sevi exam 2
The growth stage of the industry life cycle is characterized by A. "in-kind" competition (from the same type of product). B. premium pricing. C. a growing trend to compete on the basis of price. D. retaliation by competitors whose customers are stolen.
"in-kind" competition (from the same type of product).
result of information asymmetry
crowding out of desirable goods and services by inferior ones
Which of the following firms is most prone to experiencing a diversification discount?
A company that pursues unrelated diversification
Spinout
A division is separated from the rest of the company and is turned into a new, stand-alone corporation.
Which of the following best illustrates forward vertical integration?
A firm that manufactured and sold car engines to major automobile companies launches its own line of cars.
What is the primary goal of cost leadership strategy? A) Maximizing differentiation B) Achieving the lowest overall costs in the industry C) Targeting niche markets D) Emphasizing premium pricing
Achieving the lowest overall costs in the industry
How can a firm pursuing a diversification strategy enhance its overall corporate performance by leveraging financial economies?
By using internal capital markets as a source of value creation
According to the BCG matrix, which category represents high market share in a slow-growing industry? A) Stars B) Cash Cows C) Question Marks D) Dogs
Cash Cows
In unrelated diversification, what is the primary benefit derived from hierarchical relationships between the corporate office and business units?** A) Leveraging core competencies across business units B) Enhancing internal competition among business units C) Reducing market power for each business unit D) Centralized decision-making and resource allocation
Centralized decision-making and resource allocation
Dogs
ElectraSync Inc., a large consumer electronics company, has divided each product in its portfolio into a separate strategic business unit (SBU). The desktop SBU has been experiencing drastic decline in its cash flow, and its market share has also reduced to an insignificant 10 percent. This has been attributed to the low-growth in the desktop market after the arrival of tablet computers and laptops. In the context of the Boston Consulting Group (BCG) growth-share matrix, the desktop SBU will be categorized under:
Which of the following are pitfalls of using a combination strategy?
Firms may underestimate the challenges and costs associated with coordinating value-creating activities in the extended value chain. Firms may miscalculate sources of revenue and profit pools in their industry. Firms that are not able to attain both strategies may become "stuck in the middle."
assets whose physical and engineering properties are designed to satisfy a particular customer.
Physical-asset specificity
___ is a way of orchestrating value activities in which a firm is backwardly or forwardly integrated and relies on outside-market firms for supplies or distribution.
Taper integration
Red Empire Inc., a large multinational company owned by two partners, is active in the petroleum, capital market, chemicals, steel, beverages, hospitality, airlines, education, automobiles, and consumer electronics industries. The company has multiple brands and a large product portfolio under its banner. Which of the following terms would best describe this company?
a conglomerate
In the Boston Consulting Group growth-share matrix, each of the four categories in the matrix represents
a different investment strategy
High product differentiation is generally accompanied by A. higher market share. B. decreased emphasis on competition based on price. C. higher profit margins and lower costs. D. significant economies of scale.
decreased emphasis on competition based on price.
The text discusses three approaches to combining overall cost leadership and differentiation competitive advantages. These are the following EXCEPT A. automated and flexible manufacturing systems. B. exploiting the profit pool concept for competitive advantage. C. coordinating the "extended" value chain by way of information technology. D. deriving benefits from highly focused and high technology markets.
deriving benefits from highly focused and high technology markets.
two challenges of the introduction stage of the industry life cycle?
developing the product and finding a way to get users to try it generating enough exposure so the product emerges as the "standard" by which all rivals' products are evaluated
introduction stage (generic strategy; functional areas of concern; overall objective)
differentiation; research and development; increase market awareness
growth stage (generic strategy; functional areas of concern; overall objective)
differentiation; sales and marketing; create consumer demand
In order to assess whether ______ is working, managers can ask if the individual businesses are worth more under the firm's management or if they are worth more under individual management.
diversification
The experience curve is a factor central to an overall cost leadership strategy and refers to how business learns to increase costs as it gains experience with production processes. (T/F)
false
Zappos sells shoes. Its CEO, Tony Hsieh, considers the core element of its differentiation advantage to be its variety of shoes. (T/F)
false
What does taper integration allows firms to do?
gain knowledge from external sources be more flexible when responding to market changes such as fluctuations in demand
Research shows that the following are all strategies used by firms engaged in successful turnarounds EXCEPT A. asset and cost surgery. B. selective product and market pruning. C. global expansion. D. piecemeal productivity improvements.
global expansion.
