Strategic Management Ch 5-6

Related Diversification By pursuing related diversification, you are choosing to explore innovative products that remain within the scope of aeronautics, space systems, and electronic systems—Lockheed Martin's current specialties. Which of these space-related business opportunities might you pursue to balance your dependence on government contracts?

Begin a venture in the private sector for space tourism.

Space Tourism You chose to enter into the embryonic space tourism industry in the private sector. Your board of directors supports this move and believes tourism is the future of space. However, they are concerned about the overall cost. How will you pursue the venture into tourism?

Collaborate with an established space tourism firm, specifically Virgin Galactic.

Which of the following is a likely reason for a retailer to close its stores when challenged by a new retailer such as Aldi?

Failure to conduct a competitor analysis

Which of the following is the basis for Aldi's business strategy?

Low cost

How have Aldi's innovations affected wholesalers and other suppliers?

Prices have declined.

Strategic Diversification: Lockheed Martin Lockheed Martin has been a recognized brand in technology for aeronautics and space systems for decades. The U.S. government is Lockheed Martin's main customer. Recently, as large-scale military actions have decreased across the globe, the government has been consuming less of Lockheed Martin's offerings. As a top executive of Lockheed Martin, you've been asked to consider the opportunities to diversify into new markets in order to remain competitive and continue to increase profits. Through which strategy do you believe Lockheed Martin would be most profitable to pursue diversification?

Related diversification

Which of the following is NOT a factor in predicting how a firm is likely to respond to competitive actions such as those taken by Aldi?

The challenger's size

Which of the following American competitors was forced to close all of its stores as a result of its competitive rivalry with Aldi? a. Bottom Dollar b. Sam's c. Costco d. Walmart

a. Bottom Dollar

How is Starbucks diversifying itself by purchasing La Boulange? a. By increasing its product offerings to include bakery items. b. By decreasing its product offerings to focus primarily on bakery items. c. By maintaining its product offering of premium beverages. d. By eliminating its current product offerings and offering bakery items instead.

a. By increasing its product offerings to include bakery items.

If General Motors releases a new pick-up truck, which competitor should the firm be aware of for competitive responses? a. Ford b. Toyota c. Honda d. Chrysler

a. Ford

When Disney adopts a corporate strategy in order to create synergy or achieve economies of scope, it is engaging in what type of diversification? a. Related diversification b. Unrelated diversification c. Value-neutral diversification d. Value-reducing diversification

a. Related diversification

Starbucks is implementing a corporate-level strategy to diversify its product offerings by purchasing La Boulange in an effort to: a. increase Starbucks' value to customers by improving its quality and overall performance in its industry. b. maintain Starbucks' value to customers by continuing to offer bakery products. c. decrease Starbucks' value to customers but improve its profitability through cost cutting. d. increase Starbucks' value to customers and lower its cost structure.

a. increase Starbucks' value to customers by improving its quality and overall performance in its industry.

Based on the information from the video, nearly 50% of U.S. consumers prefer sport utility vehicles. Between U.S.-based car companies, this demonstrates a: a. market commonality. b. resource similarity. c. resource commonality. d. market rivalry.

a. market commonality.

Disney facilitates skill transfer among its different business units. This is a function of what type of relatedness? a. Operational b. Corporate c. Vertical d. Multipoint

b. Corporate

One of Disney's resources is the use of fairy tale themes in the creation of new movies. If Disney chooses to continue with this strategy, why might Disney's ultimate ability to create value for the corporation from this resource be limited? a. Fairy tales are a tangible resource with a limited supply. b. Fairy tales are not necessarily rare, difficult to imitate, or nonsubstitutable. c. The cost to buy the rights to use the fairy tales may outweigh the benefits they provide. d. As an intangible resource, fairy tales, by definition, have a limited value.

b. Fairy tales are not necessarily rare, difficult to imitate, or nonsubstitutable.

Which of the following is a reason that a retailer might NOT engage in competitive rivalry with a new challenger such as Aldi? a. It is aware of a competitor's challenge to its business. b. It perceives that its market position will neither improve nor suffer. c. It realizes that the competitor is challenging its business. d. It has the ability to respond to an attack by the competitor.

b. It perceives that its market position will neither improve nor suffer.

Comcast and Time Warner are both trying to build skills in retail marketing power and franchising to complement their abilities in content and distribution. Which best explains the diversification goals of both companies? a. Economies of scope (related diversification) b. Market power (related diversification) c. Financial economies (unrelated diversification) d. Risk reduction (value-neutral diversification)

b. Market power (related diversification)

Disney's corporate strategy is successful because of synergy. What does that mean? a. Because the businesses within Disney are independent, each is able to create the maximum amount of value. b. The various businesses within Disney are able to create more value working together than the total of what each business could create on its own. c. The businesses within Disney have joint interdependence, which increases the firm's ability to respond to market conditions. d. Disney realizes cost savings because of the large number of businesses that it operates.

b. The various businesses within Disney are able to create more value working together than the total of what each business could create on its own.

What is a value-increase reason for Starbucks to diversify its product offerings to include bakery items? a. To help Starbucks executives receive higher compensation as a result of implementing more complex operations. b. To help Starbucks develop a more competitive position. c. To help Starbucks match and neutralize a competitor's advantage. d. To help Starbucks develop less of a competitive position.

b. To help Starbucks develop a more competitive position.

