CHAPTER 1The correct answer for each question is indicated by a .

1 INCORRECT The competitive moves and business approaches a company's management

are using grow the business, attract and please customers, compete successfully, conduct operations, and achieve the targeted levels of organizational performance is referred to as its:

A)strategic offensive for becoming a market leader.

B)business model.

C)long-term strategic direction.

D)mission statement.

E)strategy.

2 INCORRECT Which one of the following is not related to actions and approaches that

comprise a company's strategy?

A)How management intends to grow the business.

B)How to prove to shareholders that the company's business model is viable.

C)How to build a loyal clientele and out compete rivals.

D)How to boost the company's performance.

E)

How each functional piece of the business (R&D, supply chain activities, production, sales and marketing, distribution, finance, and human resources) will be operated.

3 INCORRECT In committing to a particular strategy, a company's managers are in effect

saying:

A)"This is where we are headed and we have a plan for getting where we want to go.''

B)"We have a plan for being a winner in the marketplace and our extensive analysis of the company's situation indicates it will work.""This is who we are, what we do, and where we are headed."

C)

D)

"Among all the many different business approaches and ways of competing we could have chosen, we have decided to employ this particular combination of competitive and operating approaches in moving the company in the intended direction, strengthening its market position and competitiveness, and boosting performance."

E)"This is our current business model, but it will probably have to be modified as market conditions change."

4 INCORRECT The heart and soul of any strategy is:

A)to identify actions and operating approaches that will validate the company's business model work.

B)to identify business approaches that will produce good bottom-line results.

C)

the actions and moves in the marketplace that managers are taking to improve the company's financial performance, strengthen its long-term competitive position, and gain a competitive edge over rivals.

D)the actions a company takes to steal substantial sales and market share away from rivals.

E)pursuing competitive maneuvers that will make the company a market leader.

5 CORRECT

Which of the following is not one of the most frequently used strategic approaches to building competitive advantage?

A)Striving for a competitive edge based on bigger profit margins.

B)

Developing expertise and resource strengths that give the company competitive capabilities that rivals can't easily imitate or trump with capabilities of their own.

C)Striving to be the industry's low-cost provider, thereby aiming for a cost-based competitive advantage over rivals.

D)

Focusing on a narrow market niche and winning a competitive edge by doing a better job than rivals of serving the special needs and tastes of buyers comprising the niche.

E)Outcompeting rivals based on differentiating features.

6 INCORRECT A company's strategy and its quest for competitive advantage are tightly

related because:

A)a company's strategy determines whether it will have lower or higher costs than rivals and thus be at a competitive advantage or disadvantage.competitive advantage is essential to having a profitable business model.

B)

C)choosing a competitive advantage to pursue also helps a company choose which business model is most appropriate.

D)competitive advantage enables a company to achieve its strategic objectives.

E)

a company is almost certain to have better profits and financial performance when its strategy produces a competitive advantage over rivals as opposed to when the strategy results in a competitive disadvantage--in short, a strategy that leads to sustainable competitive advantage is a company's most reliable means of achieving above-average profitability and financial performance.

7 INCORRECT Which one of the following is not something to look for in identifying a

company's strategy?

A)

Its actions to enter new geographic or product markets or exit existing ones and its actions to form strategic alliances and collaborative partnerships.

B)Its actions to merge with or acquire another company in order to strengthen the company's business position.

C)Its actions to capture emerging market opportunities and defend against external threats to the company's business prospects.

D)The company's actions to validate and improve upon its business model.

E)The actions and approaches that define how a company manages such functions as R&D, production, sales and marketing, and finance.

8 INCORRECT What separates a powerful strategy from a run-of-the-mill or ineffective one

is:

A)whether the strategy allows the company's business model to work as planned.

B)whether the strategy produces good bottom-line results.

C)

management's ability to forge a series of moves, both in the marketplace and internally, that sets the company apart from rivals, tilts the playing field in the company's favor by giving buyers a reason to prefer its products or services, and produces a sustainable competitive advantage over rivals.

D)the extent to which the strategy enables a company to boost its sales and market share.

E)whether the strategy ends up being a substantial contributor to achieving the company's strategic vision.

9

INCORRECT Company strategies evolve because:

A)it is a bad idea to do too much strategizing until a company has been in business long enough to know what strategies will work best.

B)most managers like to develop the strategy in bits and pieces rather than all at once.

C)

of the ongoing need to respond to changing market conditions, advancing technology, the fresh moves of competitors, shifting buyer needs and preferences, emerging market opportunities, new ideas for improving the strategy, and any evidence that indicates the strategy is not working well.

D)

many managers are conservative, preferring to carefully contemplate the best responses to new developments and avoiding the risks associated with developing a complete strategy too quickly.

E)

a strategy does not really transition to a well-crafted stage until a company has been trying to execute it for a number of years and has learned what works and what doesn't.

10 INCORRECT It is normal for a company's strategy to end up being:

A)little different from management's original planned set of actions and business approaches since making on-the-spot changes is too risky.

B)

a combination of defensive moves to protect the company's market share and offensive initiatives to set the company's product offering apart from rivals.

C)

pretty much like the strategies of other industry members since all companies are confronting much the same market conditions and competitive pressures.

D)

a blend of proactive actions to improve the company's competitiveness and financial performance and as-needed reactions to unanticipated developments and fresh market conditions.

E)a mirror image of its business model, so as to avoid impairing company profitability.

11 INCORRECT A company's strategy can be considered "ethical":

A)if all of its different actions and elements are legal and in compliance with governmental rules and regulations.

B)

so long as its actions and behaviors can pass the test of "moral scrutiny" and are aboveboard in the sense of not being shady or unconscionable, injurious to others, or unnecessarily harmful to the environment.

C)only if all elements of the strategy are in accord with what is generally considered as being in the overall best interests of society at large.

D)so long as religious authorities and noted ethics experts find nothing "wrong" in the company's actions.

