MAN 4720 Exam 2 Review

Which of the following industries can be LEAST described as a slow-cycle market? -Freight railroads -Pharmaceuticals -Cell phone providers -Private ownership of highways and bridges

Cell phone providers

The use of a differentiation strategy would likely be LEAST effective in which of the following markets? -Commodity goods -Motion pictures -Popular music -Writing instruments

Commodity goods

The ongoing set of competitive actions competitive responses that occur among firms as they maneuver for an advantageous market position is known as what? -Market Place competition -Competitive behavior -Competitive dynamics -Competitive rivalry

Competitive rivalry

Which of the following is NOT a value-creating activity associated with the differentiation strategy? -Developing policies to ensure efficient hiring and retention to keep costs low and implement training to ensure high employee efficiency -Providing accurate and timely delivery of goods to customers -Ensuring the receipt of high-quality supplies (raw materials and other goods) -Developing flexible systems that allow rapid response to customers' changing needs

Developing policies to ensure efficient hiring and retention to keep costs low and implement training to ensure high employee efficiency

What term is used to define cost savings the firm creates by successfully sharing resources and capabilities or transferring one or more corporate level core competencies -Economies of scale -Economic readiness -Economic core competency transfer -Economies of scope

Economies of scope

Strategic actions are a major strategy in companies throughout the world. Which of the answers below is an example of a strategic action? -A "two movies for the price of one" campaign by Redbox -Use of product coupons by a local grocer -Entry into the European market by Home Depot -Fare increases by Southwest Airlines

Entry into the European market by Home Depot

Which of the following is a value-reducing reason for diversification? -Enhancing the strategic competitiveness of the entire company -Expanding the business portfolio in order to diversify managerial employment risk -Gaining market power relative to competitors -Conforming to antitrust regulation

Expanding the business portfolio in order to diversify managerial employment risk

The new generation of lunch trucks serving high-end fare in cities such as New York, San Francisco, and Los Angeles share which of the following business strategies? -Cost leadership -Focused differentiation -Integrated cost leadership/differentiation -Differentiation

Focused differentiation

Which of the following companies committed significant resources to enter the information service market and, given its success, was imitated by other competitors? -Compaq -IBM -HP -Dell

IBM

Zara has pioneered "cheap chic" in clothing apparel. Zara offers current and desirable fashion goods at relatively low prices. To implement the strategy, Zara uses sophisticated designers and effective means of managing costs. These are all characteristics of which of the following business-level strategies? -Cost leadership -Differentiation -Integrated cost leadership/differentiation -Stuck in the middle

Integrated cost leadership/differentiation

What is the term use to describe the number of markets with which the firm and competitors are jointly involved and the degree of importance of the individual markets to each? -Market commonality -Multi-market tactics -Resource similarity -Competitive dynamics

Market commonality

When a company attacks a rival company or responds to a competitive attack by arrival company which of the following relates to the gains or losses the firm will experience? -Motivation -Awareness -Responsiveness -Ability

Motivation

One of the answers is a tactical action, which is correct? -Walmart's launch of Sam's Club stores -Continental Airlines' exit from a hub airport in Denver -Netflix beginning to offer music in addition to movies -Dell's launch of a new line of high performance, custom-made PCs

Netflix beginning to offer music in addition to movies

If Southwest Airlines' employees lost their high enthusiasm and commitment to the company: -the airline could continue without problems because its cost leadership strategy is dependent on its efficient internal procedures. -replacement employees could be hired from rival airlines that are laying off employees and easily be merged into the Southwest culture. -there would be no impact on Southwest's profitability because Southwest's customers value the low fares rather than being "entertained" by the employees. -Southwest would have lost one of its competitive advantages, and its performance would be threatened.

Southwest would have lost one of its competitive advantages, and its performance would be threatened.

Which of the following is true of Southwest Airlines? -Southwest has an unusually low amount of flexibility for a large firm. -Southwest's success is largely due to the fact that it has little market commonality with other airlines. -Decision-making responsibility is centered at its Dallas headquarters, which allows the firm to respond quickly to competitive attacks. -Southwest's advantage lies in its ability to "think small."

Southwest's advantage lies in its ability to "think small."

The typical risks of a differentiation strategy do NOT include which of the following? -Customers may find the price differential between the low-cost product and the differentiated product too large. -Customers' experience with other products may narrow customers' perception of the value of a product's differentiated features. -Counterfeit goods are widely available and acceptable to customers. -Suppliers of raw materials erode the firm's profit margin with price increases.

