Strategic Management Chapters 5-8

Diversification ought to be considered when a

company is under pressure to create a more attractive and cost-efficient value chain.

A good example of vertical integration is a

crude oil refiner purchasing a firm engaged in drilling and exploring for oil.

Examples of important cost drivers in a company's value chain do not include

customer service

What is the foremost strategic issue that must be addressed by firms when operating in two or more foreign markets?

deciding on the degree to vary its competitive approach to fit the specific market conditions and buyer preferences in each host country

What hurdles are present in calculating industry attractiveness scores?

deciding whether a business is related or unrelated

Imagine that you have been hired by Bill Newlands, President and COO of Constellation Brands (CB), to review the beverage company's diversified portfolio of businesses. Of the analytical tools that you could use to assess CB's business lineup for adequate resource fit, which one would you not be likely to use?

determining whether or not the opportunity exists for CB to achieve 1 + 1 = 2 outcomes among CB's portfolio of brands

An approach that is UNLIKELY to help a company's low-cost provider strategy succeed is

evolving the capabilities to simultaneously deliver lower cost and higher-quality/differentiated features.

In the face of strong competition from Amazon, Walmart's 2016 acquisition of Jet. com was driven by a strategic objective, such as

expanding its geographic coverage or extending its business into new product categories.

Strategic offensives should, as a general rule, be based on

exploiting a company's strongest competitive assets—its most valuable resources and capabilities

Acquisition of an existing firm rather than via internal development may be the least risky and cost-efficient means of overcoming entry barriers such as

gaining access to local distribution networks, building supplier networks, and establishing working relationships with key government officials

For all types of generic strategies, a company's success in sustaining its competitive edge depends on

having resources and capabilities that rivals have trouble duplicating and for which there are no good substitutes.

The five generic competitive strategies are not characterized by a_________ strategy

high-cost

An umbrella brand

is a generalized resource that can be leveraged in unrelated diversification.

Whether a broad differentiation strategy ends up enhancing a company's profitability depends mainly on whether

most buyers accept the customer value proposition as unique and the product can produce sufficient unit sales to cover the costs of achieving the differentiation.

The major difference between a low-cost provider strategy and a focused low-cost strategy is the

size of the buyer group to which a company is appealing.

Differentiation strategies

strive to create value for customers.

When should a business not be divested?

when the business is a cash cow

Procter & Gamble's acquisition of Gillette was integral to a corporate diversification strategy for building the company around businesses

with strategic fit with respect to key value chain activities and competitive assets

Procter & Gamble's acquisition of Gillette was integral to a corporate diversification strategy for building the company around businesses

with strategic fit with respect to key value chain activities and competitive assets.

A location-based advantage for competing on an international basis can best be exemplified by

De Beers establishing greenfield operations in the mining region of South Africa

Modification of a company's business model to accommodate the unique local circumstances of developing countries is best exemplified by

Dell entering China by deviating from its traditional Internet-based orders to orders over phone and fax

Which is the better approach to diversification—a strategy of related diversification or a strategy of unrelated diversification? Explain and support your answer.

Any approach to diversification is fine as long as it provides a clear avenue for increasing shareholder value. Diversifying into related businesses where competitively valuable strategic-fit benefits can be captured puts a company's businesses in position to perform better financially as part of the company than they could have performed as independent enterprises, thus providing a clear avenue for increasing shareholder value and satisfying the better-off test. Where unrelated business are concerned, unless the combination of businesses is more profitable together under the corporate umbrella than they are apart as independent businesses, the strategy cannot create economic value for shareholders. And unless it does so, there is no real justification for unrelated diversification, since top executives have a fiduciary responsibility to maximize long-term shareholder value for the company's owners (its shareholders).

What factors should management consider when ranking business units and setting a priority for resource allocation?

As a rule, business subsidiaries with (1) the brightest profit and growth prospects, (2) attractive positions in the nine-cell matrix, and (3) solid strategic and resource fit should receive top priority for allocation of corporate resources. However, in ranking the prospects of the different businesses from best to worst, it makes good strategic sense to also consider each business's past performance as concerns sales growth, profit growth, contribution to company earnings, return on capital invested in the business, and cash flow from operations. Competitively strong businesses in attractive industries have significantly better performance prospects than competitively weak businesses in unattractive industries.

Gallo Wines is seeking international market entry. One if its top criteria for choosing a country to enter is a pro-business government policy. John would advise Gallo Wines to enter

Australia, which recently introduced a permanent employer-sponsored visa program for skilled manpower.

Why does a U.S. company exporting wooden furniture manufactured in Malaysia to the European Union benefit from the decline in the value of the ringgit against the euro?

Because decline in the value of the ringgit against the euro reduces the cost of furniture manufactured in Malaysia, making it more competitive in European markets

Choose the best example of a women's fashion retailer that uses cost drivers effectively to manage its value chain activities.

Bowdon Designs uses just-in-time inventories and produces made-to-order products as and when customer demand rises.

What is the BEST guideline for deciding what the priorities should be for allocating resources to the various businesses of a diversified company?

Business subsidiaries with the brightest profit and growth prospects, attractive positions on the nine-cell matrix, and solid strategic and resource fits generally should head the list for corporate resource support.

From the list below, identify the company that is not the lowest-cost provider in its industry.

CNN

When pharmacy chain CVS Health announced a $69 billion merger with the health insurance giant Aetna late in 2017, top management of CVS needed to weigh a number of strategic considerations except

CVS's opportunities to pursue debt reduction to lower its debt/equity ratio while maintaining asset levels.

What is the relevance of quantitatively measuring the competitive strength of each business in a diversified company's business portfolio and determining which business units are strongest and weakest?

Calculating quantitative industry attractiveness scores for each industry helps in ranking the performance prospects of the businesses from best to worst and determining what the corporate parent's priorities should be in allocating resources to its various businesses. A good case can be made for concentrating resources in those businesses that enjoy higher degrees of attractiveness and competitive strength, being very selective in making investments in businesses with intermediate positions on the grid, and withdrawing resources from businesses that are lower in attractiveness and strength unless they offer exceptional profit or cash flow potential.

Under what circumstances might a diversified firm choose to divest one or more of its businesses?

Candidates for divestiture in a corporate restructuring effort typically include not only weak or up-and-down performers or those in unattractive industries, but also: (1) business units that lack strategic fit with the businesses to be retained, (2) business units that are cash hogs, and/or (3) business units in a once-attractive industry that have badly deteriorated.

Véronique is the CEO of a wind power energy company. Identify which company model she would emulate to craft a multidomestic strategy.

Castrol produces over 3,000 different formulas of oil lubricants to meet the requirements of different climates, vehicle types and uses, and equipment applications that characterize different country markets

As general manager of a local restaurant chain, you have been asked to develop defensive moves to protect your company's market position and restrict any challenger's options for initiating a competitive attack. You would present all but ONE of the following strategic options to your executive team.

Challenge struggling runner-up restaurants that are on the verge of going under.

Imagine that you have been hired by Bill Newlands, President and COO of Constellation Brands (CB), to review the beverage company's diversified portfolio of businesses. Based in Victor, New York, CB has about 40 facilities and approximately 9,000 employees. The company has more than 100 brands in its portfolio. Wine brands include Robert Mondavi, Wild Horse Winery, Clos du Bois, Franciscan Estates, Kim Crawford, Meiomi, Mark West, Ruffino, and The Prisoner. CB's beer portfolio includes imported brands such as Corona, Modelo Especial, Negra Modelo, Pacífico, as well as Ballast Point and Funky Buddha. Spirits brands include Black Velvet Canadian Whisky, Svedka Vodka, Casa Noble Tequila, and High West Whiskey. Your task is to quantitatively measure the competitive strength of each business in CB's portfolio and determining which business units are strongest and weakest. List the six steps involved in the process.

Conducting a quantitative appraisal of each of CB's business units' strengths and competitive positions in their respective industries (primarily wine, beer, and spirits) not only reveals each business unit's chances for industry success, but also provides a basis for ranking the units from competitively strongest to weakest. The steps include: (1) evaluating industry attractiveness, (2) evaluating business unit competitive strength, (3) determining the competitive value of strategic fit in diversified companies, (4) checking for resource fit, (5) ranking business units and assigning a priority for resource allocation, and (6) crafting new strategic moves to improve overall corporate performance are the six steps for evaluating a diversified company's strategy.

PepsiCo divested its group of fast-food restaurant businesses (KFC, Pizza Hut, and Taco Bell) to Yum! Brands in order to allow PepsiCo to focus on its core soft drink and snack-food businesses. A useful guide to determine whether or when to divest a business subsidiary is to ask,

"If we were not in this business today, would we want to get into it now?"

Capturing cross-business strategic-fit benefits via a strategy of related diversification builds shareholder value in ways that shareholders cannot undertake by simply owning a portfolio of stocks of companies in different industries. Provide (1) an example showing how a strategy of related diversification benefited both companies and (2) an example showing how a strategy of related diversification did not benefit both companies. On balance, is related diversification a wise move for a corporation?

(1) See Illustration Capsule 8.1. The 2015 merger between Kraft Foods and Heinz was predicated on the idea that the strategic fit between these two companies was such that they could create more value as a combined enterprise than they could as two separate companies. As a combined enterprise, Kraft Heinz would be able to exploit its cross-business value chain activities and resource similarities to more efficiently produce, distribute, and sell profitable processed food products. (2) On occasion, a diversification move that seems sensible from a strategic-fit standpoint turns out to be a poor cultural fit. When several pharmaceutical companies diversified into cosmetics and perfume, they discovered their personnel had little respect for the "frivolous" nature of such products compared to the far nobler task of developing miracle drugs to cure the ill. The absence of shared values and cultural compatibility between the medical research and chemical-compounding expertise of the pharmaceutical companies and the fashion and marketing orientation of the cosmetics business was the undoing of what otherwise was diversification into businesses with technology-sharing potential, product development fit, and some overlap in distribution channels. In summary, the greater the relatedness among a diversified company's businesses, the bigger a company's window for converting strategic fit into competitive advantage. The strategic and business logic is compelling: Capturing the benefits of strategic fit along the value chains of its related businesses gives a diversified company a clear path to achieving competitive advantage over undiversified competitors and competitors whose own diversification efforts don't offer equivalent strategic-fit benefits. That said, however, the benefits of cross-business strategic fit are not automatically realized when a company diversifies into related businesses; the benefits materialize only after management has successfully pursued internal actions to capture them.