E)if it in compliance with the company's code of ethics and has been approved by the company's chief ethics officer.

12 INCORRECT A company's business model:

A)determines whether its strategy will be ethical or not.

B)is management's storyline for how the strategy will result in achieving sustainable competitive advantage.

C)

is management's storyline or rationale for how the strategy will be a moneymaker--absent the ability to deliver good profitability, the strategy is not viable and the survival of the business is in doubt.

D)identifies how the company plans to outmaneuver and outcompete key rivals and become a market leader.

E)sets forth the actions and approaches that it will rely on to earn the best profit margins in the industry.

13 CORRECT Which of the following statements about a company's strategy is false?

A)

Normally, companies have a narrow window of strategic freedom in choosing the hows of strategy because all competitors are facing the same market conditions and competitive pressures and, therefore, have to cope with them using very similar strategies.

B)

A company's strategy results in achieving sustainable competitive advantage when an attractive number of buyers prefer its products or services over the offerings of competitors and when the basis for this preference is durable.

C)A company's strategy is based partly on trial-and-error organizational learning about what has worked well and what hasn't.

D)A company's strategy and strategic moves are only partly the result of proactive plotting and management design.

E)A company's strategy is a work in progress, not a one-time management exercise.

14 INCORRECT Comcast's strategy (as described in Illustration Capsule 1.1) does not include

which one of the following?

A)Continue to roll out high-speed Internet or broadband service to customers via cable modems

B)

Promote a video-on-demand service whereby digital customers with a set-top box could order and watch pay-per-view movies using a menu on their remote

C)

Use "voice-over-Internet-protocol" (VoIP) technology to offer subscribers Internet-based phone service at a fraction of the cost charged by other providers

D)Partner with Sony, MGM and others to expand Comcast's library of movie offeringsSeek to combat mounting competition from direct-to-home satellite TV

E) providers by starting up Comcast's own satellite TV service

15 INCORRECT Which of the following statements concerning Microsoft's business model

and Red Hat's business model (as discussed in Illustration Capsule 1.2) is false?

A)Microsoft has a proven business model while Red Hat's business model is unproven.

B)

Microsoft's business model involves employing a cadre of highly skilled programmers to develop proprietary code; keeping the source code hidden from customers/users, and locking them in to using Microsoft's proprietary software.

C)

Most of Microsoft's costs arise on the front end in developing the software and are thus "fixed"; the variable costs of producing and packaging the CDs provided to users are only a couple of dollars per copy—once the breakeven volume is reached, Microsoft's revenues from additional sales are almost pure profit.

D)

Red Hat relies on the collaborative efforts of volunteer programmers from all over the world who contribute bits and pieces of code to improve and polish the Linux system.

E)Red Hat's business model is predicated on closely guarding its source code while Microsoft is a strong advocate of open or free source code.

16 INCORRECT Which of the following statements about a company's strategy is true?

A)Crafting an excellent strategy is more important than executing it well.

B)

Managers at all companies face three central questions in thinking strategically about their company's present circumstances and prospects: What's the company's present situation? Where does the company need to go from here? How should it get there?

C)

A company's strategy deals with whether the revenue-cost-profit economics of its business model demonstrate the viability of the business enterprise as a whole.

D)

Masterful strategies come partly (maybe mostly) by doing things in much the same way as the industry leader but then being better than the leader in one particular area that counts heavily with buyers.

E)

Whether a company's strategy is ethical or not does not matter a lot because most customers and most suppliers are relatively unconcerned whether a company they do business with engages in sleazy practices or turns a blind eye to below-board behavior on the part of its employees.

17 INCORRECT A company's strategy:

A)is shaped partly by management analysis and choice and partly by the necessity of adapting and learning by doing.is fluid, representing the temporary outcome of an ongoing process that,

B) on the one hand, involves reasoned and creative management efforts to craft an effective strategy and, on the other hand, involves ongoing responses to market change and constant experimentation and tinkering.

C)

stands a better chance of succeeding when it is predicated on actions, business approaches, and competitive moves aimed at appealing to buyers in ways that set a company apart from rivals and carving out its own market position.

D)

is revealed in part by its actions to gain sales and market share via lower prices, more performance features, more appealing design, better quality or customer service, wider product selection, and other competitive tactics.

E)All of the above.

18 INCORRECT A winning strategy is one that:

A)makes the company a market leader, is ethically and socially responsible, and maximizes profits.

B)is highly profitable and boosts the company's market share.

C)passes the profitability test, the ethics and social responsibility test, the customer satisfaction test, and the shareholder wealth test.

D)fits the company's internal and external situation, builds sustainable competitive advantage, and boosts company performance.

E)passes the ethical standards test, the competitive advantage test, and the profitability test.

19 INCORRECT Crafting and executing strategy are top-priority managerial tasks because:

A)

how managers go about the tasks of crafting and executing strategy sends a message to shareholders and the entire investment community regarding "what it is we are trying to do and how we plan to achieve our objectives."

B)

The company is unlikely to be profitable unless senior executives have a clear answer to "where are we headed, how do we plan to get there, and when do we expect to arrive?"

C)

there is a compelling need for managers to proactively shape how the company's business will be conducted and because a strategy-focused organization is more likely to be a strong bottom-line performer.

D)

without clear guidance as to what the company's business model and strategy are, managerial decision-making is likely to be haphazard and inconsistent.

E)

a company cannot hope to be a market leader if all it does is respond to changing market conditions, new technologies, new opportunities, and threatening moves on the part of competitors.

20 INCORRECT The most trustworthy signs of a well-managed company are:

A)a strong emphasis on offensive strategies rather than defensive strategies.

B)a strategy matched to fast-evolving market conditions and bigger profit margins than rivals and a steady upward trend in net income.

C)attractive bottom-line performance and a proven business model.

D)good strategy and good strategy execution.