Suppliers of raw materials erode the firm's profit margin with price increases.

Which of the following is NOT a governance mechanism that may limit managerial tendencies to over diversify? -Market for corporate control -Board of directors -Surveillance technologies -Executive compensation practices

Surveillance technologies

Equator, a U.S. manufacturer of pharmaceuticals, has acquired a firm in the same industry in Ireland. It plans to transfer one of its key managers from its plant in St. Louis to Ireland. Which of the following is the major threat to Equator's plan to transfer competencies from itself to the Irish firm? -The St. Louis manager may quit Equator in order to remain in St. Louis. -American pharmaceutical manufacturing techniques may not transfer to Ireland. -Irish managers will refuse to take direction from a foreign executive. -Transferring U.S. managers overseas is not usually cost-effective.

The St. Louis manager may quit Equator in order to remain in St. Louis.

Dragonfly, publisher of children's books, has purchased White Rabbit, another publisher of children's books. Both companies' books are sold to the same retail stores and schools. Their content is different because Dragonfly produces children's literature, whereas White Rabbit focuses on child-level nonfiction scientific and nature topics. Which of the following statements is probably true about this acquisition? -This is a horizontal acquisition. -This is an example of virtual integration. -Dragonfly is beginning to build a conglomerate. -Economies of scope are unlikely to result from this acquisition.

This is a horizontal acquisition.

Backward integration is also known as what when a company produces its own inputs? -Multipoint integration -Horizontal integration -Market power -Vertical integration

Vertical integration

Hyundai allows customers to return their cars if they lose their job within 12 months of purchase. Hyundai is engaged in which of the following aspects of managing customer relationships? -Who: Determining the Customers to Serve -What: Determining Which Customer Needs to Satisfy -How: Determining Core Competencies Necessary to Satisfy Customer Needs -When: Determining When to Satisfy Customer Needs

What: Determining Which Customer Needs to Satisfy

The risks of a focus strategy include: - a competitor's ability to use its core competencies to out-focus the focuser by serving an even more narrowly defined segment. - a competitor's ability to use its core competencies to out-focus the focuser by serving an even more broadly defined segment. -decisions by industry-wide competitors to use their resources to serve a wider range of customers' needs than the focuser has been serving. -decisions by focused competitors to use their resources to serve a wider range of customers' needs.

a competitor's ability to use its core competencies to out-focus the focuser by serving an even more narrowly defined segment.

What is a late mover?

a firm that responds to a competitive action a significant amount of time after the first mover's action and the second mover's response.

What is a second mover?

a firm that responds to the first mover's competitive action, typically through imitation

What is a first mover?

a firm that takes an initial competitive action in order to build or defend its competitive advantages or to improve its market position

What is Total quality management (TQM)?

a managerial process that emphasizes an organization's commitment to the customer and to continuous improvement of all processes through problem-solving approaches based on empowerment of employees

What is a strategic action/strategic response?

a market-based move that involves a significant commitment of organizational resources and is difficult to implement and revers

What is a tactical action/tactical response?

a market-based move that is taken to fine-tune a strategy; it involves fewer resources and is relatively easy to implement and reverse

What is market segmentation?

a process used to cluster people with similar needs into individual and identifiable groups

What is competitive action?

a strategic or tactical action the firm takes to build or defend its competitive advantages or improve its market position.

What is a competitive response?

a strategic or tactical action the firm takes to counter the effects of a competitor's competitive action.

What is corporate-level strategy?

actions a firm takes to gain a competitive advantage by selecting and managing a group of different businesses competing in different product markets.

Viewing the world through the customer's eyes and constantly seeking ways to create more value for the company enhances: -the reach of the company toward the customer. -the ability to identify the customer. -the richness of the relationship with the customer. -affiliation with the customer.

affiliation with the customer.

What is Business Level Strategy?

an integrated and coordinated set of commitments and actions the firm uses to gain a competitive advantage by exploiting core competencies in specific product markets

What is the differentiation strategy?

an integrated set of actions taken to produce goods or services (at an acceptable cost) that customers perceive as being different in ways that are important to them

What is the focus strategy?

an integrated set of actions taken to produce goods or services that serve the needs of a particular competitive segment

What is cost leadership strategy?

an integrated set of actions taken to produce goods or services with features that are acceptable to customers at the lowest cost, relative to that of competitors

According to researchers, horizontal acquisitions ______________: -tend to have disappointing financial results in the long run. -are being replaced by virtual acquisitions. -result in lower levels of performance than unrelated acquisitions. -are able to use activity sharing to successfully create economies of scope.

are able to use activity sharing to successfully create economies of scope.