Four Seasons Hotels uses which strategy to compete globally?

A "think-global, act-local approach."

Explain and provide examples comparing and contrasting cash cow businesses and cash hog businesses.

A cash cow business generates cash flows over and above its internal requirements, thus providing a corporate parent with funds for investing in cash hog businesses, financing new acquisitions, or paying dividends. A cash hog business generates cash flows that are too small to fully fund its growth; it thereby requires cash infusions to provide additional working capital and finance new capital investment. A popular example is Apple Inc., whose cash cows are Macs, notebooks, and iPads, whereas its cash hog businesses include services (iTunes, the App Store, the Mac App Store, Apple Music, iCloud, Apple Pay, and AppleCare) and its newer generation smartphones and wearables (iPhone and Apple Watch).

Identify cost drivers in a company's value chain. Explain how these drivers impact a firm's generic strategy.

A cost driver is a factor having a strong effect on the cost of a company's value chain activities and cost structure. These can support a firm's pursuit of low-cost leadership strategy by: (1) striving to capture all available economies of scale; (2) taking full advantage of experience and learning curve effects; (3) trying to operate facilities at full capacity; (4) substituting lower-cost inputs whenever there's little or no sacrifice in product quality or product performance; (5) employing advanced production technology and process design to improve overall efficiency; (6) using communication systems and information technology to achieve operating efficiencies; (7) using the company's bargaining power vis-à-vis suppliers to gain concessions; (8) being alert to the cost advantages of outsourcing and vertical integration; and (9) pursuing ways to boost labor productivity and lower overall compensation costs.

What is meant by the term "resource fit" as it applies to evaluating a diversified company's business lineup?

A diversified company exhibits resource fit when its businesses add to a company's overall mix of resources and capabilities and when the parent company has sufficient resources to support its entire group of businesses without spreading itself too thin

What is meant by the term "resource fit" as it applies to evaluating a diversified company's business lineup?

A diversified company exhibits resource fit when its businesses add to a company's overall mix of resources and capabilities and when the parent company has sufficient resources to support its entire group of businesses without spreading itself too thin.

Carefully explain the difference between and the rationale for selecting a strategy of related diversification and/or a strategy of unrelated diversification.

A related diversification strategy involves building the company around businesses where there is good strategic fit across corresponding value chain activities. Strategic fit exists whenever one or more activities constituting the value chains of different businesses are sufficiently similar to present opportunities for cross-business sharing or transferring of the resources and capabilities that enable these activities. Companies that pursue a strategy of unrelated diversification generally exhibit a willingness to diversify into any business in any industry where senior managers see an opportunity to realize consistently good financial results.

What is meant by the term "strategic fit"? What are the advantages of pursuing strategic fit and matchups in choosing which industries to diversify into?

A related diversification strategy involves building the company around businesses where there is good strategic fit across corresponding value chain activities. Strategic fit exists whenever one or more activities constituting the value chains of different businesses are sufficiently similar to present opportunities for cross-business sharing or transferring of the resources and capabilities that enable these activities. Related diversification is based on value chain matchups with respect to key value chain activities—those that play a central role in each business's strategy and that link to its industry's key success factors.

Anna and Martha are owners and managers of A&M, a limited liability corporation (LLC) that provides a wide array of services: mailing, notary services, packaging and pickup for UPS and FedEx, as well as faxing and document scanning. Anna and Martha have asked you, as their consultant, to consider whether or not they might want to diversify into financial planning due to the increasing number of retirees moving into their community. How would you advise Anna and Martha to proceed?

A&M needs to consider diversification opportunities into financial planning if you have encountered diminishing market opportunities and stagnating sales in your principal business.

Identify and briefly discuss each of the three options for entering new businesses. What are the driving choice parameters for entry into new businesses and which one is the most popular in the sense of being used most frequently?

Acquisition is the most popular means of diversifying into another industry. Not only is it quicker than trying to launch a new operation, but it also offers an effective way to hurdle such entry barriers as acquiring technological know-how, establishing supplier relationships, achieving scale economies, building brand awareness, and securing adequate distribution. Achieving diversification through internal development involves starting a new business subsidiary from scratch. Generally, internal development of a new business has appeal only when (1) the parent company already has in-house most of the resources and capabilities it needs to piece together a new business and compete effectively; (2) there is ample time to launch the business; (3) the internal cost of entry is lower than the cost of entry via acquisition; (4) adding new production capacity will not adversely impact the supply-demand balance in the industry; and (5) incumbent firms are likely to be slow or ineffective in responding to a new entrant's efforts to crack the market. Entering a new business via a joint venture can be useful in at least three types of situations. First, a joint venture is a good vehicle for pursuing an opportunity that is too complex, uneconomical, or risky for one company to pursue alone. Second, joint ventures make sense when the opportunities in a new industry require a broader range of competencies and know-how than a company can marshal on its own. Third, companies sometimes use joint ventures to diversify into a new industry when the diversification move entails having operations in a foreign country.

Briefly discuss when it makes good strategic sense for a company to consider diversification.

Diversification is a sound strategic option when a company can: spot opportunities to expand into industries whose technologies and products complement its present business. leverage existing resources and capabilities by expanding into industries where these same resource strengths are key success factors and valuable competitive assets. combine the related value chain activities of different businesses to achieve lower costs. boast of a powerful and well-known brand name that can be transferred to the products of other businesses and thereby be used as a lever for driving up the sales and profits of such businesses. open up new avenues for reducing costs by diversifying into closely related businesses. encourage knowledge sharing and collaborative activity among the businesses.

Imagine you are the CEO of a regional ride-sharing company considering diversification into meal delivery services. How would you determine whether or not your diversification strategy would be successful?

Diversification would result in enhanced shareholder value.

_________ is when a company sells its goods in foreign markets at prices that are below the prices at which it normally sells in its home market or well below its full costs per unit

Dumping practices

Choose the intended outcome that did not happen with Expedia's merger and acquisition of HomeAway, Inc.

Expedia suppressed its rival company Orbitz's breakthroughs in management or technology.

Mary Barra, CEO of General Motors, has asked you to evaluate the financial resource fit of its new autonomous (self-driving) vehicle and electric vehicle (EV) divisions. You would advise CEO Barra that a diversified company's business units exhibit good financial resource fit when

GM has the resources to adequately support the requirements of its new divisions as a group without spreading itself too thin because these new divisions have the potential to add to GM's overall strengths.

A strategy that incorporates elements of both multidomestic and global strategies is termed a "transnational" strategy, but sometimes it is referred to as a(n) _________ strategy.

Glocalization

The best example of forward vertical integration is

Harley-Davidson and Ducati's own-branded stores that sell motorcycles and related memorabilia.

_____________ is the range of product and service segments that the firm serves within its market.

Horizontal scope

Choose the statement that is not a reason a global strategy contrasts sharply with a multidomestic strategy.

In global competition, there's more cross-country variation in industry conditions and competitive forces than there is in industries where multidomestic competition prevails

Explain the relevance of the following as they relate to building shareholder value via diversification.a. the industry attractiveness testb. the cost of entry testc. the better-off test

In principle, diversification cannot be considered a success unless it results in added long-term economic value for shareholders. Business diversification stands little chance of building shareholder value without passing the following three Tests of Corporate Advantage: a. The industry attractiveness test: The industry to be entered through diversification must be structurally attractive (in terms of the five forces), have resource requirements that match those of the parent company, and offer good prospects for growth, profitability, and return on investment.b. The cost of entry test: The cost of entering the target industry must not be so high as to exceed the potential for good profitability. Since the owners of a successful and growing company usually demand a price that reflects their business's profit prospects, it's easy for such an acquisition to fail the cost of entry test.c. The better-off test: Diversifying into a new business must offer potential for the company's existing businesses and the new business to perform better together under a single corporate umbrella than they would perform operating as independent, stand-alone businesses.

What might be considered to be a major drawback of employing an outsourcing strategy?

It can hollow out a firm's own capabilities and cause it to lose touch with activities and expertise that contribute fundamentally to the firm's competitiveness and market success.

What can happen when international rivals compete against one another in multiple-country markets?

It could initiate a deterrence effect that encourages mutual restraint in taking aggressive action against one another due to the fear of a retaliatory response that might escalate the battle into a cross-border competitive war.

What is a primary drawback of a localized multidomestic strategy?

It hinders the transfer of a company's competencies and resources across country boundaries and hinders the pursuit of a single, uniform competitive advantage in all country markets where a company operates

When Disney relied on licensing agreements with the Oriental Land Company to open its first foreign theme park, Tokyo Disneyland,

Its licensing partner, the Oriental Land Company reaped the windfall, because the partner who bore the risk was also likely to be the biggest beneficiary from any upside gain

Why do mergers and acquisitions sometimes fail to produce anticipated results?

Key employees at the acquired company can quickly become disenchanted and leave

One of the strategy options for competing in the markets of foreign countries is a ________ strategy.

Multidomestic

The following are good examples of outsourcing some value chain activities that were formerly performed in-house except

Nordstrom retails certain products for Coach Inc.

Why is it pertinent in evaluating a diversified company's business lineup to rank a diversified company's businesses on the basis of their future performance prospects?

Once a diversified company's strategy has been evaluated from the perspective of industry attractiveness, competitive strength, strategic fit, and resource fit, the next step is to use this information to rank the performance prospects of the businesses from best to worst. Such ranking helps top-level executives assign each business a priority for resource support and capital investment.

What might induce an already diversified company to enter additional businesses and broaden its diversification base?

Opting to broaden a diversified company's business base is often attributable to (1) sluggish growth in revenues or profits; (2) vulnerability to seasonality or recessionary influences; (3) the potential for transferring resources and capabilities to other related businesses; (4) unfavorable driving forces; or (5) a need to complement and strengthen the market position and competitive capabilities of one or more of its present businesses.

A drink manufacturer finds setting up a plant to make its own bottle caps expensive and technically difficult. Which of the following will be most helpful in solving the manufacturer's problem?

Outsourcing

Why has corporate restructuring become a popular strategy at many diversified companies over the past decade?