In order for a firm to lower costs, it must ______.
grow
Specialized assets have ______.
high opportunity cost
What are the risks of vertical integration?
increased costs reduced flexibility reduced quality
In the __________ stage of the industry life cycle, there are many segments, competition is very intense, and the emphasis on process design is high. A. introduction B. growth C. maturity D. decline
maturity
an overall low-cost leadership strategy provides
more flexibility to cope with demands from powerful suppliers who want to increase input costs; substantial entry barriers due to economies of scale and cost advantages; a favorable position with respect to substitute products
Companies that use a ______ positioning strategy offer products with fewer product attributes and lower prices, in contrast to the industry tendency to continuously augment products as part of the product life cycle.
reverse
turnaround strategy
reversing performance decline and reinvigorating growth toward profitability
______ are perhaps the major drawback of transacting in markets.
search costs
Proctor and Gamble announced that it would sell off or close down up to 100 of its brands. This is an example of which turnaround strategy used by successful companies?
selective product and market pruning
The forms of specialized assets include which of the following?
site specificity human-asset specificity physical-asset specificity
Sharing core competencies is one of the primary potential advantages of diversification. In order for diversification to be most successful, it is important that A. the similarity required for sharing core competencies must be in the value chain, not in the product. B. the products use similar distribution channels. C. the target market is the same, even if the products are very different. D. the methods of production are the same.
the similarity required for sharing core competencies must be in the value chain, not in the product.
A disadvantage of a short-term contract as an alternative on the make-or-buy continuum is that ______.
the supplying firm has little reason to perform transaction-specific investments
As markets mature, A. costs continue to increase. B. application for patents increase. C. differentiation opportunities increase. D. there is increasing emphasis on efficiency.
there is increasing emphasis on efficiency.
among the reasons firms need to grow?
to increase profits to motivate management
Which of the following is the term for the costs associated with an economic exchange?
transaction costs
goal of combination strategy is to provide
unique value in an efficient manner
Shaw Industries, a giant carpet manufacturer, increases its control over raw materials by producing much of its own polypropylene fiber, a key input into its manufacturing process. This is an example of A. leveraging core competencies. B. sharing activities. C. vertical integration. D. pooled negotiating power.
vertical integration.
What happens when the markets along the industry value chain are too risky and alternatives too costly in time or money?
vertical market failure
Corporate-level strategy addresses two related issues: A. how to compete in a given business; the application of technology. B. what businesses to compete in; how these businesses can achieve synergy. C. how to integrate primary activities; increase shareholder wealth. D. how to improve a firm's infrastructure; how to maintain ethical behavior.
what businesses to compete in; how these businesses can achieve synergy.
What is the main benefit of related diversification? A) Leveraging core competencies B) Reducing market power C) Minimizing economies of scope D) Increasing internal competition
Leveraging core competencies
Transaction costs include all of the following costs EXCEPT A. search costs. B. negotiating costs. C. monitoring costs. D. agency costs.
agency costs.
The factors that lead to a low-cost position also provide a substantial ________ barriers position with respect to ________ products introduced by new and existing competitors.
entry; substitute
Which activity is associated with overall cost leadership strategy? A) Highly developed MIS B) Aggressive construction of efficient-scale facilities C) Expensive advertising campaigns D) Premium customer service
Aggressive construction of efficient-scale facilities
goals of reverse positioning
Allow a product to assume a new competitive position in its category. Move a product from maturity backward into a growth position.
Which of the following are alternatives on the make-or-buy continuum?
equity alliances joint ventures
characteristics of a joint venture
It is a long-term commitment by two or more partners. It facilitates transaction-specific investments.
______ costs are all of the costs associated with an economic exchange.
Transaction
All of the following are potential pitfalls of a differentiation strategy EXCEPT: A. uniqueness that is not valuable. B. too high a price premium. C. all rivals share a common input or raw material. D. perceptions of differentiation may vary between buyers and sellers.
all rivals share a common input or raw material.
