MP&S ch. 5-6
There are several basic approaches to competing successfully and gaining a competitive advantage over rivals, such as:
Delivering more value to its customers than rivals or delivering value more efficiently than rivals (or both).
A company’s competitive strategy deals with:
The specifics of management’s game plan for competing successfully–its specific efforts to please customers, strengthen its market position, counter the maneuvers of rivals, respond to shifting market conditions, and achieve a particular kind of competitive advantage
While there are many routes to competitive advantage, the two biggest factors that distinguish one competitive strategy from another involves:
Whether a company’s target market is broad or narrow and whether the company is pursuing a competitive advantage linked to low costs or differentiation
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 or trump.
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.
Which of the following is NOT one of the five generic types of competitive strategy?
A market share dominator strategy
The generic types of competitive strategies include:
low-cost provider, broad differentiation, best-cost provider, focused low-cost and focused differentiation strategies.
Which one of the following generic types of competitive strategy is typically the “best” strategy for a company to employ?
One that is customized to fit the macro-environment, industry and competitive conditions, and the company’s own resources and competitive capabilities
A low-cost leader’s basis for competitive advantage is:
meaningfully lower overall costs than rivals on comparable products
Low-cost leaders, who have the lowest industry costs, are exceptionally good at finding ways to drive costs out of their businesses and still provide a product or service that buyers find acceptable:
positioned to deliver affordable luxury products at mass market quality
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.
A low-cost leader translates its low-cost advantage over rivals into superior profit performance by:
either using its lower-cost edge to under-price competitors and attract price-sensitive buyers in great enough numbers to increase total profits or maintain the present price, and using the lower-cost edge to earn a higher profit margin on each unit sold, thereby raising total profits and overall return on investment.
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
To succeed with a low-cost provider strategy, company managers have to:
do two things: (1) perform value chain activities more cost-effectively than rivals, and (2) act proactively in revamping the firm’s overall value chain to eliminate or bypass “nonessential” cost producing activities
Achieving a cost advantage over rivals entails:
performing value chain activities more cost-effectively than rivals and finding ways to eliminate or bypass some cost-producing activities altogether
A factor that has a strong influence on a company’s costs is termed:
a cost driver
Which of the following is NOT an action that a company can take to do a better job than rivals of performing value chain activities more cost-effectively?
Eliminate product features that might have market appeal, but excessively increase production costs
Cost-efficient management of a company’s overall value chain activities requires that management:
ferret out cost-saving opportunities in every part of the value chain
Which of the following is NOT one of the ways that a company can achieve cost-efficient management of its value chain activities?
Striving to ensure a corporate diversity policy is introduced with effective controls
The culture of a company can be a cost-efficient value chain activity because it can:
allow for safeguarding internalized operating benefits
Which of the following is NOT one of the ways that a company can achieve a cost advantage by revamping its value chain?
Increasing production capacity and then striving hard to operate at full capacity
An example of how companies can revamp their value chain to reduce costs is:
to increase service availability while reducing staffing requirements
Success in achieving a low-cost edge over rivals comes from:
out-managing rivals in finding ways to perform value chain activities faster, more accurately, and more cost efficiently
While low-cost providers are champions of frugality, they:
seldom hesitate to spend aggressively on resources and capabilities that promise to drive costs out of the business
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.
Being the overall low-cost provider in an industry has the attractive advantage of:
putting the firm in the best position to with the business of price-sensitive customers, set the floor on market price, and still earn a profit.
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
A competitive strategy predicated on low-cost leadership tends to work best when:
price competition among rivals is especially vigorous and the offerings of rival firms are essentially identical, standardized, commodity-like products
In which of the following circumstances is a strategy to be the industry’s overall low-cost provider NOT particularly well-matched to the market situation?
When buyers have widely varying needs and special requirements, and the prices of substitute products are relatively high
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
Which of the following is NOT one of the pitfalls of a low-cost provider strategy?