E)

having a profitable business model, a willingness to change the company's business model whenever circumstances warrant, and having a sustainable competitive advantage.

CHAPTER 2The correct answer for each question is indicated by a .

1 INCORRECT Which one of the following is not an integral part of the managerial process

of crafting and executing strategy?

A)Developing a strategic vision

B)Choosing a strategic intent

C)Setting objectives and crafting a strategy to achieve them

D)

Evaluating performance and initiating corrective adjustments in the company's long-term direction, objectives, strategy, or execution in light of actual experience, changing conditions, new ideas, and new opportunities

E)Implementing and executing the chosen strategy efficiently and effectively

2 INCORRECT A strategic vision for a company:

A)involves how fast to pursue the chosen strategy and reach the targeted levels of performance.

B)consists of thinking through what it will take to make the chosen strategy work as planned.delineates management's aspirations for the business, providing a

C) panoramic view of "where we are going" and a convincing rationale for why this makes good business sense for the company--a strategic vision thus points an organization in a particular direction and charts a strategic path for it to follow in preparing for the future.

D)spells out how the company is going to get from where it is now to where it want to go and when it is expected to arrive.

E)concerns management's view of how to transition the company's business model from where it is now to where it needs to be.

3 INCORRECT Which of the following is not an important consideration in deciding to

commit to one directional path versus another?

A)Are changes underway in the market and competitive landscape acting to enhance or weaken the company's prospects?

B)Where should we head in order to prove that our business model is viable and that our strategy is working?

C)Will the company's present business generate sufficient growth and profitability in the years ahead to please shareholders?

D)What, if any, new geographic markets and/or customer groups should the company get in position to serve?

E)What are our ambitions for the company--what industry standing do we want the company to have?

4 INCORRECT The difference between a company's mission statement and the concept of a

strategic vision is that:

A)

the mission statement lays out the desire to make a profit, whereas the strategic vision addresses what strategy the company will employ in trying to make a profit.

B)a mission statement deals with "where we are headed " whereas a strategic vision provides the critical answer to "how will we get there?"

C)a mission deals with what a company is trying to do and a vision concerns what a company ought to do.

D)

a mission statement typically concerns an enterprise's present business scope and purpose--"who we are, what we do, and why we are here"--whereas the focus of a strategic vision is on the direction the company is headed and what its future product-customer-market-technology focus will be.

E)a mission is about what to accomplish for shareholders whereas a strategic vision concerns what to accomplish for customers.

5 INCORRECT Which one of the following is not a characteristic of an effectively-worded

strategic vision statement (see Table 2.2, as well as the discussion on page 21)?

A)

Directional (is forward-looking;describes the strategic course that management has charted and the kinds of product-market-customer-technology changes that will help the company prepare for the future)

B)Concrete and unambiguous (leaves no doubt as to what the company is trying to accomplish for shareholders)

C)Graphic (paints a clear picture)

D)Easy to communicate (ideally, explainable in 10 minutes)

E)

Focused and flexible (specific enough to provide managers with guidance in making decisions and allocating resources but stops short of a once-and-for-all-time statement because the strategic path may need to be changed as as market-customer-technology circumstances change)

6 INCORRECT According to both the text discussion and the summary in Table 2.3, which of

the following is not a common shortcoming of company vision statements?

A)Incomplete or vague—short on specifics

B)Too reliant on superlatives (best, most successful, recognized leader, global or worldwide leader, first choice of buyers)

C)

Too broad—so umbrella-like and all-inclusive that the company could head in most any direction, pursue most any opportunity, or enter most any business

D)Lacking in analysis—based more on managerial emotion and excessive ambition than on what is realistically achievable

E)

Not distinctive—provides no unique company identity; could apply to companies in any of several industries (or at least several rivals operating in the same industry or market arena)

7 INCORRECT Which of the following statements about a company's values is false?

A)

A company's values are the beliefs, traits, and behavioral norms that company personnel are expected to display in conducting the company's business and pursuing its strategic vision and strategy.

B)

In companies with long-standing values that are deeply entrenched in the corporate culture, senior managers are careful to craft a vision, mission, and strategy that match established values, and they reiterate how the value-based behavioral norms contribute to the company's business success. If the company changes to a different vision or strategy, executives take care to explain how and why the core values continue to be relevant.

C)

A company's core values can relate to such things as fair treatment, integrity, ethical behavior, the emphasis the company will place on innovativeness or top-notch quality or superior customer service, and the company's beliefs in high ethical standards, socially responsible

behavior, and giving back to the community.

D)

At companies whose executives take the stated values very seriously, the values are widely adopted by company personnel, are ingrained in the corporate culture, and are mirrored in how company personnel conduct themselves and the company's business on a daily basis.

E)At all but a few companies, the stated values are mostly window-dressing and serve mainly to embellish the company's public image.

8 INCORRECT When there's an order of magnitude change in a company's environment that

dramatically alters its prospects and mandates radical revision of its strategic course, the company is said to have encountered:

A)a strategy crossroads.

B)a strategic inflection point.

C)a new strategic intent opportunity.

D)a strategic roadblock that requires a new strategic vision and business model.

E)a fundamental strategic conflict that usually requires changing either the company's strategic vision or its strategy or maybe even both.

9 CORRECT

A company's objectives or performance targets:

A)

represent a managerial commitment to achieving specified outcomes and results; they function as yardsticks for tracking the company's progress and performance--well-stated objectives are quantifiable, or measurable, and contain a deadline for achievement.

B)

are typically established after a company decides on a strategic vision and strategy so that they will entail performance targets that truly signal business success.

C)

are best stated in general terms (maximize profits, reduce costs, increase sales) rather than quantifiable terms (increase after-tax profits by 10% in 2 years, grow sales revenues by 20% annually) so that managers will have the latitude to adjust target outcomes to levels that can be achieved.

D)should place far more emphasis on financial performance targets than strategic performance targets.