Companies that pursue related diversification are able to create a diversification premium because they:
are able to increase value due to economies of scope.
Cooperative relationships such as __________ have the potential advantages such as entering new markets, reducing manufacturing (or other) costs in the value chain, and developing and diffusing new technologies. A. joint ventures B. mergers and acquisitions C. strategic alliances D. both joint ventures and strategic alliances
both joint ventures and strategic alliances
overall differentiation strategy
establishes customer loyalty; higher margins to enable the firm to deal with supplier power; reduces buyer power bc buyers lack suitable alternatives
The persons responsible for forming corporate-level strategy are the
executives
four quadrants of the core-competence market matrix
existing competencies, existing markets existing competencies, new markets new competencies, existing markets new competencies, new markets
Outside the flight experience itself, airlines are generating revenue by charging fees for credit cards, frequent-flyer programs, and access to airport lounges. This serves to
expand the profit pool.
Optimizing the location of every activity in the value chain can yield all of the following strategic advantages EXCEPT A. performance enhancement. B. cost reduction. C. extending the life cycle of the product of service. D. risk reduction.
extending the life cycle of the product of service
The risks of vertical integration are increased costs, reduced quality, reduced flexibility, and ______.
increased potential for legal repercussions
industry life cycles
introduction, growth, maturity, and decline
In general, related diversification leads to high levels of performance because _____
it accesses numerous areas of value creation, such as economies of scale and scope
Corporate strategy needs to be dynamic over time in order to ______.
keep and maintain a competitive advantage respond to the ever-changing external environment diversify to capture growth opportunities
Which of the following are types of strategic alliances?
long-term contracts joint ventures equity alliances
economies of scale; experience curve; avoidance of marginal customer accounts; reasonable competitive parity and product fit against key market requirements
overall low-cost leadership
is when firms in a turnaround situation seek to eliminate costs and improve productivity through small gains that accumulate over a period of time.
piecemeal productivity improvements
Michael Porter's framework all of the following factors affect a nation's competitiveness EXCEPT A. factor conditions. B. demand characteristics. C. related and supported industries. D. policies that protect the nation's domestic competitors.
policies that protect the nation's domestic competitors.
A company that pursues both a product and a geographic diversification strategy simultaneously follows a Blank______ diversification strategy.
product-market
A __________ can be defined as the total profits in an industry at all points along the industry's value chain. A. profit maximizer B. revenue enhancer C. profit pool D. profit outsourcing
profit pool
overall focus strategy
reduces buyer power and creates higher entry barriers; provide higher margins that enable the firm to deal with supplier power; focused niches can be less vulnerable to large rivals and/or substitutes
Examples of piecemeal productivity
reengineering business processes improving employee productivity benchmarking specific activities against industry leaders increasing capacity utilization
Which diversification strategy involves executives pursuing various business opportunities that share only a small number of similarities?
related-linked
The parent-subsidiary relationship describes the most-integrated alternative to performing an activity within one's own corporate family. The corporate parent owns the subsidiary and can direct it via command and control. Transaction costs that arise are frequently due to political turf battles, which may include the capital budgeting process and transfer prices, among other areas.
taper integration
The two alternatives to vertical integration are which of the following?
taper integration strategic outsourcing
All of the factors below have made India's software services industry extremely competitive on a global scale EXCEPT A. large pool of skilled workers. B. large network of public and private educational institutions. C. tax and antitrust legislation that protect the dominant players in the industry. D. large, growing market and sophisticated customers.
tax and antitrust legislation that protect the dominant players in the industry.
Transaction costs include ______ costs associated with an economic exchange.
the internal and external
What does taper integration involve? A) In-house production without relying on external suppliers B) Combining internal and external knowledge and resources C) Complete reliance on external suppliers and distributors D) Selling off unrelated business units
Combining internal and external knowledge and resources
__________ reflect(s) the collective learning in organizations such as how to coordinate production skills, integrate multiple streams of technologies, and market and merchandise diverse products and services. A. Primary value chain activities B. Culture C. Core competencies D. Horizontal integration
Core competencies
__ strategy involves the decisions that senior management makes and the goal-directed actions it takes to gain and sustain competitive advantage in several industries and markets simultaneously.