Setting the industry’s price ceiling to capture volume gains and achieve economies of scale
A low-cost provider’s product does NOT have to always:
suggest that a low price, by itself, is not always that appealing to buyers.
The essence of a broad differentiation strategy is to:
offer unique product attributes in ways that are valuable and appealing and that buyers consider worth paying for.
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.
Successful 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
A company that succeeds in differentiating its product offering from those of its rivals can usually:
All of these
A broad differentiation strategy improves profitability when:
the higher price the product commands exceeds the added costs of achieving the differentiation
Whether a broad differentiation strategy ends up enhancing company profitability depends mainly on whether:
most buyers accept the customer value proposition as unique and the product can command a higher price or produce sufficiently bigger unit sales to cover the added costs of achieving the differentiation
Opportunities to differentiate a company’s product offering:
can exist in activities all along an industry’s value chain
Uniqueness drivers are a:
set of factors (analogous to cost drivers) that are particularly effective in having a strong differentiation effect
Which of the following is NOT one of the ways managers can enhance differentiation based on uniqueness drivers?
Seeking out low-quality inputs
Brands create customer loyalty, which in turn:
increases the perceived cost of switching to another product
Pursuing continuous quality improvement as a uniqueness factor is sound because:
it can often reduce product defects, improve economy of use, and result in more end-user convenience
Approaches to enhancing differentiation through changes in the value chain include:
All of these
The objective of differentiation:
is to offer customers something rivals can’t, at least in terms of level of satisfaction.
A route to take in developing a differentiation advantage includes:
incorporating tangible features that add functionality, increase customer satisfaction with the product specifications, functions, and styling.
Easy-to-copy differentiating features:
cannot produce sustainable competitive advantage
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 non-economic ways, or delivers value to customers by differentiating on the bases of competencies and capabilities that rivals can’t match
Which of the following is NOT one of the four basic routes to achieving a differentiation-based competitive advantage?
Appealing to buyers who are sophisticated and shop hard for the best, stand-out differentiating attributes
Achieving a differentiation-based competitive advantage can involve:
All of these
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.
Broad differentiation strategies are well-suited for market circumstance where:
buyer needs and uses of the product are diverse and they are not fully satisfied by a standardized product.
A broad differentiation strategy works best in situations where:
technological change is fast-paced and competition revolves around rapidly evolving product features
Broad differentiation strategies generally work best in market circumstances where:
buyer needs and uses of the product are diverse and they are not fully satisfied by a standardized product
A broad differentiation strategy generally produces the best results in situations where:
few rival firms are following a similar differentiation approach
In which one of the following market circumstances is a broad differentiation strategy generally NOT well suited?
When the products of rivals are weakly differentiated and most competitors are resorting to clever advertising to try to set their product offerings apart
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.
Which of the following is NOT one of the pitfalls of pursuing a differentiation strategy?
Over-emphasizing efforts to strongly differentiate the company’s product from those of rivals rather than be content with weak product differentiation
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
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.
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
The chief difference between a low-cost provider strategy and a focused low-cost strategy is:
the size of the buyer group that a company is trying to appeal to:
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
a focused differentiation strategy aims at securing competitive advantage:
with a product offering carefully designed to appeal to the unique preferences and needs of a narrow, well-defined group of buyers
The chief difference between a broad differentiation strategy and a focused differentiation is:
the size of the buyer group that a company is trying to appeal to
A focused strategy aimed at securing a competitive edge and which is based either on low cost or differentiation becomes more attractive when:
the target market niche is small enough to limit profitability and the outlook is ripe for differentiating.
The risks of a focused strategy based on either low-cost or differentiation include:
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
Focusing carries several risks, one of which is:
the chance that competitors will find effective ways to match the focused firm’s capabilities is serving the target market
Best-cost provider strategies are:
a hybrid of low-cost provider and differentiation strategies that aim at providing desired quality/features/performance/service attributes while beating rivals on price.