E)All of these.

10 INCORRECT Which of the following represents the best example of a well-stated strategic

objective (as opposed to a well-stated financial objective)?Achieve revenue growth of 10% annually

A)

B)Increase market share from 17% to 22% and achieve the lowest overall costs of any producer in the industry, both within three years

C)Invest more money in R&D to enable the company to offer customers the widest selection of products in the industry

D)Achieve a AA bond rating within 2 years and an annual cash flow of $500 million

E)Pay more attention to reducing costs over the next two years

11 INCORRECT Establishing and achieving strategic objectives merits very high priority on

management's agenda because

A)strategic outcomes provide better benefits to shareholders in both the short-run and the long-run.

B)a company can't have a shrewd strategic vision without having aggressive and competitively astute strategic objectives.

C)

the surest path to boosting company profitability quarter after quarter and year after year is to relentlessly pursue strategic outcomes that strengthen the company's market position and produce a growing competitive advantage over rivals.

D)well-chosen strategic objectives help managers craft a good strategy.

E)

a company cannot achieve its strategic intent and strategic vision or gain a competitive advantage over rivals without having and achieving strategic objectives.

12 CORRECT Which of the following statements about objectives is false?

A)

A company's managers are well-advised to give the achievement of financial objectives a much higher priority than the achievement of strategic objectives.

B)

Companywide objectives need to be broken down into performance targets for each separate business, product line, functional department, and individual work unit because company performance can't reach full potential without each area of the organization doing its part and contributing directly to the desired companywide outcomes and results.

C)

A "balanced scorecard" for measuring company performance views financial performance measures as lagging indicators that reflect the results of past decisions and organizational activities and views strategic performance measures as leading indicators of a company's future financial performance.

D)Objectives should be set at high enough levels to stretch an organization to reach its full potential.The experiences of countless companies and managers teach that precisely spelling out how much of what kind of performance by when

E) and then pressing forward with actions and incentives calculated to help achieve the targeted outcomes greatly improve a company's actual performance.

13 INCORRECT A balanced scorecard for measuring company performance:

A)

entails balancing the pursuit of good bottom-line profit against the pursuit of non-profit objectives (although achieving profitability targets is nearly always given greater emphasis).

B)involves putting equal emphasis on the achievement of financial objectives, strategic objectives, and social responsibility objectives.

C)entails setting both financial and strategic objectives and putting balanced emphasis on their achievement.

D)helps prevent the pursuit of strategic objectives from dominating the pursuit of financial objectives.

E)

is necessary in order to prevent the drive for achieving financial objectives from weakening the attention paid to social responsibility, community citizenship, and other worthy goals.

14 INCORRECT A company exhibits strategic intent when:

A)it pursues its strategic vision.

B)it relentlessly pursues an ambitious strategic objective and concentrates its full resources and competitive actions on achieving that objective.

C)it adopts a strategic plan and tries to execute it.

D)it sets objectives and pursues their achievement.

E)it crafts a strategy and proceeds to implement it.

15 INCORRECT The task of crafting a strategy is:

A)the function and responsibility of a few high-level executives.

B)

more of a collaborative group effort that involves all managers and sometimes key employees striving to arrive at a consensus on what the overall best strategy should be.

C)the function and responsibility of a company's strategic planning staff.

D)

a job for a company's whole management team--senior executives plus the managers of business units, operating divisions, functional departments, manufacturing plants, and sales districts (as per the strategy-making hierarchy shown in Figure 2.2).

E)first and foremost the function and responsibility of a company's board of directors.

16 INCORRECT As per Figure 2.2, the strategy-making hierarchy in a single business

company consists of:

A)business strategy, divisional strategies, and departmental strategies.

B)

business strategy, functional strategies, and operating strategies, whereas in a diversified company it consists of corporate strategy, business strategies (one for each business the diversified company is in), functional strategies, and operating strategies.

C)business strategy and operating strategy.

D)managerial strategy, business strategy, and divisional strategies.

E)

corporate strategy, divisional strategies, and departmental strategies (whereas in a diversified company it consists of corporate strategy, divisional strategy and operating strategy).

17 INCORRECT Functional strategies:

A)describe the mission and strategic intent of each key functional piece of the business.

B)

concern what to do about resolving the specific strategic issues and operating problems a business confronts in each key part of its business--R&D, production, sales and marketing, finance, information technology, human resources, and so on.

C)are normally crafted by the executive in charge of the overall business and approved by the company's board of directors.

D)

add relevant detail to the overall business strategy by setting forth the actions, approaches, and practices to be employed in managing particular functions or business processes or key activities within a business--the primary role of a functional strategy is to support the company's overall business strategy and competitive approaches.

E)

are concerned with what competitive capabilities to build in support of the overall company strategy and what to do to unify the firm's skills, competencies, and resource strengths across all the various key pieces of a company's business.

18 INCORRECT Operating strategies concern:

A)what a company's various operating departments plan to do to help execute the company's overall strategy.

B)the strategic intent of each operating unit.

C)

the relatively narrow strategic initiatives and approaches for managing key operating units (plants, distribution centers, geographic units) and specific operating activities with strategic significance (advertising campaigns, the management of specific brands, supply chain-related activities, and website sales and operations)--operating strategies add further detail and completeness to functional strategies and to the overall business strategy.

D)the specific actions a company's various operating departments plan to take to unify efforts to achieve a sustainable competitive.

E)what a company will do once its strategic plan is adopted and approved by the company's board of directors.

19 INCORRECT A company's strategic plan consists of:

A)the actions and market maneuvers it plans to use to achieve a sustainable competitive advantage.

B)

management's vision of where the company is headed, the established financial and strategic objectives, and management's strategy to achieve the objectives and move the company along the chosen strategic path.

C)a company's strategic vision, strategic objectives, strategic intent, and strategy.

D)an organization's strategy and management's specific, detailed plans for implementing it.

