Flashcards – Strategic Management
The primary aim of strategic management at the business level is __________________.
A. maximizing risk-return tradeoffs through diversification
B. achieving a low cost position
C. maximizing differentiation of products and/or services
D. achieving competitive advantage
Primary value chain activities that involve the effective layout of receiving dock operations (inbound logistics) and support value chain activities that include expertise in process engineering (technology development) characterize what generic strategy?
A. differentiation
B. differentiation focus
C. overall cost leadership
D. stuck-in-the-middle
A manufacturing business pursuing cost leadership is likely to _______.
A. focus on a narrow market segment
B. use advertising to build brand image
C. rely on experience effects to raise efficiency
D. put heavy emphasis on product engineering
One aspect of using a cost leadership strategy is that experience effects may lead to lower costs. Experience effects are achieved by ____________.
A. repeating a process until a task becomes easier
B. hiring more experienced personnel
C. spreading out a given expense or investment over a greater volume
D. competing in an industry for a long time
With experience, unit costs of production decline as _________ increases in most industries.
A. costs
B. output
C. price
D. volume
Research has consistently shown that firms that achieve both cost leadership and differentiation advantages tend to perform ______________.
A. at about the same level as firms that achieve either cost or differentiation advantages
B. about the same as firms that are stuck-in-the-middle
C. higher than firms that achieve either a cost or a differentiation advantage
D. lower than firms that achieve differentiation advantages but higher than firms that achieve cost advantages
Convincing rivals not to enter a price war, protection from customer pressure to lower prices, and the ability to better withstand cost increases from suppliers characterize which type of competitive strategy?
A. differentiation
B. overall cost leadership
C. differentiation focus
D. cost leadership focus
Which of the following is a risk (or potential pitfall) of cost leadership?
A. Cost cutting may lead to the loss of desirable features.
B. Attempts to stay ahead of the competition may lead to gold plating.
C. Cost differences increase as the market matures.
D. Producers are more able to withstand increases in supplier costs.
A firm can achieve differentiation through all of the following means EXCEPT ________.
A. improving brand image
B. better customer service
C. adding additional product features
D. offering lower prices to frequent customers
Support value chain activities that involve excellent applications engineering support (technology development) and facilities that promote a positive firm image (firm infrastructure) characterize what generic strategy?
A. overall cost leadership
B. differentiation
C. differentiation focus
D. stuck-in-the middle
High product differentiation is generally accompanied by __________.
A. higher market share
B. higher profit margins and lower costs
C. decreased emphasis on competition based on price
D. significant economies of scale
Which of the following is FALSE regarding how a differentiation strategy can help a firm to improve its competitive position relative to the Porter five forces model?
A. By increasing firm margins, it avoids the need for a low cost position.
B. It reduces buyer power because buyers lack comparable alternatives.
C. Supplier power is increased, because suppliers will be able to charge higher prices for their inputs.
D. Firms will enjoy high customer loyalty.
A differentiation strategy enables a business to address the five competitive forces by ______.
A. having brand-loyal customers become more sensitive to prices
B. lessening competitive rivalry by distinguishing itself
C. increasing economies of scale
D. serving a broader market segment
Which of the following is not a potential pitfall of a differentiation strategy?
A. Uniqueness that is not valuable.
B. All rivals share a common input or raw material.
C. The price premium is too high.
D. Perceptions of differentiation may vary between buyers and sellers.
Which statement regarding competitive advantages is true?
A. With an overall cost leadership strategy, firms need not be concerned with parity on differentiation.
B. If several competitors pursue similar differentiation tactics, they may all be perceived as equals in the mind of the consumer.
C. In the long run, a business with one or more competitive advantages is probably destined to earn normal profits.
D. Attaining multiple types of competitive advantage is a recipe for failure.
A narrow market focus is to a differentiation-based strategy as a __________________.
A. growth market is to a differentiation-based strategy
B. broadly-defined target market is to a cost leadership strategy
C. growth market is to a cost-based strategy
D. technological innovation is to a cost-based strategy
A firm following a focus strategy must focus on _____________.
A. governmental regulations
B. the rising cost of inputs
C. a market segment or group of segments
D. avoiding entering international markets
Which of the following is not a potential pitfall of a focus strategy?
A. Erosion of cost advantages can arise within the narrow segment.
B. Product/service offerings that are highly focused are subject to competition from new entrants.
C. All rivals share a common input or raw material.
D. Focusers can become too focused to satisfy buyer needs.
The text discusses three approaches to combining overall cost leadership and differentiation competitive advantages. Which of the following is not one of these three approaches?
A. automated and flexible manufacturing systems
B. exploiting the profit pool concept for competitive advantage
C. deriving benefits from highly focused and high technology markets
D. coordinating the extended value chain by way of information technology
A __________ can be defined as the total profits in an industry at all points along the industry value chain.
A. profit maximizer
B. profit pool
C. revenue enhancer
D. profit outsourcing
Which of the following is not a potential pitfall of an integrated overall low cost and differentiation strategy?
A. Firms that fail to attain both strategies may end up with neither and become stuck-in-the-middle.
B. Firms that underestimate the challenges and expenses associated with coordinating value-creating activities in the extended value chain.