A second mover: -is typically ineffective in its response to a first mover. -attempts to provide a product with greater customer value than the first mover's product. -usually incurs higher expenses than the first mover since it must engage in reverse engineering. -typically has a higher survival rate than first movers which typically take greater risks.

attempts to provide a product with greater customer value than the first mover's product.

A firm's core strategy is its ____ strategy. -corporate-level -business-level -pricing -international

business-level

When attempting to evaluate the worthiness of a corporate level strategy, one would consider whether the: -corporation earns a great deal of money. -top management team is satisfied with the corporation's performance. -businesses in the portfolio are worth more under the management of the company in question than they would be under any other ownership. -businesses in the portfolio increase the firm's financial returns.

businesses in the portfolio are worth more under the management of the company in question than they would be under any other ownership.

All of the following describe strategies EXCEPT that they: -are purposeful. -cannibalize the old strategy. -precede the taking of actions to which they apply. -demonstrate a shared understanding of the firm's vision and mission.

cannibalize the old strategy.

What are corporate-level core competencies?

complex sets of resources and capabilities that link different businesses, primarily through managerial and technological knowledge, experience, and expertise

What is market commonality?

concerned with the number of markets with which the firm and a competitor are jointly involved and the degree of importance of the individual markets to each.

In order to meet and exceed customers' expectations, firms must: -constantly manipulate customers' perceptions of their needs. -answer the questions: who, what, when, where, how, and why as they apply to customers. -continuously improve, innovate, and upgrade their core competencies. -successfully defend their established core competencies from imitation by competitors.

continuously improve, innovate, and upgrade their core competencies.

What are economies of scope?

cost savings a firm creates by successfully sharing resources and capabilities or transferring one or more corporate-level core competencies that were developed in one of its businesses to another of its businesses.

What are financial economies?

cost savings realized through improved allocations of financial resources based on investments inside or outside the firm

When an industry is experiencing intensified rivalry, what does it result in normally? -increased hiring across the industry. -increased total revenues across the industry. -decreased average profitability across the industry. -increased entries into the industry.

decreased average profitability across the industry.

Mercedes mass produces luxury vehicles at a premium price. It uses a(n) __________ strategy. -differentiation -focused differentiation -integrated cost leadership/differentiation -focused cost leadership

differentiation

The value of the assets of a firm using a diversification strategy to create both operational and corporate relatedness tend to be: -discounted by investors. -inflated by investors. -completely ignored by investors. -highly valued by investors.

discounted by investors.

When does multipoint competition occur? -firms have multiple retail outlets. -firms have multiple products in their primary industry. -diversified firms compete against each other in several markets. -firms have diversified portfolios of companies.

diversified firms compete against each other in several markets.

Firms that have selected a related diversification corporate-level strategy seek to exploit: -control shared among business-unit managers. -economies of scope between business units. -the favorable demand of buyers. -market power

economies of scope between business units.

What is vertical integration?

exists when a company produces its own inputs (backward integration) or owns its own source of output distribution (forward integration).

What is market power?

exists when a firm is able to sell its products above the existing competitive level or to reduce the costs of its primary and support activities below the competitive level, or both

What is multipoint competition?

exists when two or more diversified firms simultaneously compete in the same product areas or geographical markets

What are competitors?

firms operating in the same market, offering similar products, and targeting similar customers

First movers have many disadvantages in business. Which of the following is the largest disadvantage a first mover would face? -high degree of risk. -high level of competition in the new marketplace. -inability to earn above-average returns unless the production process is very efficient. -difficulty of obtaining new customers.

high degree of risk

Isidore Crocker, CEO of Gotham Engines, is strongly in favor of acquiring Carolina Textiles, a firm in an unrelated industry. Some members of the board of directors are questioning Crocker's motives for the acquisition. They argue that it is not uncommon for CEOs to push for acquisitions because: -a successful acquisition will increase the CEO's power over the board of directors. -making an acquisition is an easier route to increased firm value than is improving the firm's core competencies. -higher CEO pay is related to larger organization size. -CEOs nearing retirement seek to create empires to continue their legacy.

higher CEO pay is related to larger organization size.