E)the specific actions management intends to take in detouring strategic inflection points and executing its overall strategy.

20 CORRECT Which one of the following is not among the chief duties/responsibilities of a

company's board of directors insofar as the strategy-making, strategy-executing process is concerned?

A)

Directing senior executives as to what the company's long-term direction, objectives, business model, and strategy should be and, further, closely supervising senior executives in their efforts to implement and execute the strategy.

B)Overseeing the company's financial accounting and financial reporting practices.

C)Evaluating the caliber of senior executives' strategy-making/strategy-executing skills.

D)Being inquiring critics and exercising strong oversight over the company's direction, strategy, and business approaches.

E)

Instituting a compensation plan for top executives that rewards them for actions and results that serve stakeholders' interests, most especially those of shareholders.

CHAPTER 3

The correct answer for each question is indicated by a .

1 INCORRECT

Which of the following is not one of the questions that needs to be answered in thinking strategically about a company's industry and competitive environment?

A)What kinds of competitive forces are industry members facing, and how strong is each force?

B)What emerging opportunities and threats are evident in the industry environment?

C)What market positions do industry rivals occupy--who is strongly/weakly positioned and who is not?

D)What are the key factors for future competitive success?

E)What forces are driving changes in the industry, and what impact will these changes have on competitive intensity and industry profitability?

2 CORRECT

In identifying an industry's dominant economic features, there is a need to consider such things as:

A)

market size and growth rate, the number of buyers, the scope of competitive rivalry, the number of rivals, demand-supply conditions, product innovation, the degree of product differentiation, the presence of scale economies and/or learning/experience curve effects, and the pace of technological change.

B)the threat of additional entry into the industry and what the industry's key success factors are.

C)the strength of competitive pressures from producers of substitute products and which competitors are in which strategic groups.

D)

the extent and importance of seller-supplier collaborative partnerships, the extent and importance of seller-buyer collaborative partnerships, and the bargaining leverage of sellers and buyers.

E)All of these.

3 INCORRECT

According to both the text discussion and the summary in Figure 3.4, which of the following is not among the factors that determine whether competitive rivalry among industry members is strong, moderate, or weak?

A)Whether buyer demand for the product is growing rapidly or slowly

B)Whether customers' costs to switch brands is low or high

C)

How active industry rivals are in initiating fresh competitive moves and in using the various weapons of competition to improve their market standing and business performance

D)Whether there are few or many rival sellers and whether there are big differences in their sizes and competitive capabilities

E)

Whether industry members are vertically integrated and whether the industry is characterized by significant scale economies and rapid technological change

4 INCORRECT

The rivalry among competing sellers in an industry intensifies:

A)when buyer demand for the product is growing rapidly.

B)when customers are brand loyal and their costs to switch to competing brands or substitute products are relatively high.

C)when buyer demand is strong and sellers have little or no excess capacity and only minimal inventories.

D)as the number of rivals increases and as they become more equal in size and competitive capability.

E)

when the products of rival sellers are highly differentiated products and the industry consists of so many rivals that any one company's actions have little direct impact on rivals' business.

5 INCORRECT

Factors that cause the rivalry among competing sellers to be weak include:

A)low buyer switching costs.

B)slow growth in buyer demand.

C)

strong buyer loyalty, rapid growth in buyer demand, and so many industry rivals that any one company's actions have little impact on the businesses of its rivals.

D)standardized or else weakly differentiated products among rival sellers.

E)the presence of one or more rivals that are dissatisfied with their current position and market share.

6 UNANSWERED According to both the text discussion and the summary in Figure 3.5,

competitive pressures associated with the threat of new entrants grow stronger when:

A)buyer demand is growing slowly and the pool of entry candidates is small.

B)the number of customers for the industry's product is large and the product offerings of rival sellers are strongly differentiated.

C)

industry members are looking to expand their market reachby entering product segments or geographic areas where they currently do not have a presence, when current industry members are unable or unwilling to strongly contest the entry of newcomers, and when a newcomer can reasonably expect to earn attractive profits.

D)there are not many competitors already in the industry, their products are highly differentiated, and buyers are brand loyal.

E)

a small percentage of companies in the industry are currently earning above-average profits, entry barriers are high, and buyers are not brand loyal.

7 INCORRECT

Which of the following conditions generally raise the barriers to entering an industry?

A)Low levels of brand loyalty on the part of customers and the presence of more than 20 rivals in the industry

B)Rapid market growth, low buyer switching costs, and weak brand preferences and customer loyalty

C)Product offerings that are pretty much standardized from rival to rival

D)

High capital requirements, difficulties in building a network of distributors-retailers and securing adequate space on retailers' shelves, and the likelihood that industry incumbents will strongly contest the efforts of new entrants to gain a market foothold

E)

The industry is not characterized by scale economies and/or sizable learning/experience curve effects and few firms in the industry hold key patents and/or possess significant proprietary technology not readily available to a newcomer

8 CORRECT

Based on both the chapter discussion and the summary in Figure 3.6, competitive pressures stemming from substitute products are weaker when:

A)

substitutes are higher-priced, buyers don't believe substitute products have equal or better features, and buyers' costs of switching to substitutes are relatively high.

B)the industry consists of a relatively large number of rival sellers that are fairly equal in size and competitive capability.

C)entry barriers are moderately high but by no means prohibitive and there is a fairly small pool of entry candidates.

D)a number of customers buy in large volumes and are in a strong bargaining position to win concessions from sellers.

E)buyer loyalty to the products they are currently purchasing is relatively low.

9 INCORRECT

Which of the following is not a factor in determining whether the suppliers to an industry are a source of strong, moderate, or weak competitive pressures?