Corporate
Portfolio management matrices are applied to what level of strategy? A. Departmental level B. Business level C. Corporate level D. International level
Corporate level
pitfalls of using a focus strategy
Cost advantages for the focus segment may become eroded over time. Companies may become too focused to satisfy buyer needs. New competitors may enter lucrative niche markets.
Which activity is associated with differentiation strategy? A) Cost minimization in all activities B) Aggressive construction of efficient-scale facilities C) Avoidance of marginal customer accounts D) Focus on underserved buyer segments
Cost minimization in all activities
What is the primary emphasis of differentiation strategy? A) Offering the lowest prices in the market B) Creating products/services with unique and valued attributes C) Expanding market reach to as many segments as possible D) Minimizing costs in every aspect of the value chain
Creating products/services with unique and valued attributes
What is the primary objective during the maturity stage of the industry life cycle? A) Increase market awareness B) Create consumer demand C) Defend market share and extend product life cycles D) Consolidate and maintain profits
Defend market share and extend product life cycles
Which strategy is often used during the decline stage of the industry life cycle? A) Expansion into new markets B) Defensive strategies to maintain market share C) Aggressive marketing and promotions D) Introducing innovative products
Defensive strategies to maintain market share
Win Goods Inc. is a large multinational conglomerate. As a single business unit, the company's stock price is estimated to be $200. However, by adding the actual market stock prices of each of its individual business units, the stock price of the company as one unit would be $300. What is Win Goods experiencing in this scenario?
Diversification discount
Which strategy involves directing attention toward narrow product lines, buyer segments, or targeted geographic markets? A) Cost Leadership B) Differentiation C) Focus D) Integration
Focus
What is the primary focus of business-level strategy? A) Managing corporate resources B) Gaining competitive advantage in specific product markets C) Establishing long-term financial goals D) Expanding the company's geographical reach
Gaining competitive advantage in specific product markets
Symphon Times Inc., a Swiss-based premium watch brand, has recently started selling its watches through company-owned retail outlets in major cities of the emerging nations. Which of the following types of diversification strategies is the firm pursuing?
Geographic diversification strategy
Which of the following is NOT a key question that a business strategy should answer? A) How to achieve lower overall costs vs rivals? B) What differentiates the firm's product or service to command a premium price? C) How to maximize profits in any market condition? D) Does it focus on underserved buyer segments, geographic markets?
How to maximize profits in any market condition?
Which statement regarding competitive advantages is true? A. If several competitors pursue similar differentiation tactics, they may all be perceived as equals in the mind of the consumer. B. With an overall cost leadership strategy, firms need not be concerned with parity on differentiation. C. In the long run, a business with one or more competitive advantages is probably destined to earn normal profits. D. Attaining multiple types of competitive advantage is a recipe for failure.
If several competitors pursue similar differentiation tactics, they may all be perceived as equals in the mind of the consumer.
piecemeal productivity improvements
Improving business processes by reengineering them, benchmarking specific activities against industry leaders, encouraging employee input to identify excess costs, increasing capacity utilization, and improving employee productivity lead to a significant overall gain.
During which stage of the industry life cycle is market growth typically low, and technological change is rapid? A) Introduction B) Growth C) Maturity D) Decline
Introduction
What is the main advantage of focus strategy in business-level strategy? A) It allows firms to dominate the entire market. B) It enables firms to serve narrow target segments more efficiently. C) It reduces the need for differentiation. D) It increases overall industry competition.
It enables firms to serve narrow target segments more efficiently
What are the two main motivations behind restructuring?
It enables the firm to spin out underperforming units. It allows higher-performing units to be more agile and pursue growth opportunities.
Which of these statements regarding the industry life cycle is correct? A. Part of the power of the market life cycle is its ability to serve as a short-run forecasting device. B. Trends suggested by the market life cycle model are generally not reversible or repeatable. C. It has important implications for a firm's generic strategies, functional areas, value-creating activities, and overall objectives.
It has important implications for a firm's generic strategies, functional areas, value-creating activities, and overall objectives.
Which of the following are ways an overall cost leadership strategy can improve a company's position vis-a-vis Porter's forces?