When firms use core competencies to implement value-creating strategies, they are answering the "__________" question. -who -what -why -how

how

TQM is most helpful to firms following the __________ business strategy. -cost leadership -integrated cost leadership/differentiation -focused cost leadership -focused differentiation

integrated cost leadership/differentiation

What is the integrated cost leadership/differentiation strategy

involves engaging in primary value-chain activities and support functions that allow a firm to simultaneously pursue low cost and differentiation

The integration of a cost leadership and a differentiation strategy: -is challenging because it increases the number of value-chain activities and support functions in which the firm must become competent. -forces a firm to adapt more slowly to changes in its environment. -allows the firm to avoid being "stuck in the middle." -requires such a large customer base that it is most practical for firms in the global marketplace.

is challenging because it increases the number of value-chain activities and support functions in which the firm must become competent.

How does the textbook define free cash flows? -liquid financial assets for which investments in current businesses are no longer economically viable. -liquid financial assets that for tax purposes must be reinvested in the firm if not distributed as dividends to shareholders. - -

liquid financial assets for which investments in current businesses are no longer economically viable.

Starbucks determined that all of the following customer needs were important EXCEPT: -low price -the experience associated with drinking coffee, not just the coffee. -the actual product of service (e.g., a cup of coffee), not the experience. -allowing customers to design their own drinks.

low price

Competitors are more likely to respond to strategic or tactical actions when they are taken by: -differentiators -larger companies -first movers -market leaders

market leaders

The Mars acquisition of the Wrigley assets was part of its related constrained diversification and added market share to the Mars/Wrigley integrated firm. It allowed Mars to gain __________ because it could sell its products above the market level or reduce its costs below the market level. -multipoint competition -virtual integration -market power -vertical integration

market power

What are fast-cycle markets?

markets in which the firm's capabilities that contribute to competitive advantages aren't shielded from imitation and where imitation is often rapid and inexpensive.

What are standard-cycle markets?

markets in which the firm's competitive advantages are partially shielded from imitation and imitation is moderately cost

What are slow-cycle markets?

markets in which the firm's competitive advantages are shielded from imitation, commonly for long periods of time, and where imitation is costly.

Define the meaning of quality. -meeting or exceeding customer expectations in the goods and/or services offered. -only a major factor in the production of luxury goods, such as BMW cars. -an assured way to gain competitive advantage. -a viable trade-off with product cost in gaining a competitive advantage.

meeting or exceeding customer expectations in the goods and/or services offered

When diversification results in two companies, such as UPS and FedEx, simultaneously competing in the same product areas or geographic markets, this is called __________ competition. -multiple -multiportal -multipoint -multiplicit

multipoint

What is Multimarket Competition?

occurs when firms compete against each other in several product or geographic markets.

Goods or services in standard-cycle markets reflect: -organizations that serve a mass market. -numerous first-mover advantages. -an inability to sustain a competitive advantage except for brief periods of time. -competitive advantages that are shielded from imitation.

organizations that serve a mass market.

The book The Dyslexic Advantage appeals to a market of educators, people with dyslexia, their friends, family, and coworkers. This is customer segmentation by __________ factors. -demographic -socioeconomic -psychological -consumption

psychological

The __________ dimension of relationships with customers is particularly important for social networking sites such as Facebook and MySpace. -reach -richness -affiliation -social

reach

What are competitive dynamics?

refer to all competitive behaviors—that is, the total set of actions and responses taken by all firms competing within a market

Scott Paper Co. has a paper towel and baby diaper business, both of which use paper products. The firm's paper production plant produces inputs for both businesses. Scott MOST likely uses the __________ diversification strategy to create __________. -related constrained; operational relatedness -related linked; corporate relatedness -related constrained; corporate relatedness -related linked; operational relatedness

related constrained; operational relatedness

Cherrywood Fine Furniture Company finds itself with excess capacity in its plant and equipment for furniture manufacturing. This excess capacity will be useful in: -unrelated diversification. -related diversification projects. -corporate restructuring. -multipoint competition.

related diversification projects.

The Publicis Groupe has three major groups of business (advertising, media, and digital) that share resources and capabilities. The Publicis Groupe is using a(n) __________ diversification strategy. -related linked -related constrained

related linked

The __________diversification strategy creates value in two ways. First, because the core competency has already been developed in one business, the firm does not have to allocate resources to develop it. Second, because the resource is intangible, competitors cannot easily imitate it. -related constrained -unrelated -related linked -dominant business

related linked

What is the lowest level of diversification? -single-business -dominant-business -related constrained -unrelated

single-business

Sustained competitive advantage is most achievable in a __________ market. -slow-cycle -medium-cycle -standard-cycle -fast-cycle

slow-cycle

Lawsuits over patent and copyright infringements are more common and intense in: -fast-cycle markets because the market is innovation-driven. -standard-cycle markets because the firm's brand name is such an important competitive advantage. -slow-cycle markets because of the ability to shelter the company from imitation of its competitive advantage. -standard-cycle markets because innovation is rare, which gives the innovating firm a significant competitive advantage.

slow-cycle markets because of the ability to shelter the company from imitation of its competitive advantage.