Performing radical surgery or restructuring a company's business lineup has become a popular strategy at many diversified companies, especially those that had diversified broadly into many different industries and lines of business. Under some circumstances a diversified company's financial performance has become squeezed or eroded by a serious mismatch between the company's resources and capabilities and the type of diversification that it has pursued, resulting in: (1) too many businesses in slow-growth, declining, low-margin, or otherwise unattractive industries; (2) too many competitively weak businesses; (3) an excessive debt burden with interest costs that eat deeply into profitability; and/or (4) ill-chosen acquisitions that haven't lived up to expectations.

Cross-country differences in demographic, cultural, and market conditions are not present for

Pizza Hut, whose store layouts and menus are uniform in all its locations around the world

Discuss the pros and cons of a strategy of unrelated diversification.

Pros: Where there are opportunities to diversify into any business with potential to obtain consistently good financial results, it makes a good strategy for unrelated diversification.Cons: However, unrelated diversification strategies have two important negatives that undercut the pluses: very demanding managerial requirements and limited competitive advantage potential due to absence of cross-business strategic fit.

A cross-border alliance was not created when

Renault-Nissan disclosed that it had sold more than one in ten cars worldwide

What is the best way to achieve the efficiency potential of a global strategy?

Resources and best practices should be shared, value chain activities should be integrated, and capabilities should be transferred from one location to another as they are developed

Barbara Rentler, CEO of Ross Stores, Inc. (parent company of Ross Dress for Less and dd's Discount retail chains) is considering broadening her company's business scope, by building positions in new related or unrelated businesses. Ms. Rentler would be advised to pursue a diversification strategy for all of the following reasons except

Ross's top management wants to increase its compensation.

What is the difference between economies of scale and economies of scope?

Scale refers to cost savings that accrue directly from larger-sized operations, while scope stems directly from strategic fit along the value chains of related businesses.

Sara is researching cross-country differences in demographic, cultural, and market conditions. She would not likely discover that

Scotland provides low-cost loans to U.S. craft whisky distillers seeking entry to its markets in order to stimulate competitive rivalry

An additional, and often very important motivating factor for adding new businesses is to complement and strengthen the market position and competitive capabilities of one or more of its present businesses. Explain and provide three examples.

Sometimes, companies need to complement and strengthen the market position and competitive capabilities of one or more of their present businesses. Three relatively recent examples of companies that made acquisitions with valuable strategic fit between the value chain activities of the two companies include: 1. In 2014, Apple strengthened its iTunes music business with the $3 billion acquisition of Beats Electronics and Beats Music, a company that produced headphones and provided streaming music services. 2. In 2015, Dutch-based Heineken, the world's third-largest brewer, broadened its slow-growing beer portfolio and increased its geographical reach via a purchase of a 50 percent stake in California-based Lagunitas Brewing Company, a regional craft brewer whose brands were growing at 58 percent per year due to changing beer consumption patterns in the United States. In 2016, Heineken purchased the remaining 50 percent share of Lagunitas Brewing Company. 3. In 2018, shareholders of the Walt Disney Company and 21st Century Fox agreed to a $71.3 billion purchase plan that gave Disney the bulk of the Fox media empire, expanding into industries whose technologies and products complemented its present media and entertainment businesses, opening up new avenues for reducing costs by diversifying into closely related businesses such as direct-to-consumer streaming of media content, and leveraging existing resources and capabilities by expanding into related industries where these same resource strengths were key success factors and valuable competitive assets.

What are the four main strategic paths that a diversified company can employ to improve the performance of its overall business lineup?

Strategic moves to improve a diversified company's overall performance include: (1) sticking closely with the existing business lineup and pursuing the opportunities these businesses present; (2) broadening the company's business scope by making new acquisitions in new industries; (3) divesting some businesses and retrenching to a narrower base of business operations; and (4) restructuring the company's business lineup and putting a whole new face on the company's business makeup.

Greenfield ventures, like all market entry strategies, can pose serious problems to achieving foreign market entry success. What is not deemed a barrier to success?

Such ventures are the fastest entry route to achieve a sizeable market share

Compared with the other countries on the list below, which country boasted the highest labor wage rates in 2016?

Switzerland

Under which circumstance can an alliance be considered just a convenient business arrangement rather than "strategic"?

The alliance helps the company obtain additional financing on better credit terms

Which statement is not a reason BP implemented a multidomestic competitive strategy to market its Castrol oil lubricants around the world?

The benefits from global integration and standardization are high

Domino's Pizza has a well-known slogan: "We'll deliver in 30 minutes or less, or it's free!" Using this slogan, what has the pizza company achieved?

The company built a unique customer value proposition.

Televisa, a Mexican media company, became the world's most prolific producer of Spanish-language soap operas owing to its expertise in Spanish culture and linguistics. Which of the following strategies did Televisa employ to defend against global giants?

The company transferred company expertise to cross-border markets and initiated actions to contend on an international level

How would you explain the difference between a one-business company and a diversified company?

The first uses a business-level strategy, while the second uses a set of business strategies and a corporate strategy.

What is the industry attractiveness test? How is it used to evaluate a diversified company's business lineup? Why is it relevant?

The industry to be entered through diversification must offer an opportunity for profits and return on investment that is equal to or better than that of the company's present lineup of businesses—and this is known as industry attractiveness. The test for gauging industry attractiveness involves calculating quantitative industry attractiveness scores based upon the following nine dimensions: (1) market size and projected growth rate; (2) intensity of competition; (3) emerging opportunities and threats; (4) presence of cross-industry strategic fit; (5) resource requirements; (6) seasonal and cyclical factors; (7) social, political, regulatory, and environmental factors; (8) industry profitability; (9) industry uncertainty and business risk. These dimensions are first assigned numbers from 1 to 10, and are then weighted to reflect their relative importance. Two conditions are necessary for an industry attractiveness score to be relevant: (1) deciding on appropriate weights for the industry attractiveness measures, and (2) for diversified companies possessing portfolios of business that have strong cross-industry strategic fit.

A potato chip manufacturer purchases a potato farm. Which of the following regarding its strategy is true?

The manufacturer has effectively used vertical integration to increase its bargaining position and reduce transaction costs.

What are the advantages and benefits of using an industry attractive-business strength matrix to evaluate a diversified company's lineup of businesses?

The nine-cell attractiveness-strength matrix provides clear, strong logic for why a diversified company needs to consider both industry attractiveness and business strength in allocating resources and investment capital to its different businesses. A good case can be made for concentrating resources in those businesses that enjoy higher degrees of attractiveness and competitive strength, being very selective in making investments in businesses with intermediate positions on the grid, and withdrawing resources from businesses that are lower in attractiveness and strength unless they offer exceptional profit or cash flow potential.

If you were advising Hoffmann-LaRoche, which set up Roche Partnering to manage more than 190 alliances in the healthcare industry, what might not be a reason why some of those alliances could prove to be unstable or break apart?

The partners may disagree among themselves over how to divide the profits gained from joint collaboration.

A weaker U.S. dollar is an economically favorable exchange-rate shift for manufacturing plants based in the United States.

This is a true statement

Identify and briefly discuss each of the three tests for determining whether diversification into a new business is likely to build shareholder value.

To build shareholder value, any business diversification strategy should pass the three Tests of Corporate Advantage: The industry attractiveness test: The industry to be entered through diversification must be structurally attractive (in terms of the five forces), have resource requirements that match those of the parent company, and offer good prospects for growth, profitability, and return on investment. The cost-of-entry test: The cost of entering the target industry must not be so high as to exceed the potential for good profitability. The better-off test: Diversifying into a new business must offer potential for the company's existing businesses and the new business to perform better together under a single corporate umbrella than they would perform operating as independent, stand-alone businesses—an effect known as synergy.

_________ is the extent to which a firm's internal activities encompass one, some, many, or all of the activities that make up an industry's entire value chain system.

Vertical scope

An example of a company that does not use blue-ocean market strategy is

Walmart's logistics and distribution in the retail industry.

The diamond framework is not LIKELY to answer which of the following questions about competing on an international basis?

What are the disadvantages of allowing foreign competition

A cross-border alliance was not created when

Yum! Brands offered KFC franchises in China

A boutique hotel chain provides upscale rooms and superior customer service at value prices. What strategy is the hotelier using to gain competitive advantage?

a best-cost provider strategy

Conditions that may make corporate restructuring strategies appealing include all of the following except

a business lineup that consists of too many cash cow businesses.

Employing a "think-local, act-local" multidomestic strategy is highly questionable when

a company desires to transfer competencies and resources across country boundaries and is striving to build a single, uniform competitive advantage worldwide

A good example of blue-ocean type of offensive strategy is

a company like Australian winemaker Casella Wines that created a Yellow Tail brand designed to appeal to a wider market, one that also includes consumers of other alcoholic beverages.

Which of the following is a diversified business with one major "core" business and a collection of small related or unrelated businesses?

a dominant business enterprise

Sharing and transferring resources and capabilities across borders may also contribute to the development of broader or deeper competencies and capabilities, thereby helping a company achieve

a dominating depth in some competitively valuable area

A focused low-cost strategy can lead to attractive competitive advantage when

a firm can lower costs significantly by limiting its customer base to a well-defined buyer segment.

When comparing and contrasting the differences between a localized multidomestic strategy and a global strategy you would not say that

a global strategy involves striving to be the global low-cost provider by economically producing and marketing a mostly standardized product worldwide, whereas a multidomestic strategy entails pursuing broad differentiation and striving to strongly differentiate its products in one country from the products it sells in other countries

Transferring core competencies and resource strengths from one country market to another is

a good way for companies to develop broader or deeper competencies and competitive capabilities that can become a strong basis for sustainable competitive advantage

The difference between a merger and an acquisition is that

a merger is the combining of two or more companies into a single corporate entity, whereas an acquisition involves one company (the acquirer) purchasing and absorbing the operations of another company (the acquired).

According to the value-price-cost framework, deploying a differentiation strategy involves costs that might well exceed those of the average competitor, but with a successful differentiation strategy, that disadvantage is more than made up for by

a rise in the perceived value of the differentiated good, giving the differentiator a clear competitive advantage over the average rival.

What are value drivers?

a set of factors (analogous to cost drivers) that are particularly effective in having a strong differentiation effect

When General Electric created an independent health care division and divested it in June 2018 by distributing to GE's stockholders new shares in the new business, the strategic action was termed

a spin-off.

Retrenching to a narrower diversification base is

a strategy that allows a diversified firm's energies to be concentrated on building strong positions in a smaller number of businesses rather the stretching its resources and managerial attention too thinly across many businesses.

