new sponge product for its Mr. Clean brand, the Magic Eraser. People like the sponge's texture and its ability to clean surfaces throughout the house.
first-mover advantage Explanation: Proctor & Gamble gained a first-mover advantage by producing the first sponge made out of melamine foam. Consumers liked the way the product cleaned and continued to buy it, so the product secured customer loyalty
During the 1990s, consumers started to drink bottled water instead of soft drinks. The Coca-Cola Company and PepsiCo decided to change their product lineup to include water products, indicating ____on the part of both companies.
strategic flexibility Explanation: Both Coke and Pepsi executed strategic flexibility, the capability to identify and react to changes in the external environment (changes in drink preferences) and mobilize internal resources to deal with those changes (by creating new products). Almost every firm has some strengths, and Coke and Pepsi used some of their strengths in pursing this new market. However, this question is about that decision, not the resources the companies used to execute it. Cost leadership is the strategy of selling products at a discount. A focus strategy means concentrating on a specific customer, geographic region, or product; Coke and Pepsi did not pursue a focus strategy by expanding their product line and seeking customers with different tastes.
Apple Inc. is reported to be developing an electric car that will begin production in 2020. Tesla Motors and General Motors are expected to unveil new electric car models in 2017 that will have a longer cruising range and more competitive price point than current models. Industry watchers believe that Apple is following a similar strategy as it did with its iPod and iPhone. With both products, other companies moved first, making and selling digital music players and smartphones, respectively. Apple learned from those efforts and then introduced a product that redefined the market and was hugely successful. To develop the technology to compete in the electric vehicle industry, Apple has been aggressively hiring battery experts from other companies. To produce the cars, it is expected to seek an alliance with an auto manufacturer, possibly in China. In this industry, Apple may have advantages due to consumers' loyalty to the Apple brand and its ability to integrate automobiles with the other technologies in its portfolio. Apple management decided to recruit employees with specific skills and knowledge. Which question did managers answer to determine this strategy?
How will we provide this product? Explanation: Apple's management asked how the company would provide electric vehicles. They determined that they needed to hire expert talent developed at other companies in this industry.
Identify the type of value chain activity being described Employees cook hamburgers and fry french fries.
Operations Explanation: Cooking hamburgers, frying french fries, and any other activities related to food preparation are all part of the operations activities of a fast-food chain. These actions are necessary to turn supplies into finished products, ready for sale.
According to Porter's 5-Forces Model, which environmental force becomes more intense under these conditions?
Rivalry among existing competitors Explanation: The closure of GAP stores is a good indicator that industry growth has slowed for clothing retailers. According to Porter, rivalry among existing competitors intensifies when industry growth slows, as companies have to work harder to attract smaller numbers of customers.
After he finishes celebrating with his team, Bruce Bochy, the general manager of the 2014 World Series Champion San Francisco Giants, is going to do a SWOT analysis to determine his strategy for the upcoming baseball season. Help him figure out how he should classify the following information. Considering all of the factors listed in the preceding SWOT analysis question, which of the following strategies would make the most sense for the Giants in the upcoming season?
Sign a free-agent outfielder to bolster the current roster and sign the current pitchers to long-term contracts. Explanation: The most effective strategy for the Giants is to sign a free-agent outfielder to bolster the current roster and sign the current pitchers to long-term contracts, because doing so would take advantage of the Giants' strengths and opportunities and minimize the Giants' weaknesses. Just as in the business world, where one's competitors are constantly seeking to improve, the Giants need to assume that other baseball teams will improve. In fact, the previous question includes the information that the Dodgers are signing better players than the Giants have. Therefore, taking no action because they were good enough to win this year is not the best option.
When referring to a SWOT analysis, the letter O stands for ____and it refers to factors that are ___ to the organization
opportunities, external
When workers at Swarovski cut crystal figurines, they are engaged in for the company.
primary activities Explanation: These Swarovski workers are engaged in primary activities for the company, because they are physically creating a product. Primary activities also include the product's sale and transfer to the buyer. Support activities include accounting and human resources, which are necessary to run the business but are not directly related to manufacturing products or services.
