Mgmt 493 Test 1

Capital market stakeholders include all of the following EXCEPT: a. banks. b. shareholders. c. former employees. d. bond holders.

c. former employees.

The rate of technological diffusion is increasing. Other than the Internet, which of the following was fastest in penetrating 25 percent of homes in the United States market? a. telephone b. television c. personal computer d. radial tires

c. personal computer

A company using a business strategy with a narrow scope: a. is following a cost leadership business strategy. b. is focusing on a broad array of geographic markets. c. seeks to limit the group of customer segments served. d. faces a decreasing number of activities on its value chain.

c. seeks to limit the group of customer segments served.

Apple has reemerged as a significant player in the computer industry, a regeneration attributed mainly to: a. implementation of strict cost controls. b. increased economies of scale. c. the development of capabilities in innovation. d. the creation of monopoly power.

c. the development of capabilities in innovation.

Reach

firms's success and connection to customers

customers

foundation of successful business-level strategy

two primary drivers of hypercompetition

global economy technology

How to obtain a differentiation strategy

lower buyers' costs raise performance of product or service create sustainability through: customer perceptions of uniqueness & customer reluctance to switch to non unique product or service

global economy

one in which goods, services, people, skills, and ideas move freely across geographic borders

strategic leaders

people located in different parts of the firm using the strategic management process to help the firm reach its vision and mission

To position itself, the firm must decide whether it intends to

perform activities differently perform different activities as compared to its rivals

business-level strategy

providing value to customers and gaining competitive advantage by exploiting core competencies in individual (specific) product markets.

organizational culture

refers to the complex set of ideologies, symbols, and core values that are shared throughout the firm and that influence how the firm conducts business

sources of "strategic inputs"

resources core competencies capabilities

core competencies

resources and superior capabilities that are sources of competitive advantage for a firm over its rivals

hypercompetition

results from the dynamics of strategic maneuvering among global and innovative combatants assumptions of market stability are replaced by notions of inherent instability and change used to capture the realities of the competitive landscape

Average returns

returns equal to those an investor expects to earn from other investments with a similar amount of risk

Above-average returns

returns in excess of what an investor expects to earn from other investments with a similar amount of risk

strategic flexibility

set of capabilities used to respond to various demands and opportunities existing in a dynamic and uncertain competitive environment

mission

specifies the business or businesses in which the firm intends to compete and the customers it intends to serve

resource - based model

suggests that a firm's unique resources and capabilities are the critical link to strategic competitiveness concerned primarily with internal environment

technology related trends and conditions

technology diffusion and disruptive technologies the information age increasing knowledge intensity

perpetual innovation

term used to describe how rapidly and consistently new, information-intensive technologies replace older ones

capability

the capacity for a set of resources to perform a task or an activity in an integrative manner

competitive risks of focus strategies

A focusing firm may be "out focused" by its competitors A large competitor may set its sights on a firm's niche market Customer preferences in niche market may change to more closely resemble those of the broader market

5 business-level strategies

Broad: cost leadership & differentiation narrow: focused cost leadership & focused differentiation both: integrated cost leadership/differentiation

Cost saving actions required by cost leadership strategy

Building efficient scale facilities Tightly controlling production costs and overhead Minimizing costs of sales, R&D and service Building efficient manufacturing facilities Monitoring costs of activities provided by outsiders Simplifying production processes

To implement a focus strategy, firms must be able to

Complete various primary and support activities in a competitively superior manner, in order to develop and sustain a competitive advantage and earn above-average returns

Value creating activities for cost leadership

Cost-effective MIS Few management layers Simplified planning Consistent policies Effecting training Easy-to-use manufacturing technologies Investments in technologies Finding low cost raw materials Monitor suppliers' performances Link suppliers' products to production processes Economies of scale Efficient-scale facilities Effective delivery schedules Low-cost transportation Highly trained sales force Proper pricing

types of focus strategies

Focused cost leadership strategy Focused differentiation strategy

Value - Creating activities and Differentiation

Highly developed MIS Emphasis on quality Worker compensation for creativity/productivity Use of subjective performance measures Basic research capability Technology High quality raw materials Delivery of products High quality replacement parts Superior handling of incoming raw materials Attractive products Rapid response to customer specifications Order-processing procedures Customer credit Personal relationships

factors that drive focused strategies

Large firms may overlook small niches. A firm may lack the resources needed to compete in the broader market A firm is able to serve a narrow market segment more effectively than can its larger industry-wide competitors Focusing allows the firm to direct its resources to certain value chain activities to build competitive advantage

