Strat Ch 4-7 Exam 2

Ultimately the ________ of a product differentiation strategy depends on the ability of individual firms to be creative in finding new ways to differentiate their products.

rarity

________ is the ability to use organizational structure to facilitate coordination among specific disciplines to conduct research.

Architectural competence

Which of the following statements is accurate? A. A cost-leadership competitive strategy increases the threat of new entrants by lowering cost-based barriers to entry. B. Correct Firms with a low-cost position can reduce the threat of rivalry in an industry. C. Cost leaders are especially vulnerable to substitute products. D. Cost leaders are especially vulnerable to the threat of suppliers.

B. Firms with a low-cost position can reduce the threat of rivalry in an industry.

A firm's vertical integration strategy can only be rare when it is the only firm that is able to vertically integrate efficiently.

False

Corporate level strategies are actions firms take to gain competitive advantages in a single market or industry.

False

Firms able to successfully differentiate their products and services are likely to see a decrease in their volume of sales.

False

More vertically integrated firms accomplish fewer stages of the value chain within their boundaries than less vertically integrated firms.

False

Over the last decade, more and more diversified firms have been abandoning efforts at managing each business's activities independently in favor of increased activity sharing.

False

Overall, related diversification is less likely to be consistent with the interests of a firm's equity holders than is unrelated diversification.

False

Timing-based product differentiation relies solely on being a first mover.

False

________ refers to how costly it is for a firm to alter its strategic and organizational decisions.

Flexibility

In a functional structure, each of the major business functions is managed by a

Functional Manager

Firms implementing cost-leadership strategies will generally adopt a

Functional organizational structure

Compared to two very risky businesses that have cash flows that are not highly correlated over time and that are operating separately, the risk of a diversified firm operating in those same two businesses simultaneously is

Lower

Which of the following statements regarding economies of scope is accurate?

Only diversified firms can exploit economies of scope.

________ is a business strategy whereby

Product differentiation

________ can be can be a source of product differentiation when a single set of customers purchases several of a firm's products.

Product mix

At the beginning of 2001, Peach Computers competed exclusively in the computer industry and generated approximately 96% of its revenue from the sales of computers and computer-related software and approximately 4% of its revenues were generated from sales of other peripherals. Further, of these revenues, 60% was from sales in the U.S., 30% was from sales in Europe, 7% was from sales in Asia and 3% was from other areas. In October 2001, Peach entered the personal electronics industry by introducing a new MP3 player known as the PeachPit. In developing and selling the PeachPit, Peach Computers was able to use many of the same R&D facilities, suppliers, production facilities, and distribution and sales outlets as the computers and software Peach Computers traditionally sold. By 2003, the PeachPit MP3 Player, accessories for the unit, and sales of songs on Peach Computers' NectarTunes website accounted for 35% of Peach Computers' revenues.

Shared Activities

________ are payments to employees in a firm's stock.

Stock grants

The Lockheed Corporation Skunk Works is an example of a(n)

cross-divisional or cross-functional team.

A cost-leadership competitive strategy can reduce both the threat of substitutes and the threat of suppliers that a firm may face.

True

Capability explanations of vertical integration acknowledge the importance of firm-specific investments in creating value for a firm.

True

Differential low-cost access to productive inputs may create cost differences among firms producing similar products in an industry

True

Firms that pursue a strategy of related corporate diversification have some type of linkages among most of the different businesses they pursue.

True

If products or services are perceived as being different in a way that is valued by customers, even if there is no physical differentiation, then product differentiation exists.

True

Which of the following bases of product differentiation attempts to create the perception that a firm's products or services are unusually valuable by focusing on links within and between firms?

product mix

Actions that firms take to gain competitive advantage in a single market or industry are known as

business-level strategies

Compensation that focuses on groups of employees such as cash bonuses and stock grants are best suited for ________ explanations of vertical integration.

capabilities-based

Firms pursuing a cost-leadership strategy are typically characterized by

close supervision of labor, raw materials,inventory, and other costs.

A firm implements a ________ when it operates in multiple industries or markets simultaneously.

corporate diversification strategy

When Apple, Inc. opened retail stores to sell its computers and iPods, this was an example of

forward vertical integration.

TerraLoc competes in the market for global positioning devices and services. The company manufactures its own GPS units, which are smaller than those of any other competitor and include a proprietary battery that lasts 200% longer than any other competitor's battery and that TerraLoc manufacturers on-site. TerraLoc also has developed proprietary software that is much faster and more precise than that of any competitor. When developing the proprietary battery, TerraLoc decided to manufacturer the battery in-house to reduce the possibility that the company it outsourced the battery manufacturing to might reverse engineer the battery and sell a similar product to competitors. This possibility was especially troubling given that the company expected a significant increase in demand due to the improved battery life. Additionally, TerraLoc sells its products and services through its own direct sales force to ensure that its representatives highlight the longer battery life of TerraLoc's units. TerraLoc is most likely to use the ________ organizational structure.

functional

Which of the following is not a potential source of diseconomies of scale?

learning-curve economies

In general, as a source of capital a diversified firm has ________ information about a business that it owns compared to external sources of capital.

more and better

When diversified firms use the revenues from profitable businesses to subsidize the operations of another business and then set the prices of the subsidized firm's products at a level that is below the subsidized business's cost to produce these items, this is known as ________ pricing.

predatory

When considering the impact of product differentiation on the threat of rivalry, product differentiation

reduces the threat of rivalry because each firm in an industry attempts to carve out its own unique product niche.

Sematech is a producer of computer chips. To gain an advantage over other computer chip makers, Sematech focuses on reducing its costs below all of its competitors and has aligned its value chain accordingly. Recently, several of Sematech's competitors have begun to reduce the company's competitive advantage. In response to this threat, Sematech has decided to add production capacity in an effort to lower costs. By increasing production volume in an effort to reduce costs, Sematech is pursuing which sources of cost advantage?

size differences and economies of scale

A firm is likely to be among the first in its industry to vertically disintegrate an exchange when

the level of uncertainty about the value of an exchange has increased.

In order for corporate diversification to be economically valuable

there must be some valuable economy of scope among the multiple businesses in which a firm is operating and it must be less costly for managers in a firm to realize these economies of scope than for outside equity holders on their own.

Firm-specific investments are a type of ________ investments.

transaction-specific