What strategy is considered more conducive to transferring and leveraging subsidiary skills and capabilities across borders?

a transnational strategy

Identify and explain the meaning and strategic significance of each of the following terms.a) Related diversificationb) Strategic fitc) Economies of scoped) Retrenchinge) Unrelated diversification

a. Related diversification: Businesses are "related" when their value chains possess competitively valuable cross-business relationships. b. Strategic fit: Strategic fit occurs when value chains of different businesses present opportunities for cross-business combinations such as skills transfer, cost sharing, or brand sharing. c. Economies of scope: Economies of scope stem directly from cost-saving strategic fit along the value chains of related businesses. Such economies are open only to a multibusiness enterprise and are the result of a related diversification strategy that allows sibling businesses to share technology, perform R&D together, use common manufacturing or distribution facilities, share a common sales force or distributor/dealer network, and/or share the same administrative infrastructure. d. Retrenching: Evidence indicates that pruning businesses and thereby narrowing a firm's diversification base in a smaller number of core businesses improves corporate performance. e. Unrelated diversification: An unrelated diversification strategy discounts the importance of pursuing cross-business strategic fit and, instead, focuses squarely on entering and operating businesses in diverse industries that allow the company as a whole to increase its earnings.

Tiffany & Co. opted to enter into the mining industry in Canada in order to

access diamonds that could be certified as "conflict-free" and not associated with unethical mining practices or the finding of military activities in Africa

Success with a best-cost provider strategy designed to outcompete high-end differentiators requires

achieving significantly lower costs in providing the upscale features.

A company can best accomplish diversification into new industries by

acquiring a company already operating in the target industry, creating a new business from scratch, or forming a joint venture with one or more companies to enter the target industry.

The best reason for investing company resources in vertical integration (either forward or backward) is to

add materially to a company's technological capabilities, strengthen the company's competitive position, and/or boost its profitability.

The impact of fluctuating exchange rates on companies competing in foreign markets

always benefit domestic companies facing competitive pressure from lower-cost imports when their government's currency grows weaker

Bonobos's Guideshop store concept allows men to have a personalized shopping experience, where they can try on clothing in any size or color, and then have it delivered the next day to their home or office. This fashion retail concept is a good example of

an offensive strategy to seek uncharted waters and compete in blue oceans.

You are the general manager of a regional HR staffing company. What strategic consideration would be LEAST likely to influence your decision to diversify your firm into new, related or unrelated business services?

analyzing and settling on the appropriate value chain for each business the company has entered

The basic premise of unrelated diversification is that

any company that can be acquired on good financial terms and that has satisfactory growth and earnings potential represents a good acquisition and a good business opportunity.

To attain a differentiation-based competitive advantage, a company would be UNLIKELY to

appeal to buyers who are sophisticated and shop hard for the best, stand-out differentiating attributes.

Best-cost provider strategies are those that

are a hybrid of low-cost provider and differentiation strategies that aim at providing desired attributes while beating rivals on price

Checking a diversified company's business portfolio for the competitive advantage potential of cross-business strategic fits does not involve ascertaining the extent to which sister business units

are cash cows and which ones are cash hogs.

Economies of scope

are cost reductions that flow from operating in multiple related businesses.

The best strategic alliances

are highly selective, focusing on particular value chain activities and on obtaining a particular competitive benefit.

Michelle Buck, CEO of the Hershey Company has hired you as a consultant to assess her diversified company's business units for cross-business competitive advantage potential. Your assessment would not normally involve ascertaining the extent to which Hershey's business units

are making maximum use of the parent company's competitive advantages.

The advantages of manufacturing goods in a particular country and exporting them to foreign markets

are weakened when that country's currency grows stronger relative to the currencies of the countries where the output is being sold

A company that succeeds in differentiating its product offering from those of its rivals is UNLIKELY to

attract mainly price-conscious buyers.

The three tests for judging whether a particular diversification move can create value for shareholders are the

attractiveness test, the cost of entry test, and the better-off test.

To test whether a particular diversification move has good prospects for creating added shareholder value, corporate strategists should use the

attractiveness test, the cost of entry test, and the better-off test.

The 2015 merger of Walgreen Boots Alliance, one of the world's largest pharamaceutical purchasers, is not likely to

avoid the effects of fluctuations in exchange rates on the costs of manufacturing goods in a particular country

A vertical integration strategy can expand the firm's range of activities

backward into sources of supply and/or forward toward end users.

A company's competitive strategy should

be well matched to its internal situation and predicated on leveraging its collection of competitively valuable resources and competencies.

Why might a company not choose to outsource certain value chain activities presently performed in-house?

because it enables a company to gain better access to end users and better market visibility

A European-based company that makes all of its goods at a plant in Brazil and then exports the Brazilian-made goods to country markets in many different parts of the world

becomes less competitive in foreign markets when the Brazilian real gains in value against the currencies of the countries to which the Brazilian-made goods are being exported

An Irish dairy producer that exports gourmet cheeses made at its Kerry plants to the United States

becomes less competitive in the U.S. market when the euro rises in value against the U.S. dollar

A U.S. organic personal hygiene product manufacturer that exports toothpaste and deodorant made at its U.S. plants for shipment to the U.K. market

becomes more competitive in the United Kingdom when the U.S. dollar declines in value against the British pound

The Achilles' heel (or biggest disadvantage/pitfall) of relying heavily on alliances and cooperative strategies is

becoming dependent on other companies for essential expertise and capabilities

The advantages of using a licensing strategy to participate in foreign markets include

being able to leverage the company's technical know-how, appealing brand, or patents without committing their resources or capabilities to foreign markets

Offensive strategic moves involve all of the following except

blocking the avenues open to challengers.

The nine-cell attractiveness-strength matrix provides clear, strong logic for considering using

both industry attractiveness and business strength in allocating resources and investment capital to its different businesses.

A think-global, act-global strategic theme puts emphasis on

building a global brand name and aggressively pursuing opportunities to transfer ideas, products, and capabilities from one country to another

Diversifying into new businesses can be considered a success only if it

builds shareholder value.

Unlikely candidates for divestiture in a corporate restructuring effort are

businesses compatible with the company's revised diversification strategy

A broad differentiation strategy works best in situations where

buyer needs and uses of the product or service are diverse.

A low-cost leadership strategy becomes competitively powerful when

buyers of the product or service use the product or service in the same ways.

An offensive to yield good results can be short if

buyers respond immediately (to a dramatic cost-based price cut or imaginative ad campaign).

Perceived value and signaling value are often an important part of a successful differentiation strategy because

buyers seldom will pay for value they don't perceive, no matter how real the value of the differentiating extras may be.

Huawei has hired you to calculate its relative share of the global mobile phone market. How would you conduct this analysis?

by dividing Huawei's percentage share of total industry sales volume by the percentage share held by its largest rival.

Opportunities to differentiate a company's product offering

can exist in activities all along an industry's value chain.

With a strategy of unrelated diversification, an acquisition is deemed to have potential if it

can pass the industry attractiveness test and the cost of entry test, and if it has good prospects for profit growth.

Experience indicates that strategic alliances

can suffer culture clash and integration problems due to different management styles and business practices.

A major drawback of using a low-cost provider strategy is

capturing volume gains and achieving economies of scale.

The competitive advantage opportunities that a global competitor can gain by dispersing performance of its activities across many nations include all of the following, except

centralizing value chain activities to foster just-in-time inventory activities

Focusing carries several risks, one of which is the

chance that competitors will find effective ways to match the focused firm's capabilities in serving the target market.

Strategic alliances are more likely to be long lasting when they involve

collaboration with suppliers or distribution allies, or when both parties conclude that continued collaboration is in their mutual interests

Strategic alliances are

collaborative formal arrangements where two or more companies join forces and agree to work cooperatively toward some strategically relevant objective.

An economy of scope is BEST illustrated by being able to eliminate or reduce costs by

combining related value-chain activities of different businesses into a single operation.

Successful broad differentiation allows a firm to

command a premium price for its product, and/or increase unit sales, and/or gain buyer loyalty to its brand.

The marketing emphasis of a company pursuing a focused low-cost provider strategy usually is to

communicate the attractive features of a budget-priced product offering that fits niche members' expectations.

To use location to build competitive advantage, a company that operates transnationally or globally must

consider whether to concentrate each activity it performs in a few select countries or disperse performance of the activity to many nations and consider in which countries to locate particular activities

A production-based emphasis toward a low-cost provider strategy usually requires a company to strive for

continuous cost reductions without sacrificing acceptable quality and essential features.

Microsoft's alliance with immuno-sequencing company Adaptive Biotechnologies can be called "strategic" because it serves all of the following strategic purposes except

contracts out certain value chain activities by both parties to outside vendors.

Entering into strategic alliances and collaborative partnerships can be competitively valuable because

cooperative arrangements with other companies are very helpful in racing against rivals to build a strong global presence and/or racing to seize opportunities on the frontiers of advancing technology.

Approaches to enhancing differentiation through changes in the value chain do not include

coordinating with employees to create a greater incentive system to encourage worker productivity.

What is the name of the process for developing new businesses as an outgrowth of a company's established business operations?

corporate venturing

Once a company has diversified into a collection of related or unrelated businesses and concludes that some strategy adjustments are needed, which one of the following is not one of the main strategy options that a company can pursue?

craft new initiatives designed to build/enhance the reputation and image of the company

A company that has greater success in managing its strategic alliance can credit all of the following, except

creating organizational learning barriers across boundaries.

Among the factors that do not determine whether to employ entry strategy options are

cross-border transfer activities and home country advantages.

What supports competitive offensives in one market with resources and profits diverted from operations in another market?

cross-market subsidization

A low-cost provider strategy can defeat a differentiation strategy when

customers are basically satisfied and don't think extra attributes are worth a higher price.

The options for allocating a diversified company's financial resources include all of the following except

decreasing dividend payments and/or selling shares of stock.

The objective of a best-cost provider strategy is to

deliver superior value to value-conscious buyers at a comparatively lower price than rivals.