Differentiation strategy aspects

Nonstandardized products Customers value differentiated features more than they value low cost

aspects of a focus strategy

Particular buyer group (e.g. youths or senior citizens Different segment of a product line (e.g. professional craftsmen versus do-it-yourselfers Different geographic markets (e.g. East coast versus West coast)

competitive risks for cost leadership

Processes used to produce and distribute good or service may become obsolete due to competitors' innovations Focus on cost reductions may occur at expense of customers' perceptions of differentiation Competitors, using their own core competencies, may successfully imitate the cost leader's strategy

cost leadership strategy key aspects (3)

Relatively standardized products Features acceptable to many customers Lowest competitive price

competitive risks of differentiation

The price differential between the differentiator's product and the cost leader's product becomes too large Differentiation ceases to provide value for which customers are willing to pay Experience narrows customers' perceptions of the value of differentiated features Counterfeit goods replicate differentiated features of the firm's products

competitive advantage

a firm has this when it implements a strategy competitors are unable to duplicate or find too costly to imitate

total quality management (TQM)

a managerial innovation that emphasizes an organization's total commitment to the customer and to continuous improvement of every process through the use of data-driven, problem-solving approaches based on empowerment of employee groups and teams.

vision

a picture of what the firm wants to be and what it ultimately wants to achieve, emotional appeal

Market segmentation

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

risk

an investor's uncertainty about the economic gains or losses that will result from a particular investment

A firm's mission: a. is a statement of a firm's business in which it intends to compete and the customers which it intends to serve. b. is an internally-focused affirmation of the organization's financial, social, and ethical goals. c. is mainly intended to emotionally inspire employees and other stakeholders. d. is developed by a firm before the firm develops its vision.

a. is a statement of a firm's business in which it intends to compete and the customers which it intends to serve.

An effective cost leader seeks to continually improve levels of efficiency to enhance profit margins. Which of the following elements of industry structure does this affect most directly? a. potential entrants b. substitutes c. buyer power d. supplier power

a. potential entrants

A central premise of the industrial organization (I/O) model is that: a. the key factor in success is choosing the correct industry in which to compete. b. the firm's internal resources and capabilities represent the foundation for development of a value creating strategy. c. the key to earning above-average returns is strategic commitment. d. the internal structure of the organization must match the industry in which it competes in order to earn above-average returns on investment.

a. the key factor in success is choosing the correct industry in which to compete.

strategic competitiveness

achieved when a firm successfully formulates and implements a value-creating strategy

Types of potential competitive advantage

achieving lower overall costs than rivals possessing the capability to differentiate the firm's product or service and command a premium price

strategy

an integrated and coordinated set of actions designed to exploit core competencies and gain a competitive advantage

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.

focus strategy

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

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.

Business-level strategies detail commitments and actions taken to provide value to customers and gain competitive advantage by exploiting core competencies: a. in the selection of industries in which the firm will compete. b. in specific product markets. c. for all of the businesses in which the firm operates. d. for each particular geographic location in which the firm operates.

b. in specific product markets.

The business strategy that benefits the most from investments in TQM is: a. cost-leadership. b. integrated cost-leadership/differentiation. c. focused cost-leadership. d. focused differentiation.

b. integrated cost-leadership/differentiation.

A service that is effectively differentiated from that offered by rivals has qualities that are: a. perceived as standardized by the customer. b. perceived by the customer to add value for which they are willing to pay a premium. c. valued by the typical industry customer. d. seen as essential attributes.

b. perceived by the customer to add value for which they are willing to pay a premium.

Using Internet technology and e-commerce to increase information volume, Amazon has built a cost effective capability around information exchanges with its customers. This represents which of the three dimensions of service? a. reach b. richness c. affiliation d. advantage

b. richness

A profit pool is: a. the pool of assets that is distributed to investors. b. the total profits earned in an industry along all points of the value chain. c. the profits available to firms which earn above-average returns. d. the total profits available to be divided up among the competitors within an industry.

b. the total profits earned in an industry along all points of the value chain.