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 firm pursuing a best-cost provider strategy:
seeks to deliver superior value to buyers by satisfying their expectations on key quality/service/features/performance attributes and beating their expectations on price (given what rivals are charging for much the same attributes).
The objective of a best-cost provider strategy is:
deliver superior value to value-conscious buyers at a comparatively lower price than rivals
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 of the same attributes).
What is the primary target market for a best-cost provider?
The competitive advantage of a best-cost provider is:
its capability to incorporate upscale or attractive industry attributes into its product offering at lower costs than rivals
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.
The target market of a best-cost provider is:
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.
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.
A company’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.
Success with a best-cost provider strategy designed to outcompete high-end differentiators requires:
achieving significantly lower costs in providing the upscale features
Each of the five generic strategies positions the company differently, except when it concerns:
creating differentiation barriers within economies of scope
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
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
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 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.
The underlying criteria of a best-cost provider strategy usually is found in the ability of a company to:
offer similar goods at more attractive prices
At the heart of 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
A company’s strategy is likely to succeed if:
All of the above
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 offense to allow the company to leverage its weaknesses to strengthen operating vulnerabilities.
Once a company has decided to employ a particular generic competitive strategy, then it must make such additional strategic choices, such as:
All of these
Which of the following is NOT a strategic choice that a company must make to complement and supplement its choice of one of the five generic competitive advantages?
Whether to employ a market share leadership strategy.
Strategic offensives should, as a generic rule, be based on:
exploiting a company’s strongest competitive assets–its most valuable resources and capabilities.
The principal offensive strategy options include all of the following EXCEPT:
initiating a market threat and counterattack simultaneously to effect a distraction
Which of the following is NOT a principal offensive strategy option?
Being the final competitor to market a next-generation product so as to guarantee the product is operationally sound.
An offensive to yield good results can be short if:
buyers respond immediately (to dramatic cost-based price cut or imaginative ad campaign).
Which of the following rivals make the best targets for an offensive attack?
Firms with weakness in areas where the challenger is strong.
When challenging a struggling rival, it can:
All of these
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.
Which of the following is NOT a prime example of a blue-ocean market strategy?
Walmart’s logistics and distribution.
All firms are subject to offensive challenges from rivals. The intent of the best defensive move is to:
All of these
Which of the following is NOT a purpose of a defensive strategy?
To increase the risk of having to defend an attack
Which of the following ways are employed by defending companies to fend off a competitive attack?
Gain product line exclusivity to force competitors to use other distributors.
What is the goal of signaling a challenger that strong retaliation is likely in the event of an attack?
To dissuade challenges from attacking or diverting them into using less threatening options.
Which of the following signals would NOT warn challengers that strong retaliation is likely?
Announcing strong quarterly earnings potential to financial analysts.
Being first to initiate a particular strategic move can have a high payoff in all of the following EXCEPT when:
market uncertainties make it difficult to ascertain what will eventually succeed.
In which of the following instances is being a first-mover NOT particularly advantageous?
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.
First-mover disadvantages (or late-mover advantages) rarely ever arise when:
the market response is strong and the pioneer gains a monopoly position that enables it to recover its investment
In which of the following cases are late-mover advantages (or first-mover disadvantageous) 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.
Because when to make a strategic move can be just as important as what move to make, a company’s best option with respect to timing is:
to carefully weigh the first-mover advantages against the first-mover disadvantages and act accordingly.
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
For every emerging opportunity there exists:
a market penetration curve, and this typically has an inflection point where the business model falls into place
Any company that seeks competitive advantage by being a first-mover must ask several hard questions prior to executing its strategy. Which question would it NOT ask?
Did the company pour too many resources into getting ahead of the market opportunity?
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
The range of products and service segments that the firm serves within its market is known as the firm’s:
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 is known as:
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).
The difference between a merger and an acquisition relates to:
the details of ownership, management control, and the financial arrangements.