C. Firms that target too large a market that causes unit costs to increase.
D. Firms that miscalculate sources of revenue and profit pools in the company industry.
Which of the following is not a reason for the possible erosion of company competitive advantage?
A. rapid change in technology
B. globalization
C. actions by rivals from within and outside of the industry
D. company commitment to innovation
Atlas Door created competitive advantage by reducing the time to receive and process and order and through installing a just in time logistics operation. Which of the following is not a reason for their favorable position relative to the five forces of industry competition?
A. It exerted power over its customers.
B. It created high entry barriers for new entrants.
C. The integration of many value-chain activities in the firm provided causal ambiguity and path dependency.
D. The product was easily imitable.
Which of the following is NOT one of the ways the Internet is lowering transaction costs?
A. eliminating supply chain intermediaries
B. minimizing office expenses
C. evaluating employee performance
D. reducing business travel
Dell Computer has an online ordering system that allows consumers to configure their own computers before Dell builds them. This capability is an example of _____________.
A. electronic data interchange
B. mass customization
C. knowledge management
D. collaborative design
Which of the following methods of implementing a differentiation strategy has been greatly enhanced because of Internet technologies?
A. celebrity endorsements
B. prestige packaging
C. mass customization
D. exceptional service
Due to the Internet, firms that use a focus strategy have new opportunities to _________.
A. respond quickly to customer requests
B. provide more services and features
C. access niche markets in a highly specialized fashion
D. access markets less expensively
One of the main reasons the Internet is eroding sustainable competitive advantages is that _______.
A. incumbent firms are entering market segments that they previously considered to be too small
B. nearly all competitors will have greater access to tools for managing costs
C. differentiators have been able to preserve their unique advantages
D. firms are ignoring opportunities to offer high-end services in niche markets
Which of these statements regarding the industry life cycle is correct?
A. Part of the power of the market life cycle is its ability to serve as a short-run forecasting device.
B. Trends suggested by the market life cycle model are generally not reversible or repeatable.
C. It points out the need to maintain a differentiation advantage and a low cost advantage simultaneously.
D. It has important implications for company generic strategies, functional areas, value-creating activities, and overall objectives.
Which of the following statements about the introduction stage of the market life cycle is TRUE?
A. It produces relatively large, positive cash flows.
B. Strong brand recognition seldom serves as an important switching cost.
C. Market share gains by pioneers are usually easily sustained for many years.
D. Products or services offered by pioneers may be perceived as differentiated because they are new.
In the __________ stage of the industry life cycle, the emphasis on product design is very high, the intensity of competition is low, and the market growth rate is low.
A. growth
B. maturity
C. introduction
D. decline
The growth stage of the industry life cycle is characterized by
A. in-kind competition (from the same type of product)
B. premium pricing
C. a growing trend to compete on the basis of price
D. retaliation by competitors whose customers are stolen
In the __________ stage of the industry life cycle, there are many segments, competition is very intense, and the emphasis on process design is high.
A. introduction
B. growth
C. maturity
D. decline
In a given market, key technology no longer has patent protection, experience is not an advantage, and there is a growing need to compete on price. What stage of its life cycle is the market in?
A. introduction
B. growth
C. maturity
D. decline
A market that mainly competes on the basis of price and has stagnant growth is characteristic of what life cycle stage?
A. introduction
B. growth
C. maturity
D. decline
As markets mature, ___________.
A. costs continue to increase
B. application for patents increase
C. there is increasing emphasis on efficiency
D. differentiation opportunities increase
The size of pricing and differentiation advantages between competitors decreases in which stage of the market life cycle?
A. introduction
B. growth
C. maturity
D. decline
Which of the following is most often true of mature markets?
A. Some competitors enjoy a significant operating advantage due to increasing experience effects.
B. Advantages that cannot be duplicated by other competitors are difficult to achieve.
C. The market supports premium pricing, which attracts additional competitors.
D. The magnitude of pricing differences and product differentiation is larger than in the growth stage.
In the __________ stage of the industry life cycle, there are few segments, the emphasis on process design is low, and the major functional areas of concern are general management and finance.
A. introduction
B. growth
C. decline
D. maturity
The most likely time to pursue a harvest strategy is in a situation of _______.
A. high growth
B. strong competitive advantage
C. decline in the market life cycle
D. mergers and acquisitions
During the decline stage of the industry life cycle, __________ refers to obtaining as much profit as possible and requires that costs be decreased quickly.
A. maintaining
B. exiting
C. harvesting
D. consolidating
Research shows that which of the following is not a strategy used by firms engaged in successful turnarounds?
A. asset and cost surgery
B. global expansion
C. selective product and market pruning
D. piecemeal productivity improvements
Piecemeal productivity improvements during a turnaround typically do NOT involve _______.
A. business process reengineering
B. increased capacity utilization
C. expansion of company product market scope
D. benchmarking
Which of the following is not a reason for the successful turnaround that Ford experienced in 2011 under CEO Mulally?
A. downsizing through the sale of non-Ford brands
B. focus on a narrower range of cars
C. tightening of the product design across brands
D. increasing its manpower across the company