A)

Whether certain needed inputs are in short supply and whether the item being supplied is a standard commodity that is readily available from many suppliers at the going market price

B)

Whether it is difficult or costly for industry members to switch their purchases from one supplier to another or to switch to attractive substitute inputs

C)

Whether industry members are major customers of suppliers and whether suppliers' sales to members of this one industry constitute a big percentage of their total sales

D)

Whether the industry supply chain is global or mostly national, whether suppliers have a wide or narrow product line, and whether industry members place orders frequently or infrequently with suppliers

E)Whether certain suppliers provide a differentiated input that enhances the performance or quality of the industry's product

10 INCORRECT Which of the following is not a reason that industry rivals are often

motivated to enter into strategic partnerships with key suppliers?

A)To enhance the quality of parts and components being supplied and/or to reduce defect rates

B)To speed the availability of next-generation components

C)To reduce the bargaining power they face from buyers of their products

D)To squeeze out important cost savings for both themselves and their suppliers

E)To reduce inventory and logistics costs

11 INCORRECT Whether the buyers of an industry's product have strong or weak

bargaining leverage over the terms and conditions of sale depends on:

A)

how often that sellers alter their prices, how sensitive buyers are to price differences among sellers, whether the item being purchased is a good or a service, and whether buyers buy frequently or infrequently.

B)the frequency with which rival firms change strategies and the amount of advertising that sellers utilize.

C)

whether all buyers have the same degree of negotiating power, whether the item carries a high or low price tag, and whether there are many or few collaborative partnerships between sellers and buyers.

D)

whether buyers purchase in relatively large or small quantities, whether the costs of switching to competing brands or to substitute products are high or low, and how well informed buyers are about sellers' prices, products, and costs.

E)

whether buyer demand is seasonal or year-round, whether entry barriers are high or low, and whether competitive pressures from substitutes are strong or weak.

12 INCORRECT As a rule, the stronger the collective impact of the five competitive forces,

A)the more strategic groups there are in an industry.

B)the lower the number of industry key success factors.

C)the lower the combined profitability of industry participants and the more "competitively unattractive" is the industry environment.

D)the weaker the industry's driving forces.

E)the higher the barriers to entry and the less likely it is that industry members will make fresh strategic moves very frequently.

13 INCORRECT The task of driving forces analysis is to:

A)identify all the underlying factors that can cause industry profitability to rise or fall in the years ahead.

B)predict what new forces of competitive and market change will emerge next.

C)determine which of the five competitive forces is the biggest driver of industry change.

D)identify which companies are being driven to move from one strategic group to another strategic group.

E)

identify what the driving forces are, assess whether the drivers of change are, on the whole, acting to make the industry more or less attractive, and determine what strategy changes are needed to prepare for the impacts of the driving forces.

14 INCORRECT Which of the following is not among the most common types of driving

forces?

A)Product innovation, marketing innovation, increasing globalization of the industry, and reductions in uncertainty and business risk

B)

Changes in the long-term industry growth rate, changes in who buys the product and how they use it, and growing buyer preferences for differentiated productsUps and downs in interest rates, changes in the number of seller-

C) supplier collaborative alliances, and changes in overall industry profitability

D)

Emerging new Internet applications and capabilities, technological change, and the diffusion of technical know-how across more companies and more countries

E)Changes in cost and efficiency, the entry or exit of major firms, and changing societal concerns, attitudes, and lifestyles

15 INCORRECT The procedure for constructing a strategic group map involves:

A)identifying the competitive characteristics that differentiate firms' market positions and competitive approaches.

B)selecting variables for the map's axes that are highly correlated.

C)

using only variables for the map's axes that are quantitative in nature (qualitative measures of market positions and competitive approaches are too subjective and unreliable).

D)

plotting the firms on a two-variable or two-dimensional map, drawing circles around those firms occupying about the same strategy space, and making the size of the circles for each strategic group proportional to the size of its members' share of total industry sales revenues.

E)Both A and D

16 INCORRECT A strategic group map is a helpful analytical tool for:

A)assessing why competitive pressures and driving forces usually impact the biggest strategic groups more so than the smaller groups.

B)determining which companies have how big a competitive advantage and how good their prospects are for increasing their market shares.

C)determining which company is the most profitable in the industry and why it is doing so well.

D)

determining who competes most closely with whom; evaluating whether industry driving forces and competitive pressures favor some strategic groups and hurt others; and ascertaining whether the profit potential of different strategic groups varies due to the strengths and weaknesses in each group's respective market positions.

E)pinpointing which of the five competitive forces is the strongest and which is the weakest.

17 INCORRECT Trying to determine what strategic moves rivals are likely to make next:

A)is interesting but usually has little bearing on a company's own best strategic moves.usually requires evaluating the industry's key success factors as well as

B) determining how many driving forces are present.

C)

is best done by monitoring each rival's market share, earnings per share, and stock price--adverse changes in these measures signal the coming of a fresh move but as long as a company's performance on these measures is satisfactory the chance of fresh moves is slim.

D)cannot be done effectively without first drawing a strategic group map.

E)

entails understanding rivals' strategies, watching their actions on a regular basis, sizing up their strengths and weaknesses, gauging how well they are faring in the marketplace, assessing how much pressure they are under to improve their performance, and evaluating the relative merits of their strategic options and alternatives so as to better predict their likely next moves.

18 INCORRECT An industry's key success factors:

A)

can best be determined by studying the strategies of those companies in the industry's best strategic group and those in the worst strategic group.

B)

concern the particular strategy elements, product attributes, resources, competencies, competitive capabilities, and market achievements that spell the difference between being a strong competitor and a weak competitor--and sometimes between profit and loss.

C)are mainly a function of an industry's macro-environment and dominant economic features.

D)

can best be determined by identifying the similarities in the strategies of rival companies--those strategy elements that are most commonly found in the strategies of rivals can be considered key success factors.

E)usually relate to technology and manufacturing-related capabilities and rarely to distribution or marketing capabilities.

19 INCORRECT Which of the following is not an important factor for company managers to

consider in drawing conclusions about whether the industry presents an attractive opportunity?