Identify whether each statement in the following table is true or false. Employee abilities to create innovative products are critical for companies that adopt a low-cost leadership strategy.
False Explanation: Companies that adopt a low-cost leadership strategy typically avoid product innovation in favor of efficiency and cost reduction.
Identify the type of value chain activity being described Sonic decided to create new commercials in 2012 using the "two guys" spokesmen who were popular from 2002 to 2010.
Marketing and sales Explanation: Advertising campaigns, such as the "two guys" approach, are marketing and sales activities that affect the way customers purchase products. Service is the way a company maintains the value of its products, while human resource management and the firm's infrastructure are support activities for marketing and sales and other primary activities.
Some aspects of Uniqlo's strategy appear to be in line with Porter's ideal of differentiation, while others are more aligned with cost leadership. If Uniqlo decided that it was going to sell clothing only to people between the ages of 16 and 30, it would be using ___ strategy
focus Explanation: Selling clothing to a small group of selected clients is part of a focus strategy, according to Porter. Focus strategies can be combined with either differentiation or cost leadership, but they are characterized by targeting a specific, select group of consumers.
Business Insider released a list of the 50 best U.S. employers, and the number one company was a surprise: the bio pharmaceutical firm Celgene. Firms invest in their ____ resources by offering excellent pay and benefits.
human Explanation: The company's employees are its human resources. Tangible resources are inanimate things like equipment, computer systems, land, and factories. Intangible resources cannot be touched or easily quantified; these include the firm's culture, brand names, and internal systems.
One of the special features of a Uniqlo dressing room is the Magic Mirror, a device that lets customers see different colors of what they are wearing without having to change clothes. The mirror was developed by the Dai Nippon Printing company, and the intellectual property that underlies the technology for the mirror is part of Dai Nippon's ____ resources
intangible Explanation: Intellectual property rights (in this case, the patents associated with the Magic Mirror) are intangible, or nonphysical, resources of their owner. The mirror itself is a tangible resource of Dai Nippon, while Dai Nippon's employees and managers are the organization's human resources.
When competitive rivalry, the threat of substitutes, the bargaining power of buyers, the bargaining power of suppliers, and the number of new entrants into a business are all high, a business is ____ likely to be successful
less Explanation: The higher each of the five competitive forces is, the less likely it is that a company will be successful. An increase in any force increases the amount of competition a company faces, and the greater the competition, the harder it will be for a company to attract and retain customers. Conversely, when each of the five competitive forces is low, the more likely it is that a company will be successful.
Which of the following conditions give suppliers more power over the firms to which they sell?
-When the supplier's industry is more concentrated than the buyer's industry -When the supplier can start a business similar to the buyer's business Explanation: Suppliers gain power and can control the prices they charge more aggressively when the supplier's industry is more concentrated than the buyer's industry; when companies face costs in switching suppliers; when the supplier offers a differentiated product; when no substitutes exist for the supplier's products; when the supplier can integrate forward into its buyer's industry; and when the supplier does not depend heavily on the purchaser's industry as a customer. Note that if a supplier makes products that other suppliers also make or if the supplier makes a product that can be easily substituted with another product, the supplier will lose power and will be more likely to charge its customers less.
After he finishes celebrating with his team, Bruce Bochy, the general manager of the 2014 World Series Champion San Francisco Giants, is going to do a SWOT analysis to determine his strategy for the upcoming baseball season. Help him figure out how he should classify the following information. Which of the following factors should be classified as a strength for the team?
The Giants' starting pitchers are exceptionally strong and can potentially keep the Giants at the top of the league for years to come. Explanation: In a SWOT analysis, the Giants' pitching lineup would be regarded as a strength, because it is something positive that is occurring inside the organization.
Identify whether each statement in the following table is true or false. Companies that use a focus strategy have narrow buyer groups.
True Explanation: Companies that use a focus strategy target a specific market or customer base. One of the best-selling iPhone applications in 2014 was Sleep Talk Recorder—a product designed specifically for people interested in what they say while they're asleep.