Low-cost leaders are in a better position to absorb supplier price increases due to their margins. Powerful buyers can only drive down prices to the level of the next most efficient producer. Low-cost leaders can earn returns even when intense rivalry erodes profits.
During the growth stage of the industry life cycle, what typically happens to market growth and competitive intensity? A) Market growth is low, and competitive intensity decreases. B) Market growth is high, and competitive intensity increases. C) Market growth is low, and competitive intensity remains stable. D) Market growth is high, and competitive intensity decreases.
Market growth is high, and competitive intensity increases.
Which of the following are issues for platform businesses?
Maximize the connection between supplier and customer. Build an accessible customer interface. Create a base of customers and suppliers.
Convincing rivals not to enter a price war, protection from customer pressure to lower prices, and the ability to better withstand cost increases from suppliers characterize which type of competitive strategy? A. Overall cost leadership. B. Differentiation. C. Differentiation focus. D. Cost leadership focus.
Overall cost leadership.
What is the concept of vertical integration in corporate strategy? A) Owning activities closer to the customer B) Owning inputs of the industry value chain C) Owning shares in different companies D) Owning competitors in the market
Owning inputs of the industry value chain
Which of the following are ways that a combination strategy can improve a company's position vis-a-vis Porter's forces?
Potential entrants may face high barriers if they do not have the financial or physical resources to compete head-to-head. Integrating value-chain activities lowers costs so the company can better withstand increases by suppliers. Low pricing and a wide product selection reduces buyer bargaining power due to the lack of competitors that can provide comparable cost/value.
Marva Industries, a U.S.-based large conglomerate, competes in the hospitality, education, telecommunications, entertainment, airlines, and chemical industries. It currently operates in about 30 nations, and is planning to expand its portfolio by investing in rapidly developing countries. Which of the following strategies is Marva Industries pursuing?
Product-market diversification strategy
What is the purpose of restructuring in corporate strategy? A) Expanding the company's market reach B) Reorganizing and divesting business units and activities C) Increasing the number of products and services offered D) Introducing cost-cutting measures
Reorganizing and divesting business units and activities
What does the BCG matrix provide guidance for in portfolio management? A) Employee performance evaluation B) Resource allocation and strategic decisions C) Customer relationship management D) Legal compliance issues
Resource allocation and strategic decisions
What does the diversification discount refer to? A) Stock price of diversified firms valued higher than their individual units B) Stock price of diversified firms valued lower than their individual units C) Stock price of a firm with limited diversification D) Stock price of unrelated diversification companies
Stock price of diversified firms valued lower than their individual units
Which of the following is an example of an external transaction cost?
The cost of searching for a contract manufacturer
Which of the following are benefits when companies successfully integrate cost and differentiation advantages create an enviable position?
They are able to erect significant barriers to entry. They decrease supplier and buyer power. They decrease industry rivalry.
Many successful firms use internal labor markets. The most important reason they do this is because A) they want to encourage job rotation. B) if an employee is in the same department for too long, he/she would become indispensable. C) they want to keep highly mobile employees motivated and challenged. D) an employee who moves too much can be identified as unreliable and eliminated.
They want to keep highly mobile employees motivated and challenged.
True or false: According to the make-or-buy continuum, strategic alliances are more integrated than short-term contracts.
True
Firms that pursue an unrelated diversification strategy and are unable to create additional value tend to experience which of the following?
a diversification discount
an overall low-cost leadership strategy protects
a firm against rivalry from competitors and against powerful buyers
example of the principal-agent problem even when the principal's goal is to create shareholder value?
a manager flying first class on all business trips
A firm following a focus strategy must focus on
a market segment or group of segments
A non-diversified company focuses on which of the following?
a single market
An overall low-cost position enables a firm to achieve ________ returns despite strong competition.
above average
Which of the following phrases best completes this sentence: Because of the Internet, firms that use a focus strategy have new opportunities to A. respond quickly to customer requests. B. provide more services and features. C. access markets less expensively. D. access niche markets in a highly specialized fashion.
access niche markets in a highly specialized fashion.
McKesson, a large distribution company, sells many product lines such as pharmaceuticals and liquor through its super warehouses. This is an example of A. achieving economies of scope through related diversification. B. achieving market power through related diversification. C. attaining the benefits of restructuring through unrelated diversification. D. attaining the benefits of parenting through unrelated diversification.
achieving economies of scope through related diversification.