Profit sanctuaries are country markets or geographic regions where a company

derives substantial profits because of its protected market position or unassailable competitive advantage

On June 26, 2018, CEO John Flannery of General Electric Company (GE) announced that the company planned to spin off its healthcare business and divest its stake in oil-services firm Baker Hughes. The slimmed-down company would re-focus on jet engines, power plants and renewable energy. What was not an important consideration for CEO Flannery when evaluating the merits of this diversified company's new strategy?

determining which business units were cash cows and which ones were cash hogs, and then evaluating how soon GE's cash hogs could be transformed into cash cows

Samsung Group, which includes Samsung Electronics, successfully manages an ecosystem of over 1,300 partnerships that enable productive activities from global procurement to local marketing to collaborative R&D. Samsung Group's alliance management capability can be said to have

developed over time, out of effort and learning.

Tailoring a strategy to fit the circumstances of emerging country markets does not typically involve

developing a strategy for the short-term and forget about a long-term strategy because conditions in emerging country markets change so rapidly

Crafting a strategy to compete in one or more foreign markets can be considered complex because

different government policies and economic conditions make the business climate more favorable in some countries than in others

Backward vertical integration can produce a

differentiation-based competitive advantage when activities enhance the performance of the final product.

Market size and growth rates in different countries can be influenced positively or negatively by

differing population sizes, cultures, income levels, infrastructure, and distribution networks among countries

It becomes particularly urgent for a company to consider diversification when there are

diminishing market opportunities and stagnating sales in its principal business.

An UNLIKELY risk of cross-border alliances between domestic and foreign firms is

disengaging from the alliance once its purpose has been served.

In expanding into foreign markets, a company can strive to gain competitive advantage (or offset domestic disadvantages) by

dispersing its activities among various countries in a manner that lowers costs or else helps achieve greater product differentiation and transferring competitively valuable competencies and capabilities from its domestic operations to its operations in foreign markets

Best-cost provider strategies are appealing in those market situations where

diverse buyer preferences make product differentiation the norm and where a large number of value-conscious buyers can be induced to purchase mid-range products.

To create value for shareholders via diversification, a company must

diversify into businesses that can perform better under a single corporate umbrella than they could perform operating as independent, stand-alone businesses.

One strategic fit-based approach to related diversification would be to

diversify into new industries that present opportunities to transfer specialized expertise, technological know-how, or other valuable resources and capabilities from one business's value chain to another's.

Strategies to restructure a diversified company's business lineup involve

divesting low-performing businesses that do not fit and acquiring new ones where opportunities are more promising to put a new face on the company's business makeup.

The task of crafting a company's overall corporate strategy for a diversified company encompasses all of the following except

divesting well-performing businesses.

A sound justification for unrelated diversification is that

doing so can deliver enhanced shareholder value if an undervalued company can be purchased at a bargain price

Kjirstin is the general manager of Labcon USA, a diversified laboratory equipment design and manufacturing business with one major "core" business that accounts for 60 percent of the company's total worldwide revenues and the remainder, a collection of small related or unrelated businesses. She would define Labcon USA as a _________ enterprise.

dominant business

You have been hired as a consultant by Mary Dillon, CEO of Ulta Beauty, a $5.9 billion company that is the largest U.S. retailer of cosmetics. CEO Dillon has asked you to consider several related diversification options for Ulta based on the potential for good resource fits. You would advise CEO Dillon that a company pursuing related diversification exhibits resource fit when

each new line of business for Ulta would add to a company's overall resource strengths and have matching resource requirements and/or could do so when Ulta has adequate corporate resources to support its business needs and add sufficient value.

Corporate parenting refers to all of the following except

efforts to judiciously segregate funds for each business in such a way that keeps the money safe and discourages shifting funds across business units.

The production emphasis of a company pursuing a broad differentiation strategy usually involves

emphasis on building differentiating features that buyers are willing to pay for and includes wide selection and many product variations.

Companies pursue closer coordination and collaboration with channel suppliers to better address customer needs in order to

enhance differentiation through the value chain system.

The potential advantages of Tesla's backward vertical integration strategy include

enhancement of Tesla's differentiation capabilities and perhaps achieving a differentiation-based competitive advantage.

When justifying her considerations for her China-based wine importation company's foreign market entry, Ming-Chi probably would not choose

entering a new foreign country via internal development and building a foreign subsidiary from scratch, because it is cheaper than entering into strategic alliances and cooperative agreements

You have been asked to consult with Sonic.net, a regional Internet Service Provider, about the advisability of competing abroad. Your assessment of the opportunities for Sonic.net to craft a strategy to compete in one or more countries in the world would not necessarily

evaluate a multidomestic strategy that considers the world market as a mostly homogeneous market

Using domestic plants as a production base for exporting goods to selected foreign country markets can be a(n)

excellent initial strategy to test the international waters and learn if attractive market positions can be established in foreign markets

On July 27, 2018, shareholders of the Walt Disney Company and 21st Century Fox agreed to a $71.3 billion purchase plan that gave Disney the bulk of the Fox media empire, substantially altering the entertainment landscape. What was LEAST likely among Disney's considerations in completing its acquisition of Fox?

expanding into additional businesses that unlock possibilities for a comprehensive cost enhancement strategy.

Vertical integration strategies

extend a company's competitive scope within the same industry by expanding its operations across multiple segments or stages of the industry value chain

Vanguard, one of the world's largest investment management companies, has attained cost leadership via

ferreting out cost-saving opportunities in every part of the value chain.

A broad differentiation strategy generally produces the best results in situations where

few rival firms are following a similar differentiation approach.

Market circumstances that make a focused low-cost or focused differentiation strategy attractive are characterized by

few, if any, rivals are attempting to specialize in the same target segment.

When tailoring their strategy to fit circumstances of emerging country markets, viable strategic options companies should consider include all of the following, except

focusing on local markets whose circumstances will be most challenging to the company's business model

Strategic fit between two or more businesses exists when one or more activities comprising their respective value chains present opportunities

for cross-business collaboration to build valuable new resource strengths and competitive capabilities.

When Disney acquired Marvel Comics on August 31, 2009, for $4.24 billion, management needed to determine whether or not there were opportunities to strengthen the business, which includes all of the following considerations, except

forcing cultural independence, operating diversity, and sophisticated analytical responsibility on the businesses to ensure compatibility with the corporate overhead identity.

What factor is not LIKELY responsible for Apple's decision to set up mobile phone manufacturing facilities in India?

franchising opportunities in India

Mergers and acquisitions

frequently do not produce the hoped-for outcomes

Social media giant Facebook Inc. decided to expand outside its home market in order to

gain access to new customers for the company's products/services

The primary reasons that companies opt to expand into foreign markets are to

gain access to new customers, achieve lower costs, enhance the company's competitiveness, capitalize on core competencies, and spread business risk across a wider market base

The strategic impetus for forward vertical integration is to

gain better access to end users and better market visibility

The strategic impetus for Tesla's forward vertical integration into dealerships and charging stations is

gaining better access to Tesla's end users and better market visibility

Companies racing against rivals for global market leadership need strategic alliances and collaborative partnerships with companies in foreign countries to

get into critical country markets quickly, gain inside knowledge about unfamiliar markets and cultures, and access valuable skills and competencies that are concentrated in particular geographic locations.

Trader Joe's biggest vulnerability in employing a best-cost provider strategy is

getting squeezed between the strategies of firms employing low-cost provider strategies and high-end differentiation strategies.

A "think-local, act-local" multidomestic strategy entails

giving local managers considerable strategy-making latitude and often producing different product versions for different countries

Market conditions and factors that tend not to favor first movers include

growth in demand that depends on the development of complementary products or services that are not currently available and new-industry infrastructure that is needed before buyer demand can surge.

The world economy is globalizing at an accelerated pace because

growth-minded companies are racing to build stronger competitive positions in the markets of more countries

Sandi is considering conditions that make an internal startup strategy appealing over an acquisition, and has determined that she would ONLY choose an internal startup strategy when an internal startup

has the necessary scale and resource strengths to compete with rivals

A localized or multidomestic strategy

has two big drawbacks: (1) it hinders transfer of a company's competencies and resources across country boundaries because the strategies in different host countries can be grounded in varying competencies and capabilities; and (2) it does not promote building a single, unified competitive advantage, especially one based on low cost

Unrelated businesses

have dissimilar value chains and resource requirements with no competitively important cross-business commonalities at the value chain level.

Low-cost leaders who have the lowest industry costs are likely to

have out-managed rivals in finding ways to perform value chain activities more cost-effectively.

An example of how companies can revamp their value chain to reduce costs is to

have suppliers locate their plants close to companies' own facilities.

The advantages of using an acquisition strategy to pursue opportunities in foreign markets include

having a high level of control and speed as an entry strategy to overcome trade barriers

The advantages of using a franchising strategy to pursue opportunities in foreign markets include

having franchisees bear most of the costs and risks of establishing foreign locations and requiring the franchisor to expend only the resources to recruit, train, and support and monitor franchisees

A company racing to seize opportunities on the frontiers of advancing technology often utilizes strategic alliances and collaborative partnerships to

help master new technologies and build new expertise and competencies, establish a stronger beachhead for participating in the target industry, and open up broader opportunities in the target industry.

Dispersing activities to many locations is competitively advantageous when

high transportation costs, diseconomies of large size, and trade barriers make it too expensive to operate from a central location

The big risk of employing an outsourcing strategy is

hollowing out a firm's own capabilities and losing touch with activities and expertise that contribute fundamentally to the firm's competitiveness and market success.

Dispersing the performance of value chain activities to many different countries rather than concentrating them in a few country locations tends to be advantageous in all of the following situations, except

if resources retain their foreign contexts so there is competitive advantage over a broader domain

Whirlpool's efforts to link its product R&D and manufacturing operations in North America, Latin America, Europe, and Asia did not enable the company to

impart technical knowledge to high-cost human resources in developing nations

Despite their obvious benefits, think-local, act-local strategies have all of the following drawbacks except

in global competition, the size of a firm's worldwide competitive advantage (or disadvantage) equals the sum of the competitive advantages (or disadvantages) it has in each country market where it competes

To profitably employ a best-cost provider strategy, a company must have the resources and capabilities to

incorporate attractive or upscale attributes into its product offering at a lower cost than rivals.

A route to take in developing a differentiation advantage includes

incorporating tangible features that add functionality, and increase customer satisfaction with the product specifications, functions, and styling.

Businesses with strategic fit with respect to their supply chain activities perform better together because of all of the following except the

increased allocation and allotment of support activities and specialized resources and capabilities.

Brands create customer loyalty, which in turn

increases the perceived cost of switching to another product.