In order to stay ahead of the competition, car companies must study ______________ to predict the competitive actions and responses their competitors are likely to take. a. tactical action b. competitive rivalry c. strategic rivalry d. competitive dynamics

b. competitive rivalry

By purchasing La Boulange, Starbucks is implementing a ______________ in the hopes of gaining a competitive advantage. a. business-level strategy b. corporate-level strategy c. small business strategy d. industry-level strategy

b. corporate-level strategy

Car companies competing in various market segments, including SUVs, trucks, and compact cars, are referred to as: a. competitive dynamics. b. multimarket competition. c. market commonality. d. fast-cycle markets.

b. multimarket competition.

By purchasing La Boulange and operating the bakery as Starbucks' sole supplier, Starbucks is able to control the value, quality, and costs associated with its products. These value chain efforts to increase profitability are called: a. tapered integration. b. vertical integration. c. horizontal integration. d. vertical disintegration.

b. vertical integration.

What form of vertical integration is Starbucks using in purchasing La Boulange? a. Forward vertical integration b. Middle vertical integration c. Backward vertical integration d. Horizontal integration

c. Backward vertical integration

Consider the graphic in your text that shows four quadrants for value-creating diversification strategies based on operational and corporate relatedness. Based on the information provided about Disney, in which quadrant of the chart does Disney best fit? a. Related constrained diversification b. Unrelated diversification c. Both operational and corporate relatedness d. Related linked diversification

c. Both operational and corporate relatedness

Starbucks' previous attempts to include food in its product offerings have met with mediocre results. Currently, only one-third of customers buy food products at Starbucks. How does using vertical integration increase Starbucks' financial risk by buying and operating its own bakery supplier? a. The bakery supplier will begin to take precedence over the development of its beverages. b. Demand is predictable. c. Demand is unpredictable. d. Starbucks can establish market power in the bakery industry.

c. Demand is unpredictable.

Disney is able to realize cost savings by sharing resources or transferring core competencies across its businesses. This is known as what? a. Synergy b. Market power c. Economies of scope d. Vertical integration

c. Economies of scope

Like Disney, Comcast also owns media outlets and movie studios, as does Time Warner. As they pursue corporate-level strategies, these firms need to be aware that they experience what type of competition, which probably pushes them to seek increased diversification? a. Vertical competition b. Horizontal competition c. Multipoint competition d. Synergistic competition

c. Multipoint competition

Which of the following is exemplified by Morrison's decision to cut costs in order to compete with Aldi? a. Strategic action b. Tactical action c. Strategic response d. Tactical response

c. Strategic response

General Motors and its competitors are constantly "thinking of tomorrow" in terms of their products. This means that car companies are competing in a: a. slow-cycle market. b. standard-cycle market. c. fast-cycle market. d. stagnant market.

c. fast-cycle market.

Disney can share activities across its different production firms, which allows it to learn faster and gain success by the knowledge sharing and efficiencies associated with each studio's expertise. What is a risk associate with this approach? a. Activity sharing leads to an increase in managerial compensation, which is a reason for value-reducing compensation. b. Activity sharing can diversify managerial employment risk, which is a reason for value-reducing compensation. c. Activity sharing increases the uncertainty of future cash flows. d. Activity sharing requires careful coordination among businesses in order to be successful.

d. Activity sharing requires careful coordination among businesses in order to be successful.

Which of the following provides feedback to a retailer such as Aldi based on a competitive reality model? a. First-mover benefits b. Market dependence c. Awareness d. Market position

d. Market position

How does Starbucks' current market power increase its chances for success in expanding its product offerings to include bakery items? a. Starbucks is able to sell its products below its competitors' price point because it already brings in enough profit from coffee to keep growing. b. Starbucks is able to sell its beverage products and new bakery products at a lower price point than its competitors because it has a diverse product offering. c. Starbucks is able to sell its beverage products at a lower price point and its new bakery offerings at a premium price point. d. Starbucks is able to sell both its coffee and bakery products above its competitors' price point because it has a strong differentiation.

d. Starbucks is able to sell both its coffee and bakery products above its competitors' price point because it has a strong differentiation.

Disney features characters and products in its movies. It is then able to cross-sell these products in its own media distribution outlets and at its parks and resorts. This is an example of what tool? a. Market power b. Multipoint competition c. Economies of scope d. Vertical integration

d. Vertical integration

To understand the competitive environment of the small car market, including market commonalities and resource similarities, General Motors should perform a: a. tactical action. b. competitive response. c. strategic action. d. competitor analysis.

d. competitor analysis.

Why do retailers like Aldi engage in competitive rivalry?

To gain an advantageous market position

Which of the following received a first-mover benefit among the competitors in the American grocery market?

Walmart

Sharing Activities vs. Vertical Integration In deciding to collaborate with Virgin Galactic's space tourism ventures, Lockheed Martin must determine how its business unit in this sector will operate. You recommend to the top executives at the firm that the most cost-effective way to do this is by:

sharing activities within your business units to put your expertise into Virgin Galactic's existing projects.