The corporate office of Cooper Industries adds value to its acquired businesses by performing such activities as auditing their manufacturing operations, improving their accounting activities, and centralizing union negotiations. This is an example of A. achieving economies of scope through related diversification. C. attaining the benefits of horizontal integration. D. attaining the benefits of parenting through unrelated diversification.
attaining the benefits of parenting through unrelated diversification.
____ is to offer a product in a different category to create the perception that the product is altogether different.
breakaway positioning
A narrow market focus is to a differentiation-based strategy as a A. broadly-defined target market is to a cost leadership strategy. B. growth market is to a differentiation-based strategy. C. growth market is to a cost-based strategy. D. technological innovation is to a cost-based strategy.
broadly-defined target market is to a cost leadership strategy.
In 2007, Salesforce.com recognized an emerging market for "platform as a service (PaaS)" offerings and developed a new competency in delivering software development and deployment tools. This allowed its customers to either extend their existing CRM offering or build completely new types of softwares. This is an example of:
building new core competencies to create and compete in markets of the future.
According to the text, corporate restructuring includes A. capital restructuring, asset restructuring, and technology restructuring. B. global diversification, capital restructuring, and asset restructuring. C. management restructuring, financial restructuring, and procurement restructuring. D. capital restructuring, asset restructuring, and management restructuring.
capital restructuring, asset restructuring, and management restructuring.
Philip Morris bought Miller Brewing and used its marketing expertise to improve Miller's market share. This justification for diversification is best described as A. utilizing common infrastructures. B. capitalizing on core competencies. C. reducing corporate risk. D. using portfolio analysis.
capitalizing on core competencies.
According to the Boston Consulting Group matrix, cash cows are SBUs that do which of the following?
compete in a low-growth market but have high market share
The primary benefit of using a combination strategy is
competitors often have difficulty duplicating or imitating them
When a business answers the question of where to compete, it is determining ___.
corporate strategy
maturity stage (generic strategy; functional areas of concern; overall objective)
cost leadership differentiation; production; defend market share and extend product life cycles
decline stage (generic strategy; functional areas of concern; overall objective)
cost leadership focus; general management and finance; consolidate, maintain, harvest or exit
Zipster is a local manufacturer of athletic shoes. Zipster has decided it wants to expand to global markets and to offer a larger selection of items. It plans to offer not just athletic shoes but also luggage and car accessories. Zipster is engaging in ______.
diversification
A(n) ______ is a situation in which the stock price of a highly diversified firms is valued as less than the sum of their individual business units.
diversification discount
TWN, a large multinational corporation, chose to spin off one of its SBUs that was unrelated to TWN's core business in order to avoid the ______. When they announced the spin-off, the stock price of TWN went up by 5%.
diversification discount
One reason why firms pursue growth is to lower their costs, which they achieve through Blank______, which drives down average costs as output increases.
economies of scale
The sale of Boeing's commercial aircraft and Microsoft's operating systems in many countries enable these companies to benefit from A. higher prices in their domestic markets. B. economies of scale. C. optimizing the location for many activities in their value chain. D. reducing their exposure to currency risks.
economies of scale.
Today, many companies use PeopleSoft and EDS to avoid maintaining a human resource management system. By doing this, these firms are:
engaging in strategic outsourcing.
The risks of vertical integration include all of the following EXCEPT A. costs and expenses associated with increased overhead and capital expenditures. B. lack of control over valuable assets. C. problems associated with unbalanced capacities along the value chain. D. additional administrative costs associated with managing a more complex set of activities.
lack of control over valuable assets.
A differentiation strategy enables a business to address the five competitive forces by A. lessening competitive rivalry by distinguishing itself. B. having brand-loyal customers become more sensitive to prices. C. increasing economies of scale. D. serving a broader market segment.
lessening competitive rivalry by distinguishing itself.
overall cost leadership strategy
low cost position and broad target market
cost focus strategy
low cost position and narrow target market
In the BCG Growth Share Matrix, the suggested strategy for stars is to
maintain position and after the market growth slows use the business to provide cash flow
One way to overcome the principal-agent problem is to ______.
make managers owners through stock options
A firm can achieve differentiation through all of the following means EXCEPT A. improving brand image. B. better customer service. C. offering lower prices to frequent customers. D. adding additional product features.
offering lower prices to frequent customers.