Which of the following is NOT a typical strategic objective or benefit that drives mergers and acquisitions?
To facilitate a company’s shift from a broad differentiation strategy to a focused differentiation strategy.
Mergers and acquisitions are often driven by such strategic objectives as:
expanding a company’s geographic coverage or extending its business into new product categories.
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
What outcomes do horizontal merger and acquisition strategies intend?
All of these
Mergers and acquisitions:
frequently do not produce the hoped-for outcomes.
A primary reason for 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.
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.
The two best reasons for investing company resources in vertical integration (either forward or backward) are to:
add materially to a company’s technological capabilities, strengthen the company’s competitive position, and/or boost its profitability
A vertical integration strategy can expand the firm’s range of activities:
backward into sources of supply and/or forward toward end users.
When firms are involved in a mix of in-house and outsourced activity in any given stage of the vertical chain, it is called:
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.
Vertical integration can lower costs by:
facilitating the coordination of production flows and avoiding bottlenecks
Which of the following is NOT a potential advantage of backward vertical integration?
Reduced business risk because of controlling a bigger portion of the overall industry value chain.
Backward vertical integration can produce:
a differentiation-based competitive advantage when activities enhance the performance of the final product
The strategic impetus for for forward vertical integration is to:
gain better access to end users and better market visibility
Which of the following is typically the strategic impetus for forward vertical integration?
Gaining better access to end users and better market visibility.
Which of the following is NOT a strategic disadvantage of vertical integration?
Vertical integration reduces the opportunity for achieving greater product differentiation.
Bypassing regular wholesale/retail channels in favor of direct sales and Internet retailing can have appeal if:
it reinforces the brand, enhances customer, satisfaction, and results in lower prices to end users.
A strategy of vertical integration can have substantial drawbacks, including:
the environmental cost of coordinating operations across vertical chain activities.
A strategy of vertical integration can have both important strengths and weaknesses and depends on:
All of these
An outsourcing strategy:
involves farming out certain value chain activities presently performed in-house to outside vendors.
The two big drivers of outsourcing are:
that outsiders can often perform certain activities better of 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).
Outsourcing the performance of value chain activities presently performed in-house to outside vendors and suppliers makes strategic sense EXCEPT when:
it restricts a company’s ability to assemble diverse kinds of expertise speedily and efficiently.
Which of the following is NOT one of the benefits of outsourcing value chain activities presently performed in-house?
Enables a company to gain better access to end users and better market visibility.
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.
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 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
are collaborative formal arrangements where two or more companies join forces and agree to work cooperatively toward some strategically relevant objective
A strategic alliance
is a formal agreement between two or more companies in which there is strategically relevant collaboration of some sort, the joint contribution of resources, shared risk, shared control, and mutual dependence.
Which of the following is NOT a factor that makes an alliance “strategic” as opposed to just a convenient business arrangement?
The alliance helps the company obtain additional financing on better credit terms.
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.
Which of the following is NOT one of the factors that affects whether a strategic alliance will be successful and realize its intended benefits?
Minimizing the amount of resources that the partners commit to the alliance.
Capturing the benefits of strategic alliances is not easy, but success generally is a function of six factors, except when:
ensuring the division of work is directly apportioned to appropriate skill sets.
Which of the following is NOT a typical reason that many alliances prove unstable or break apart?
Disagreement over how to divide the profits gained from joint collaboration.
Experience indicates that strategic alliances:
can suffer culture clash and integration problems due to different management styles and business practices.
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 principal advantage of strategic alliances over vertical integration or horizontal mergers/acquisitions is defined best by:
resource pooling and risk sharing, more adaptive response capabilities, and the speed of deployment wherewithal.
A company that has greater success in managing their strategic alliances can credit all of the following, EXCEPT:
creating organizational learning barriers across boundaries
A company that fails in managing their strategic alliance probably has not:
All of these
Alliance management is considered an organizational capability and:
develops over time, out of effort and learning.
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