The strategic options to improve a diversified company's overall performance do not include which of the following categories of actions?

increasing dividend payments to shareholders and/or repurchasing shares of the company's stock

The purposes of a defensive strategy do not include

increasing the risk of having to defend an attack.

The businesses in a diversified company's lineup exhibit good resource fit when

individual businesses have matching resource requirements at points along their value chain and add to a company's overall resource strengths and when solid parenting capabilities exist without spreading itself too thin.

A competitive strategy to be the low-cost provider in an industry works well when

industry newcomers use introductory low prices to attract buyers and build a customer base.

The principal offensive strategy options include all of the following except

initiating a market threat and counterattack simultaneously to effect a distraction

What is it called when a diversified company can add value by shifting capital from business units generating free cash flow to those needing additional capital to expand and realize their growth potential?

internal capital market

Profit sanctuaries are found to differ by a company's strategy, such that a(n)

international competitor usually has a profit sanctuary in its home market and may have other sanctuaries in countries where it has a strong position and market share

Deploying a diversified company's financial resources would normally not involve

investing financial resources in cash cow businesses until they show enough strength to generate positive cash flows.

Outsourcing strategies

involve farming out value chain activities presently performed in-house to outside specialists and strategic allies.

Corporate restructuring strategies

involve making major changes in a diversified company's business lineup, divesting some businesses and/or acquiring others, so as to put a whole new face on the company's business lineup.

A blue-ocean strategy

involves abandoning efforts to beat out competitors in existing markets and instead invent a new industry or new market segment that renders existing competitors largely irrelevant and allows a company to create and capture altogether new demand.

An outsourcing strategy

involves farming out certain value chain activities presently performed in-house to outside vendors.

A primary drawback of a global strategy is that it

involves higher coordination costs due to more complex tasks of managing a globally integrated enterprise

A hit-and-run or guerrilla warfare type offensive strategy

involves unexpected attacks (usually by a small-to-medium size competitor) to grab sales and market share from complacent or distracted rivals.

A U.S. company that makes all of its goods at a plant in Brazil and then exports the Brazilian-made goods to country markets across the world

is competitively advantaged when the Brazilian real declines in value against the currencies of the countries to which the Brazilian-made goods are being exported

Companies often implement a transnational strategy because it

is conducive to mass customization techniques that enable companies to address local preferences in an efficient semi-standard manner.

A diversified company has a parenting advantage when it

is more able than other companies to boost the combined performance of its individual businesses through its high-level guidance, general oversight, and other corporate-level contributions.

A "think-local, act-local" multidomestic type of strategy

is more appealing when the country-to-country differences in buyer tastes, cultural traditions, and market conditions are diverse

The nine-cell industry attractiveness competitive strength matrix

is useful for helping decide which businesses should have high, average, and low priorities in deploying corporate resources.

All other things being equal, the "best" generic competitive strategy for a company to employ is a strategy that

is well matched to a company's internal situation; underpinned by an appropriate set of resources, know-how, and competitive capabilities; and difficult for rivals to match.

The competitive advantage of a best-cost provider like Trader Joe's is

its capability to incorporate upscale or attractive attributes into its product offerings at lower costs than rivals.

For a diversified company to be a strong performer

its principal business must be in industries with a good outlook for growth and above-average profitability

For a diversified company to be a strong performer

its principal business must be in industries with a good outlook for growth and above-average profitability.

Daimler's 2017 agreement with automotive supplier Robert Bosch GmbH to develop self-driving taxis that customers can hail with a smartphone app is called a

joint venture

Apollo Tires sets up a manufacturing unit in Mexico. Following this, Renault-Nissan signs a supply contract with the tire multinational. In which of the following ways is Renault-Nissan likely to gain from the pact?

knowledge sharing within same value chain system

A "think-local, act-local" multidomestic strategy works particularly well in all of the following situations, except when there are

large demands to pursue conflicting objectives simultaneously

When concentrating production in a few locations, which of the following can allow a manufacturer to lower unit costs, boost quality, or master a new technology more quickly?

learning-curve effects

When seeking to develop competitive strength in a foreign market, firms generally DO not evaluate the

level of industry-related support activities to foster customization of products and services

For an unrelated diversification strategy to produce financial results above that of stand-alone entities, executives must do all of the following except

leverage the cross-business strategic fit advantage effectively.

Companies that compete internationally can pursue competitive advantage in world markets (or offset domestic disadvantages) by

locating value chain activities in whatever nations prove most advantageous in a manner that uses location to lower costs or achieve greater product differentiation, allow for the transfer of competitively valuable competencies and capabilities from one country to another, and allow for cross-border coordination

The generic types of competitive strategies include

low-cost provider, broad differentiation, best-cost provider, focused low-cost, and focused differentiation strategies.

The big problem a franchisor faces is

maintaining quality control due to a lack of commitment to consistency and standardization

A low-cost leader can translate its low-cost advantage over rivals into superior profit performance by

maintaining the present price and using the lower-cost edge to earn a higher profit margin on each unit sold.

For every emerging opportunity, there exists a(n)

market penetration curve, and this typically has an inflection point where the business model falls into place

Tinder's first-mover strategic thrust into the online dating industry resulted in a high payoff in all of the following except

market uncertainties made it difficult for Tinder's founding team to ascertain whether or not the dating app would eventually succeed

The strength of a "think-local, act-local" multidomestic strategy is that it

matches a company's competitive approach to prevailing market and competitive conditions in each country market, country by country

Merger and acquisition strategies

may offer considerable cost-saving opportunities and can also be beneficial in helping a company try to invent a new industry

A low-cost leader's basis for competitive advantage is

meaningful lower overall costs than rivals on comparable products.

The competitive objective of a best-cost provider strategy is to

meet or exceed buyer expectations on key quality/performance/features/service attributes and beat their expectations on price (given what rivals are charging for much the same attributes).

Carlos, the CEO of a local HR recruiting and staffing company, is considering a strategic alliance with a local payroll company. What would not likely be a consideration for Carlos with respect to whether the proposed alliance could become successful and realize its intended benefits?

minimizing the amount of resources that the partners commit to the alliance

A primary reason why mergers and acquisitions sometimes fail is due to the

misinterpretation of the cultural differences, like employee disenchantment and low morale, differences in management styles and operating procedures, and operations integration decision mistakes.

A competitive strategy of striving to be the low-cost provider is particularly attractive when

most buyers use the product in much the same ways, with user requirements calling for a standardized product.

Launching a preemptive strike type of offensive strategy entails

moving first to secure advantageous competitive assets that rivals can't readily match or duplicate

For backward vertical integration into the business of suppliers to be a viable and profitable strategy, a company

must be able to achieve the same scale economies as outside suppliers and match or beat suppliers' production efficiency with no drop-off in quality

Outsourcing strategies can offer such advantages as

obtaining higher quality and/or cheaper components or services, improving a company's ability to innovate, and reducing its risk exposure.

The underlying criteria of a best-cost provider strategy usually is found in the ability of a company to

offer better goods at attractive prices.

The objective of differentiation is to

offer customers something rivals can't, at least in terms of the level of satisfaction.

The essence of a broad differentiation strategy is to

offer unique product attributes in ways that are valuable and appealing and that buyers consider the cost worth it.

A focused differentiation strategy aims at securing competitive advantage by

offering a product carefully designed to appeal to the unique preferences and needs of a narrow, well-defined group of buyers.

A big advantage of related diversification is that it

offers ways for a firm to realize 1 + 1 = 3 benefits because the value chains of the different businesses present competitively valuable cross-business relationships.

A differentiation-based competitive advantage

often hinges on incorporating features that raise the performance of the product or lower the buyer's overall costs of using the company's product, or enhances buyer satisfaction in intangible or noneconomic ways, or delivers value to customers by differentiating on the basis of competencies and capabilities that rivals can't match.

Late-mover advantages (or first-mover disadvantages) are not likely to arise when

opportunities exist for a blue-ocean strategy to invent a new industry or distinctive market segment that creates altogether new demand.

The worst targets for an offensive-minded company to target are

other offensive-minded companies that possess a sizable war chest of cash and marketable securities

Actions that a company should take to perform value chain activities more cost-effectively ordinarily will not be concerned with

over-differentiating so that product features exceed the needs of most buyers.

Of the following strategic fit opportunities, which choice is not supportive of related business activities?

overhauling and streamlining the operations of the business by refocusing value chain activities toward businesses that can provide a superior job of parenting

The big dilemma an acquisition-minded firm faces is whether to

pay a premium price for a successful company or buy a struggling company at a bargain price.

Once a company has decided to employ a particular generic competitive strategy, then it must make the following additional strategic choices, except whether to

pay special attention to buyer segments that a rival is already serving.

In order to be successful with a low-cost leadership strategy, company managers have to

perform value chain activities more cost-effectively than rivals and be proactive in revamping the firm's overall value chain to eliminate or bypass "nonessential" cost-producing activities.

Whatever strategic approach is adopted by a company to deliver value, it nearly always requires

performing value chain activities differently than rivals and building competitively valuable resources and capabilities that rivals cannot readily match.

The major avenues for achieving a cost advantage over rivals include

performing value chain activities more cost-effectively than rivals or revamping the firm's overall value chain to eliminate or bypass some cost-producing activities.

The one factor that company executives need not worry about when their company is managing many diverse, unrelated firms is to

pick business-unit heads having the requisite combination of managerial skills and know-how to motivate people.

The difference between political risks and economic risks is that

political risks stem from instability or weakness in national governments, while economic risks stem from the stability of a country's monetary system, and its economic and regulatory policies

The risks of strategic alliances often include all of the following except

potential for royalty from trustworthy firms

The risks of a focused strategy for a company like Canada Goose are the

potential for the preferences and needs of niche members to shift over time toward product attributes desired by buyers in the mainstream portion of the market.

In April 2017, PetSmart agreed to make the largest e-commerce acquisition in history to date, putting a deal in place to snatch up fast-growing pet food and product site Chewy. com for $3.35 billion. The acquisition premium for this particular deal can be calculated as the amount by which the price PetSmart offered for Chewy.com exceeded the

preacquisition market value of Chewy.com.

The better-off test for evaluating whether a particular diversification move is likely to generate added value for shareholders involves assessing whether the move will

produce a synergistic outcome such that the company's different businesses perform better together than apart and the whole ends up being greater than the sum of the parts.

A broad differentiation strategy is generally not suitable for attaining a competitive advantage when

products of rivals are weakly differentiated.