A)

Whether powerful competitive forces are squeezing industry profitability to subpar levels and whether competition appears destined to grow stronger or weaker

B)The industry's growth potential and the degree of uncertainty and risk in the industry's future

C)Whether industry profitability will be affected favorably or unfavorably by the prevailing driving forces

D)How many of the industry's key success factors do companies in the industry typically incorporate into their strategies

E)

The company's ability to capitalize on the vulnerabilities of weakly positioned rivals and whether the company has sufficient competitive

strength to defend against or counteract the factors that make the industry unattractive

20 CORRECT

Which one of the following statements is false?

A)

A company's macro-environment includes all relevant external factors and influences that bear upon a company's decision to move to a different strategic group, change its strategic intent, or modify its objectives, strategy, or business model.

B)

A company's strategy is increasingly effective the more it provides some insulation from competitive pressures and shifts the competitive battle in the company's favor.

C)The task of driving forces analysis is to separate the major causes of industry change from the minor ones.

D)

Scouting competitors well enough to anticipate their next moves allows managers to prepare effective countermoves (perhaps even beat a rival to the punch) and to take rivals' probable actions into account in crafting their own best course of action.

E)

The degree to which an industry is attractive or unattractive is not the same for all industry participants or all potential entrants because the attractiveness of the opportunities an industry presents depends heavily on whether a company has the resource strengths and competitive capabilities to capture them.

CHAPTER 4The correct answer for each question is indicated by a .

1 CORRECT

Evaluating a company's resources and competitive position does not include developing answers to which one of the following questions?

A)How good is the company's value chain?

B)Is the company competitively stronger or weaker than key rivals?

C)What are the company's resource strengths and weaknesses and its external opportunities and threats?

D)Are the company's prices and costs competitive?

E)What strategic issues and problems merit front-burner managerial attention?

2 INCORRECT Which one of the following is not helpful in identifying the components of a

single-business company's strategy?

A)The company's moves to respond to changing conditions in its macro-environment and in industry and competitive conditions

B)The scope of the company's geographic coverage

C)The company's resource strengths and weaknesses

D)The company's key functional strategies

E)The company's planned, proactive moves to outcompete rivals and its efforts to build competitive advantage

3 INCORRECT Which one of the following is not a good indicator of how well a company's

present strategy is working?

A)

Whether its sales are growing faster than, slower than, or about the same pace as the market as a whole, thus resulting in a rising, falling, or stable market share.

B)

How well the company stacks up against rivals on such factors as technology, product quality, customer service, product innovation, delivery time, speed in getting new products to market, and other factors on which buyers base their choice of brands

C)Whether the firm's profit margins are increasing or decreasing and how well its margins compare to rival firms' margins

D)Whether the company's resource strengths and competitive capabilities outnumber its resource weaknesses and competitive vulnerabilities

E)

The firm's image and reputation with its customers and whether the company's overall financial strength and credit rating are improving or on the decline

4 INCORRECT SWOT analysis:

A)

consists of three steps (as shown in Figure 4.2): identifying a company's resource strengths and weaknesses and its opportunities and threats, drawing conclusions about the company's overall situation, and translating the conclusions into strategic actions to improve the company's strategy and business prospects.

B)

provides a quick overview of where on the scale from "alarmingly weak" to "exceptionally strong" the attractiveness of the company's overall business situation ranks.

C)helps provide a basis for matching the company's strategy to its internal resource capabilities and its external opportunities and threats.

D)

helps identify a company's core competencies and competitive capabilities and the seriousness of its resource weaknesses and competitive deficiencies.All of these.

E)

5 INCORRECT A core competence:

A)is a more durable company resource than a "distinctive competence."

B)

usually resides in a company's technology and physical assets (state-of-the-art plants and equipment, attractive real estate locations, modern distribution facilities, and so on) whereas a company competence usually resides in a company's human assets.

C)

is typically knowledge-based, residing in people and in a company's intellectual capital and not in its assets on the balance sheet; moreover, a core competence tends to be grounded in cross-department combinations of knowledge and expertise rather than being the product of a single department or work group.

D)is usually tied closely to the caliber of a company's manufacturing capability and/or its proprietary technology and know-how.

E)is better suited to helping a company defend against external threats than in pursuing external market opportunities.

6 INCORRECT Which one of the following groups of characteristics is least likely to

represent company strengths or competitive assets?

A)Physical assets such as state-of-the-art plants, attractive real estate locations, and worldwide distribution facilities

B)

More plants than rivals, more employees than rivals, being in business more years than rivals, and smaller capital investment expenditures than rivals

C)A well-known brand name, a highly motivated workforce, and the collective learning embedded in the organization

D)

Short development times in bringing new products to market, a strong dealer network, strong collaborative partnerships with key suppliers, and an experienced and capable workforce

E)

Proven quality control skills, good supply chain management capabilities, state-of-the-art systems for doing business via the Internet, and a strong balance sheet

7 INCORRECT A distinctive competence:

A)is a more important competitive asset than a core competence.

B)

represents uniquely strong capability relative to rival companies—it qualifies as a competitively superior resource strength with competitive advantage potential.

C)is a competitively important value chain activity that a company performs better than its rivals.

D)can underpin and add real punch to a company's strategy.

E)All of the above.

8 INCORRECT Which of the following is not a measure of the competitive power of a

company's resource strengths?

A)How hard it is for competitors to copy the resource strength

B)Whether the company has more resources/capabilities than any other key rival

C)Whether a company's resource is really competitively superior to what rivals have or can do

D)How easily the resource or capability can be trumped by the different resources/capabilities of rivals

E)Whether the resource or capability is durable and has staying power (in the sense of not losing its value quickly because of new developments)

9 INCORRECT The industry or market opportunities that are most relevant to a company and

those which its strategy should aim at capturing include:

A)opportunities that are well-suited to the company's competitive capabilities and resource strengths.

