Chapter 6 - LearnSmart

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A company's strategic offensive should be based on:

The company's strengths as well as its rival's strengths and weaknesses

Companies that outsource strategically important operations run the risk of:

Weakening their ability to sustain their competitive advantage in areas vital to the company's success

Contract-based outsourcing can introduce problems because:

- A company may have difficult time monitoring the work of the outside company - Issues arising from delays and budget overruns may be difficult to resolve - The outside company may lack incentive to meet the needs of the outsourcing company

When are first-movers likely to experience significant advantages?

- Being first in a new market builds strong brand loyalty and enhances a firm's reputation - Switching costs discourage a first mover's customers from seeking a different vendor

What are reasons that mergers and acquisitions sometimes fail?

- Cost savings are less than anticipated - Gains in competitive advantage materialize more slowly than anticipated

A merger or acquisition that extends business into new product categories:

- Helps a company fill gaps in its product line - Can be more cost-effective for a company than developing the product on its own

What are typical obstacles that a company might create to deter the strategic offensive of a would-be-challenger?

- Introducing new features and adding new models - Offering lower prices by maintaining a line-up of economy-based products - Lengthening warranties and offering free support services

Which statements about strategic alliances among large corporations is true?

- Large corporations can be well-served by managing their strategic alliances like a portfolio - It is not uncommon for large corporations to have up to 50 strategic alliances

In order to make a backward vertical integration strategy profitable, what must a company do?

- Match suppliers production efficiency and quality - Achieve the same economies of scale as suppliers

When there are improvements in technology at the supply stage of the value chain, a vertically integrated company:

- May be required to incur high costs for abandoning old technologies in an effort to keep price with suppliers - May need to continue producing suboptimal products rather than upgrading its technology

Strategic alliances are more likely to succeed if partners:

- Protect themselves with safeguards - Make mutual commitments - Establish trust

Which two firms would be the best targets for an offensive strategic attack by a company?

- Regional firms with limited capabilities - Firms in danger of going out of business

Lowering prices can be a successful competitive strategy for a company if:

- The company convinces buyers that its products are as good as its competitor's products - Its competitor maintains product prices at higher levels

Approximately what percentage of strategic business alliances fail each year?

60-70%

Expanding along the value chain into products and services that are closer to the end user is called:

Forward vertical integration

Which statement about entering the supply stage of the value chain as part of a vertical integration strategy is true?

Matching a supplier's production efficiency often requires significant investment in research and development


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