The chief purpose of calculating quantitative industry attractiveness scores for each industry a company has diversified into is to

provide a basis for drawing analysis-based conclusions about the attractiveness of the industries a company has diversified into, both individually and as a group, and further to provide an indication of which industries offer the best and worst long-term prospects.

The objective of a competitive strategy is to

provide buyers superior value relative to the offerings of rival sellers in order to attain a competitive advantage.

A signal that would not warn challengers that strong retaliation is likely is

publicly announcing strong quarterly earnings potential to financial analysts.

Companies like Amazon, Apple, Facebook, and Google employ all but ONE of the following offensive actions to complement and supplement the choice of one of the five generic competitive strategies. Which is not an example of an offensive move?

pursuing a market share leadership strategy

Strategic options for expansion into foreign markets do not consist of

pursuing a profit sanctuary strategy

By cutting back operations to match areas of declining demand and moving some operations overseas, Hewlett-Packard anticipates a reduction in costs of more than $2 billion. But despite having made significant progress toward being a smaller, more nimble company, significant challenges in returning to profitability still remain. Hewlett-Packard is a good example of

pursuing a strategy of corporate restructuring

Corporate strategy options for already diversified companies include all of the following except

pursuing certain acquisitions even if they have done badly or haven't quite lived up to expectations.

Bumble, a digital dating site where women make the first move, specifically uses which strategic weapon in its offensive arsenal?

pursuing disruptive product innovations to create new markets

The approach of a firm using a "think-global, act-local" version of a transnational strategy entails

pursuing the same basic competitive strategy theme (low cost, differentiation, best cost, focused) in all countries where the firm does business but giving local managers some latitude to adjust product attributes to better satisfy local buyers and to adjust production, distribution, and marketing to be responsive to local market conditions

The transnational approach of a firm using a "think-global, act-local" version of a global strategy entails

pursuing the same basic competitive strategy theme (low-cost, differentiation, best-cost, focused) in all countries where the firm does business but giving local managers some latitude to adjust product attributes to better satisfy local buyers and to adjust production, distribution, and marketing to be responsive to local market conditions

Management's ranking of business units and establishing a priority for resource allocation should

put business units with the brightest profit and growth prospects and solid strategic and resource fits at the top of the investment priority list.

Being the overall low-cost provider in an industry has the attractive advantage of

putting a firm in the best position to win the business of price-sensitive customers and earn profits by setting the floor on market price.

First-mover advantages are unlikely to be present when

rapid market evolution (due to fast-paced changes in technology or buyer preferences) presents opportunities to leapfrog a first-mover's products with more attractive next-version products.

The value of determining the relative competitive strength of each business a company has diversified into is to have a quantitative basis for

rating them from strongest to weakest in contending for market leadership in their respective industries

The value of determining the relative competitive strength of each business a company has diversified into is to have a quantitative basis for

rating them from strongest to weakest in contending for market leadership in their respective industries.

Relying on outsiders to perform certain value chain activities offers such strategic advantages as

reducing the company's risk exposure to changing technology and/or changing buyer preferences.

Initiating actions to boost the combined performance of the corporation's collection of businesses includes all of the following strategic options, except

refocusing the existing businesses on new substitute product-line opportunities outside the existing industry framework.

A company that fails to manage its strategic alliance probably has

refrained from making commitments to its partners and ensured they do the same.

Bypassing regular wholesale/retail channels in favor of direct sales and Internet retailing can have appeal if it

reinforces the brand, enhances consumer satisfaction, and results in lower prices to end users.

Assessments of how a diversified company's subsidiaries compare in competitive strength should be based on such factors as

relative market share, the ability to match or beat rivals on key product attributes, brand image and reputation, costs relative to competitors, and the ability to benefit from strategic fits with sister businesses.

The strategic options for expansion into foreign markets do not include

relying on home country governments to restrict imports via raising tariffs and local content requirements

A typical host government requirement that is not said to impact the operations of foreign companies is

requiring foreign companies to use vertical integration to support operations of local companies

The hallmarks of Tesla's vertical integration strategy do not include

research and development and rapid deployments of Tesla's control integration systems (creating control factors across its entire value chain).

The principal advantages of strategic alliances over vertical integration or horizontal mergers/acquisitions are

resource pooling and risk sharing, more adaptive response capabilities, and greater speed of deployment.

For a best-cost provider strategy to be successful, a company must have

resource strengths and competitive capabilities that allow it to incorporate upscale attributes at lower costs than rivals whose products have similar upscale attributes.

Moves to improve a diversified company's overall performance do not include

retaining weak-performing businesses in order to sustain a wide base of business operations.

Hilton Hotels has diversified its lodging brands by adding Curio Collection, Tapestry Collection, and Canopy by Hilton, properties that offer stylish, distinctive decors and personalized services that appeal to young professionals seeking distinctive lodging alternatives. Managers can enhance the differentiation of these new brands based on all of these value drivers except

seeking out low-quality inputs.

A firm pursuing a best-cost provider strategy

seeks to deliver superior value to buyers by satisfying their expectations on key attributes and beating rivals in meeting customer expectations on price.

Calculating quantitative competitive strength ratings for each of a diversified company's business units involves

selecting a set of competitive strength measures, weighting the importance of each measure, rating each business on each strength measure, multiplying the strength ratings by the assigned weight to obtain a weighted rating, adding the weighted ratings for each business unit to obtain an overall competitive strength score, and using the overall competitive strength scores to evaluate the competitive strength of all the businesses, both individually and as a group.

Calculating quantitative attractiveness ratings for the industries a company has diversified into involves

selecting a set of industry attractiveness measures, weighting the importance of each measure, rating each industry on each attractiveness measure, multiplying the industry ratings by the assigned weight to obtain a weighted rating, adding the weighted ratings for each industry to obtain an overall industry attractiveness score, and using the overall industry attractiveness scores to interpret the attractiveness of all the industries, both individually and as a group.

The decision to pursue diversification requires management to resolve which industries to enter and whether to enter, and includes such decisions as the following, except

selecting the appropriate value chain operating practices to improve the financial outlook.

Achieving a sure-cost advantage over rivals entails

selling a mostly standard product and increasing the scale of operation.

The most unlikely element of a localized multidomestic strategy is

selling directly to buyers (perhaps via the company's website) to avoid having to establish networks of wholesale/retail dealers in each country market

A focused low-cost strategy seeks to achieve competitive advantage by

serving buyers in a narrow piece of the total market (target market niche) at a lower cost and lower price than rivals.

What does the World Trade Organization (WTO) not do primarily?

sets countries' tariff rates

A major advantage afforded by a low-cost provider strategy is

setting the industry's price ceiling to capture volume gains and achieve economies of scale.

A healthy fast-casual restaurant that offers only vegetarian and vegan meals insists on portraying organic ingredients in its advertisements, charges a higher price for its meals, and has a rigorous quality control process to insure the cleanliness of its facilities. What strategy is the manufacturer using to deliver superior value to customers?

signaling value by targeting sophisticated buyers

The culture of a company can be a cost-efficient value chain activity because it can

spur worker pride in productivity and continuous improvement.

When discussing "economies of scope," it involves understanding that they

stem from cost-saving strategic fits along the value chains of related businesses.

A formal agreement, or _________, is between two or more separate companies in which they agree to work cooperatively toward some common objective.

strategic alliance

The two most compelling reasons for a company to pursue vertical integration (either forward or backward) are to

strengthen the company's competitive position and/or boost its profitability.

The keys to maintaining a broad differentiation strategy are to

stress constant innovation to stay ahead of imitative rivals and to concentrate on a few differentiating features.

The marker of a true transnational strategy is

striking the right balance between thinking globally and acting locally, even though it is more costly and complex to implement

Government policies that can make it more attractive for foreign companies to locate operations abroad include all of the following except

stringent environmental compliance regulations

Should a company pursue an unrelated diversification strategy, the types of companies that make particularly attractive acquisition targets would be

struggling companies with good turnaround potential, undervalued companies that can be acquired at a bargain price, and companies that have bright growth prospects but are short on investment capital.

A company attempting to be successful with a broad differentiation strategy has to

study buyer needs and behavior carefully to learn what buyers consider important, what they think has value, and what they are willing to pay for.

A fast-food restaurant stocks bread, meat, sauces, and other main ingredients, but does not assemble and cook its burgers and sandwiches until a customer places an order. Which cost driver is the restaurant efficiently using to cut costs?

supply chain efficiencies

A differentiation strategy works best when

technological change is fast-paced and competition revolves around rapidly evolving product features.

Broad differentiation strategies generally work best in market situations where

technological change is fast-paced and competition revolves around rapidly evolving product features.

Indra Nooyi is CEO of PepsiCo, a diversified consumer products company. What does a competitive strength score above 5 tell her about PepsiCo's position in the market?

that PepsiCo's business units are all fairly strong market contenders in their respective industries

One of the most significant contributions to strategy making in diversified companies that the nine-cell industry attractiveness competitive strength matrix provides is

that businesses having the greatest competitive strength and that are positioned in the most attractive industries should have the highest priority for corporate resource allocation and that competitively weak businesses in relatively unattractive industries should have the lowest priority and perhaps even be considered for divestiture.

The two big drivers of outsourcing are

that outsiders can often perform certain activities better or more cheaply, and outsourcing allows a firm to focus its entire energies on those activities that are at the center of its expertise (its core competencies).

The big danger or risk of a best-cost provider strategy is

that rivals with low-cost provider strategies will be able to steal away some customers on the basis of a lower price, and high-end differentiators will be able to steal away customers with the appeal of better product attributes.

The essential difference between a "think-global, act-global" and a "think-global, act-local" approach to strategy-making is that

the "think-global, act-global" approach gives local managers more latitude to make minor strategy variations where necessary to better satisfy local buyers and to better match local market conditions

Maya has chosen to research the export strategies of several global products. She would consider a good example of a DOMINANT export strategy to be

the United States, which is home to the world's three largest producers and suppliers of artificial heart valves

In competing in foreign markets, companies find it advantageous to concentrate their activities in a limited number of locations in all of these situations, except when

the addition of new production capacity will not adversely impact the supply-demand balance in the local market

For a backward vertical integration strategy into the business of suppliers to be viable and profitable, a company must possess

the capability to achieve the same scale economies as outside suppliers and also match or beat suppliers' production efficiency with no drop in quality.