Primark, a fashion retailer, has found a way to keep its cost structure lower than its rivals by leveraging streamlined logistics, a low marketing budget, and negotiating bargain prices from its suppliers. They are using a(n) ________ strategy.
overall cost leadership
Primary value chain activities that involve the effective layout of receiving dock operations (inbound logistics) and support value chain activities that include expertise in process engineering (technology development) characterize what generic strategy? A) differentiation B) overall cost leadership C) differentiation focus D) stuck-in-the-middle
overall cost leadership
Which type of diversification is most likely to lead to superior performance? A) unrelated diversification B) dominant business C) single business D) related diversification
related diversification
A manufacturing business pursuing cost leadership will likely A. focus on a narrow market segment. B. rely on experience effects to raise efficiency. C. use advertising to build brand image. D. put heavy emphasis on product engineering.
rely on experience effects to raise efficiency.
One aspect of using a cost leadership strategy is that experience effects may lead to lower costs. Experience effects are achieved by A. hiring more experienced personnel. B. repeating a process until a task becomes easier. C. spreading out a given expense or investment over a greater volume. D. competing in an industry for a long time.
repeating a process until a task becomes easier.
Mass customization permits companies to manufacture unique products in relatively ________ quantities at ________ costs.
small; lower
Which of the following have significantly more value in their intended use than in their next-best use?
specialized assets
A(n) ______ is a voluntary arrangement between firms that involves sharing of resources and capabilities with the intent of developing processes, products, or services.
strategic alliance
A company offering local telecommunications service combines resources with an international company that manufactures digital switching equipment to research a new type of telecommunications technology. This is an example of A. joint diversification. B. strategic alliance. C. divestment. D. global integration.
strategic alliance.
Long-term contracts (such as licensing and franchising), equity alliances, and joint ventures are examples of which of the following?
strategic alliances
broad differentiation strategy
superior perceived value by customer and broad target market
differentiation focus strategy
superior perceived value by customer and narrow target market
A benefit of Blank______ is that in-house suppliers and distributors are subjected to market competition, which allows the firm to assess performance in comparison to others.
taper integration
What are advantages of organizing economic activity inside of a firm?
the creation of a community of knowledge command-and-control decisions transaction-specific investments
What are the three dimensions along which executives formulate corporate strategy?
the degree of vertical integration the geographic scope the type of diversification
A firm should consider vertical integration when A. the competitive situation is highly volatile. B. customer needs are evolving. C. the firm's suppliers willingly cooperate with the firm. D. the firm's suppliers of raw materials are often unable to maintain quality standards.
the firm's suppliers of raw materials are often unable to maintain quality standards.
The degree of vertical integration corresponds to ______.
the number of industry value chain stages in which a firm directly participates
What is a major disadvantage of organizing economic activity within firms?
the principal-agent problem
economies of scope
the savings from producing two or more outputs at less cost than producing each output individually
Which of the following are the four underlying strategic management concepts that determine the scope of a firm?
transaction costs core competencies economies of scope economies of scale
True or false: It can be riskier to own parts of the supply chain than to rely on external supply chains.
true
A conglomerate fits which type of corporate diversification model?
unrelated diversification
What are the main types of corporate diversification?
unrelated diversification related diversification dominant business diversification single business diversification
At Cooper Industries, there are few similarities in the products it makes or the industries in which it completes. The corporate office adds value through such activities as improving their accounting activities and centralizing union negotiations. This is an example of creating value by using
unrelated diversification to acquire synergies through corporate restructuring and parenting
industry life cycle is characterized by which characteristics
unspecified product features and low sales growth rapid technological change and operating losses poorly defined market segments new products that are not known to customers
Unbalanced capacities that limit cost savings, difficulties in combining specializations, and reduced flexibility are disadvantages associated with A. strategic alliances. B. divestment. C. vertical integration. D. horizontal integration
vertical integration
______ refers to the firms' ownership of its production of needed inputs or of the channels by which it distributes its outputs.
vertical integration