In order to meet and exceed customer expectations, firms must: a. constantly manipulate customers' perceptions of their wants. b. address the who, what, when, where, how, and why as they apply to need satisfaction. c. continuously improve, innovate, and upgrade their core competencies. d. successfully defend their established core competencies to repel innovation and imitation.

c. continuously improve, innovate, and upgrade their core competencies.

Value creating strategies satisfy customer needs through: a. firm resources. b. firm assets. c. core competencies. d. capabilities.

c. core competencies.

Firms competing under the resource-based view of the firm: a. should focus on their homogeneous capabilities to compete against their rivals. b. argue that the industry environment has a stronger influence on firms' ability to implement strategies more successfully than does the competitor environment. c. emphasize that it is difficult to develop and sustain a competitive advantage based on resources alone. d. suggest that vision and mission are closely linked to sustainable competitive advantage.

c. emphasize that it is difficult to develop and sustain a competitive advantage based on resources alone.

Focus strategies: a. shelter a firm from the risks associated with industry-wide strategies because of their niche focus. b. allow a firm to avoid global risk by focusing on niches in national or regional markets. c. face different types of risks than industry-wide strategies. d. are more likely to fail than industry-wide strategies.

c. face different types of risks than industry-wide strategies.

How to obtain a cost advantage (determine and Control)

cost drivers: alter production process, change in automation, new distribution channel, new advrtising media, direct sales in place of indirect sales

Affiliation

facilitation of useful interactions with customers

Which of the following is NOT a common risk associated with the differentiation strategy? a. Customers find the price gap between the low-cost product and the differentiated product too large. b. Customers' experience with other products may narrow their perception of the value of a product's differentiated features. c. Counterfeit goods are widely available to customers. d. Suppliers of raw materials erode a firm's profit margin with price increases.

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

One effect of globalization is: a. lower operational efficiency as firms must transport raw materials and finished goods farther. b. increasing loyalty of customers for products made domestically. c. declining returns from investment in research and development. d. increased product quality.

d. increased product quality.

Above-average returns are: a. profits greater than the firm earned last year. b. profits greater than the industry average over the last 3 years. c. profits greater than an investor expects to earn from a historical pattern of performance of the firm. d. profits greater than an investor expects to earn from other investments with a similar level of risk.

d. profits greater than an investor expects to earn from other investments with a similar level of risk.

When a firm successfully formulates and implements a value-creating strategy, it creates: a. an above-average profit pool. b. successful core values. c. sustainable competitive advantage. d. strategic competitiveness.

d. strategic competitiveness.

Richness

depth and detail of two-way flow of information between the firm and the customer

profit pool

entails the total profits earned in an industry at all points along the value chain

resources

inputs into a firm's production process, such as capital equipment, the skills of individual employees, patents, finances, and talented managers

integrated cost leadership/differentiation strategy

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

Industrial Organization (I/O) Model

the external environment is the primary determinant of a firm's strategic actions identifying and then competing successfully in an attractive industry or segment of an industry are the keys to competitive success

Broad scope

the firm competes in many customer segments

narrow scope

the firm selects a segment or group of segments in the industry and tailors its strategy to serving them at the exclusion of others

strategic management process

the full set of commitments, decisions, and actions required for a firm to achieve strategic competitiveness and earn above-average returns

globalization

the increasing interdependence among countries and their organizations as reflected in the flow of their goods and services, financial capital, and knowledge across country borders product of a large number of firms competing against one another in an increasing number of global economies

stakeholders

the individuals and groups who can affect, and are affected by, the strategic outcomes achieved and who have enforceable claims on a firm's oerformance

liability of forgiveness

the risks of participating outside of a firm's domestic country in the global economy

technology diffusion

the speed at which new technologies become available and are used

how to obtain a cost advantage (reconfigure, if needed)

value chain: new raw material, forward integration, backward integration, change location relative to suppliers or buyers

Business-level strategies key issues

which good or service to provide? how to manufacture it? how to distribute it?