The tests of whether a diversified company's businesses exhibit resource fit do not include whether

the corporate parent has sufficient cash to fund the needs of its individual businesses and pay dividends to shareholders without having to borrow money.

The two biggest drawbacks or disadvantages of unrelated diversification are

the demanding managerial requirements and the limited competitive advantage potential due to lack of cross-business strategic fit benefits.

The difference between a merger and an acquisition relates to

the details of ownership, management control, and the financial arrangements.

Two important negatives of unrelated diversification are

the difficulties of competently managing a set of fundamentally different businesses and having a very limited competitive advantage potential that cross-business strategic fit provides.

The two biggest drawbacks or disadvantages of unrelated diversification are

the difficulties of competently managing many different businesses and being without the added source of competitive advantage that cross-business strategic fit provides.

A strategy of vertical integration can have substantial drawbacks, including

the environmental costs of coordinating operations across vertical chain activities.

In the process of evaluating the attractiveness of a multibusiness (diversified) company's business lineup, an analyst would generally not consider

the frequency with which strategic alliances and collaborative partnerships are used in each industry, and the extent to which firms in the industry utilize outsourcing

A broad differentiation strategy improves profitability when

the higher price the product commands exceeds the added costs of achieving the differentiation.

When calculating the weighted industry attractiveness scores, we find the more intensely competitive an industry is

the lower the attractiveness weighting for that industry.

The race among rivals for industry leadership is more likely to be a marathon rather than a sprint when

the market depends on the development of complementary products or services that are currently not available, buyers have high switching costs, and influential rivals are in position to derail the efforts of a first mover.

Focused strategies keyed either to low cost or differentiation are especially appropriate for situations where

the market is composed of distinctly different buyer groups who have different needs or use the product in different ways.

First-mover disadvantages (or late-mover advantages) rarely arise when

the market response is strong and the pioneer gains a monopoly position that enables it to recover its investment

A global strategy allows for

the markets in various countries to be part of the world market and competitive conditions across country markets to be strongly linked

A strategy to be the industry's overall low-cost provider tends to be more appealing than a differentiation or best-cost or focus/market niche strategy when

the offerings of rival firms are essentially identical, standardized, commodity-like products.

What makes related diversification an attractive strategy?

the opportunity to convert cross-business strategic fit into competitive advantage over business rivals whose operations don't offer comparable strategic fit benefits

Focusing the ability can secure a competitive edge but also carries some risks that could be detrimental to the focused firm, such as

the potential for the preferences and needs of niche members to shift over time toward mainstream provider product attributes.

The transaction costs of completing a business agreement or deal of some sort, over and above the price of the deal, can include all of the following except

the premium cost

The transaction costs of completing a business agreement or deal of some sort, over and above the price of the deal, can include all of the following except

the premium cost.

What does the scope of the firm refer to?

the range of activities the firm performs internally and the breadth of its product offerings, the extent of its geographic market, and its mix of businesses

As a rule, the key indicators of industry attractiveness, for all the industries represented in a diversified company's business portfolio, should not be measured on such attractiveness factors as

the utility of the products for consumers from all age groups.

Cross-business strategic fit in a diversified enterprise is not normally achieved when

the value chain activities of unrelated businesses possess economies of scope and good financial fit.

A weighted industry attractiveness assessment is generally analytically superior to an unweighted assessment because

the various measures of attractiveness are not likely to be equally important in determining overall attractiveness.

What sets focused (or market niche) strategies apart from low-cost leadership and broad differentiation strategies is

their concentrated attention on serving the needs of buyers in a narrow piece of the overall market.

The essential requirement for different businesses to be "related" is that

their value chains exhibit competitively valuable cross-business commonalities.

Broad differentiation strategies are well-suited for market circumstances where

there are many ways to differentiate the product or service that has value to buyers.

Dispersing particular value chain activities across many countries rather than concentrating them in a select few countries can be more advantageous, except when

there are reasons to decouple buyer-related activities in favor of locational advantages.

There is ample room for companies to customize their diversification strategies and be defined as being either narrowly or broadly diversified, and when combination related-unrelated diversification strategy options are adopted, they have particular appeal to

those companies with a mix of valuable competitive assets, covering the spectrum from generalized to specialized resources and capabilities.

Companies that compete on an international basis have a competitive advantage over their purely domestic rivals

to benefit from coordinating activities across different countries' domains

Why do companies decide to enter a foreign market?

to capture economies of scale in product development, manufacturing, or marketing

Because the timing of a strategic move can be just as important as the choice of move to make, a company's best option with respect to timing of an action is

to carefully weigh the first-mover advantages against the first-mover disadvantages and act accordingly.

Checking the competitive advantage potential of cross-business strategic fits in a diversified company involves evaluating the extent to which sister businesses present opportunities

to create a positive image in the industry irrespective of the financial performance of its businesses.

A major DISADVANTAGE of strategic alliances, joint ventures, and cooperative agreements between domestic and foreign firms is

to create permanent arrangements between the domestic and foreign firms.

What is the goal of signaling a challenger that strong retaliation is likely in the event of an attack?

to dissuade challengers from attacking or diverting them into using less-threatening options

What might not be considered as a strategically beneficial reason why a company may enter into strategic partnerships or cooperative arrangements with key suppliers, distributors, or makers of complementary products?

to enable greater opportunities for employee advancement

Related corporate diversification does not necessarily provide opportunities

to exploit a first-mover strategy and capture valuable financial fits.

A strategic objective that is highly UNLIKELY to drive a mergers and acquisition strategy is

to facilitate a company's shift from a broad differentiation strategy to a focused differentiation strategy.

ExxonMobil enters into a pact with Gazprom, the world's largest natural gas extractor, to set up a processing unit in Baku, Azerbaijan. Which of the following is most likely the reason for ExxonMobil to opt for this strategic alliance?

to gain access to low-cost inputs of production

In today's world, companies aspiring for global market leadership cannot afford

to ignore establishing competitive positions in the markets of emerging countries

A strategic disadvantage of vertical integration is

to impair a company's flexibility in accommodating shifting buyer preferences

The big issue an acquisition-minded firm must consider is whether

to pay a premium price for a successful local company or to buy a struggling firm at a discount price.

Which of the following rationales for pursuing unrelated diversification is likely to increase shareholder value?

to restructure an underperforming business

The marketing emphasis of a company pursuing a broad differentiation strategy usually is to

tout differentiating features and charge a premium price that more than covers the extra costs of differentiating features.

A pitfall to avoid in pursuing a differentiation strategy is

trying to differentiate on the basis of attributes or features that are easily and quickly copied.

To fend off a competitive attack, defensive-minded companies

use innovation and intellectual property protection to obtain product line exclusivity to force competitors to use other distributors.

A global strategy is one in which a company performs all of the following tasks, except it

uses local brand names to cater to a country's specific needs

Sometimes it makes sense for a company to go on the offensive to improve its market position and business performance. The best offensives tend to incorporate the following EXCEPT

using a strategic offensive to allow the company to leverage its weaknesses to strengthen operating vulnerabilities.

A viable strategy option for a local company when entering into competition with global challengers does not involve?

using cross-market transfer strategies to hedge against the risks of exchange rate fluctuations and adverse political developments

Value drivers of a broad differentiation strategy tend not to include

utilizing just-in-time inventories and made-to-order products when customer demand rises and that buyers consider worth the cost.

The basic strategy options for local companies in competing against global challengers include

utilizing understanding of local customer needs and preferences to create customized products or services, developing business models to exploit shortcoming in local infrastructure, and using acquisitions and rapid growth to defend against expansion-minded multinationals

The target market of a best-cost provider is

value-conscious buyers

What is the primary target market for a best-cost provider?

value-conscious buyers

A government oil company is having trouble with the private refineries and transporters to whom it delegates important stages of production. It decides to become more active along the entire supply chain from locating deposits to retailing the fuel to consumers. Which of the following does it intend to achieve?

vertical integration

How can a capital-intensive company achieve a cost advantage by revamping its value chain?

via higher rates of capacity utilization to allow depreciation and other fixed costs to be spread over a larger unit volume, thereby lowering fixed costs per unit

Apple's $3 billion acquisition of Beats Electronics and Beats Music in 2014 was an attractive strategy option for entering promising new industries in headphones and streaming music services because it

was an effective way to hurdle entry barriers, is usually quicker than trying to launch a brand-new startup operation, and allows the acquirer to move directly to the task of building a strong position in the target industry.

Being a first mover is not particularly advantageous under which circumstance?

when markets are slow to accept the innovative product offering of a first mover, and fast followers possess sufficient resources and marketing muscle to overtake a first mover

Tanisha is CEO of a multinational corporate event planning firm. What would make it unappealing to her to consider diversification into a new industry such as lodging by forming an internal startup subsidiary to enter and compete in the target industry?

when the industry is growing rapidly and the target industry is comprised of several relatively large and well-established firms

When is it appropriate to use a think-local, act-local approach strategy?

when the need for local responsiveness is high due to significant cross-country differences in demographic, cultural, and market conditions and where benefits from standardization is limited

A greenfield venture in a foreign market is one

where the company creates a wholly owned subsidiary business by setting up all aspects of the operation upon entering the market from the ground up

The biggest and most important differences among the competitive strategies of different companies boil down to

whether a company's market target is broad or narrow and whether the company is pursuing a competitive advantage linked to low cost or differentiation.

While there are many routes to competitive advantage, the two biggest factors that distinguish one competitive strategy from another are

whether a company's target market is broad or narrow and whether the company is pursuing a low-cost or differentiation strategy.

How valuable a low-cost leader's cost advantage is depends on

whether it is easy or inexpensive for rivals to copy the low-cost leader's methods or otherwise match its low costs.

Companies operating in an international marketplace have to respond to all of the following, except

whether to buy a struggling competitor at a bargain price or pay a premium to gain entry to the local market

One of the biggest strategic challenges to competing in the international arena includes

whether to offer a standardized product worldwide or a customized product offering in each different country market

When a company operates in the markets of two or more different countries, its foremost strategic decision is

whether to vary the company's competitive approach to fit specific market conditions and buyer preferences in each host country or whether to employ essentially the same strategy in all countries

A generic strategy to become an industry's overall low-cost provider would not be particularly well-matched to a customer-market characterized by

widely varying buyers' needs and special requirements, and the prices of substitute products are relatively high.