The larger the resources of a firm taking a competitive action compared with the resources of the other firms in the industry, the __________ the response will be of these other firms. -more fragmented -slower -larger -more tactical

slower

The flat-panel television market where prices have come down and competition has become more stable is best characterized as: -standard-cycle -fast-cycle -slow-cycle -competitive rivalry

standard-cycle

Because Coca-Cola, Nestlé, and PepsiCo all sell a product (bottled water) that is essentially the same and all three giant companies are engaged in battles for market share using incremental changes in their products and seeking loyalty to brand names, it is MOST likely that the bottled water market is a(n): -slow-cycle market -standard-cycle market -fast-cycle market -intermediate-cycle market

standard-cycle market

Of the value-neutral incentives to diversify, all of the following are internal firm incentives EXCEPT: -overall firm risk reduction. -uncertain future cash flows. -stricter interpretation of antitrust laws. -low performance.

stricter interpretation of antitrust laws.

What is resource similarity?

the extent to which the firm's tangible and intangible resources are comparable to a competitor's in terms of both type and amount.

A firm practicing unrelated diversification can make better capital allocations to its subsidiary businesses than the external capital market can for all the following reasons EXCEPT: -corporate headquarters can allocate capital according to more specific criteria than is possible with external market allocations. -corporate headquarters has more complete information about the subsidiary businesses than the external capital market. -the firm can acquire other firms with innovative products instead of allocating capital to research and development. -corporate headquarters can more effectively discipline underperforming management teams through resource allocation than can the external market.

the firm can acquire other firms with innovative products instead of allocating capital to research and development.

The curvilinear relationship of corporate performance and diversification indicates that: -dominant-business corporate strategies tend to be higher performing than related constrained or unrelated business strategies. -the highest performing business strategy is related constrained diversification. -the less related the businesses acquired, the higher performing the organization. -none of the strategies consistently outperforms the others

the highest performing business strategy is related constrained diversification.

What is a competitive rivalry?

the ongoing set of competitive actions and competitive responses that occur among firms as they maneuver for an advantageous market position.

Companies in fast-cycle markets need to profit quickly from an innovative product for all of the following reasons EXCEPT: -the technology used is not proprietary. -the prices of component parts tend to rise rapidly. -product prices fall quickly in fast-cycle markets. -counterattacks from rivals come quickly.

the prices of component parts tend to rise rapidly.

What is competitive behavior

the set of competitive actions and responses a firm takes to build or defend its competitive advantages and to improve its market position

The basic types of operational economies through which firms seek value from economies of scope are: -synergies between internal and external capital markets. -the leveraging of individual tangible resources. -the sharing of value chain activities and support functions. -joint ventures and outsourcing.

the sharing of value chain activities and support functions

What is synergy? -cost savings are realized through improved allocations of financial resources based on investments inside or outside the firm. -two units create value by utilizing market power in their respective industries. -firms utilize constrained related diversification to build an attractive portfolio of businesses. -the value created by business units working together exceeds the value that those same units create when working independently.

the value created by business units working together exceeds the value that those same units create when working independently.

A firm successfully implementing a differentiation strategy would expect: -customers to be sensitive to price increases. -to charge premium prices. -customers to perceive the product as standard. -to have high levels of power over suppliers.

to charge premium prices.

When one uses the terminology conglomerates, they are referring to firms which use which of the following diversification strategies? -unrelated -related constrained -related linked -global

unrelated

Research suggests that __________ has decreased while __________ has increased, possibly due to the restructuring that continued in the 1990s through the early twenty- first century. -forward vertical integration; backward vertical integration -backward vertical integration; forward vertical integration -related diversification; unrelated diversification -unrelated diversification; related diversification

unrelated diversification; related diversification

Shown below are reasons a company will use a corporate level diversification strategy, which one is not correct? -value-creating -value-neutral -value-reducing -value-diversifying

value-diversifying

Smithfield Meats produces pork products including hams, bacon, and does so through its own hog farms. This is an example of a business that is ____________. -reducing vertical integration. -vertically integrated. -totally integrated. -horizontally integrated.

vertically integrated.