B)opportunities which the company has the financial resources to pursue.

C)opportunities that offer important avenues for growth.

D)opportunities where the company has the greatest potential for competitive advantage.

E)All of the above.

10 INCORRECT Which of the following is not an example of an external threat to a company's

future business prospects (see Table 4.2)?

A)Mounting intensity of competition among industry rivals and costly new regulatory requirements

B)Having a weaker brand image than rivals and a smaller network of retailer dealers than rivals

C)Shifts in buyer needs and preferences away from using the industry's productVulnerability to unfavorable industry driving forces and adverse demographic changes that are likely to curtail demand for the industry's

D) product

E)Growing bargaining power on the part of customers and/or suppliers

11 INCORRECT Which of the following analytical tools are particularly useful for

determining whether a company's prices and costs are competitive?

A)SWOT analysis, strategy assessment, activity-based costing analysis, and key success factor analysis.

B)SWOT analysis, competitive strength assessment, best practices analysis, and value chain analysis.

C)Value chain analysis and benchmarking.

D)Competitive position assessment, competitive strength assessment, strategic group mapping, SWOT analysis, and value chain analysis.

E)SWOT analysis, best practices analysis, activity-based costing analysis, and competitive strength assessment.

12 INCORRECT A company's value chain consists of:

A)the activities a company performs in converting its resource weaknesses into resource strengths.

B)

the collection of activities it performs in the course of designing, producing, marketing, delivering, and supporting its product or service and delivering value to customers—these activities can be grouped into (a) the primary activities that are foremost in creating value for customers and (b) the related support activities that facilitate and enhance the performance of the primary activities.

C)

those activities a company performs that represent "best practices"—only best practice activities are capable of delivering value to customers and thus qualify to be part of a company's value chain.

D)the activities that a company performs in developing a distinctive competence.

E)

the activities that represent a company's competencies, core competencies, distinctive competencies, and competitive capabilities—it is these activities that underpin a company's efforts to create value for customers and shareholders.

13 INCORRECT Benchmarking:

A)

is inherently unethical if it involves companies that are direct competitors because it involves gathering competitively sensitive information about the operations and costs of rivals.

B)is not a valid tool for measuring the cost-effectiveness of an activity unless it is restricted to companies in the same industry.

C)

is a tool for learning which companies are best at performing particular activities and then using their techniques (or "best practices") to improve the cost and effectiveness of a company's own internal activities.

D)

loses much of its managerial usefulness if it is done with the aid of third-party organizations who insist on protecting the confidentiality of individual company data; moreover, benchmarking is not used very often by companies because of "borderline" ethical considerations and because most of the time the information and data used in doing benchmarking studies has turned out to be unreliable and untrustworthy.

E)entails calculating the costs of performing each of the primary and related support activities in a company's value chain.

14 INCORRECT A company's cost competitiveness is largely a function of:

A)

whether it does a good enough job of benchmarking its value chain activities against the value chains of competitors so that it knows exactly how low to drive its costs to be cost-competitive.

B)how efficiently it manages its overall value chain activities relative to how efficiently competitors manage theirs.

C)whether it does a better job of building its resource strengths more cost effectively than rivals.

D)whether it possesses more core competencies and competitive capabilities than rivals.

E)

how closely its internally-performed activities are linked to the activities performed by suppliers and to the activities performed by forward channel allies.

15 CORRECT Strategic actions to eliminate a cost disadvantage:

A)

can aim at lowering costs (1) in the suppliers' part of the industry value chain, (2) in a company's own internally-performed activities, and/or (3) in the forward channel portion of the value chain.

B)

work best when they aim at lowering the costs of performing those tasks and activities where the company has core competencies and distinctive competencies.

C)

work best when aimed at increasing the amount of the company's low-cost competitive assets and decreasing the amount of its high-cost competitive assets.

D)are likely to be most effective when they are aimed at lowering the costs of the value chain activities that a company performs internally.

E)

are most likely to be successful when they involve efforts to concentrate more company resources and talents on those value chain activities where the company already has the lowest costs.

16 INCORRECT The options for attacking the high costs of items purchased from suppliers

does not include which one of the following?

A)Pressuring suppliers for more favorable prices

B)Integrating backward into the business of high-cost suppliers and making the item in-house so as to better control the cost

C)Switching to lower priced substitute inputs

D)Raising prices to customers (so as to cover the high costs)

E)Collaborating closely with suppliers to identify mutual cost-saving opportunities

17 CORRECT For a company to translate performance of value chain activities into

competitive advantage, it:

A)

must (1) develop core competencies and maybe a distinctive competence that rivals don't have or can't quite match and that are instrumental in helping it deliver attractive value to customers or (2) be more cost efficient in how it performs value chain activities such that it has a low-cost advantage.

B)has to develop more core competencies than rivals.

C)must be more adept than rivals in using benchmarking and activity-based costing.

D)has to position itself in the strategic group where profit margins are highest.

E)must adopt more best practices than rival firms.

18 INCORRECT Doing a weighted competitive strength assessment of how a company

compares against key rivals involves:

A)

developing a list of 6 to 10 telling measures of competitive strength and then assigning weights to each of these strength measures that reflects their relative importance.

B)

rating each company on each strength measure (using a scale of 1 to 10) and then multiplying the strength rating by the assigned weight to get a weighted strength score.

C)

summing each company's weighted strength scores on the various strength measures to get an overall measure of competitive strength for each competitor.

D)

drawing conclusions about the size of a company's net competitive advantage or disadvantage vis-à-vis its rivals (with the size of the advantage/disadvantage being indicated by the sizes of the differences among the companies' competitive strength scores).All of the above.

E)

19 INCORRECT Which one of the following is not something that can be learned from doing a

competitive strength assessment?

A)

Identifying the competitive factors where a company is strongest and weakest vis-à-vis key rivals and the kinds of offensive/defensive actions the company can use to exploit its competitive strengths and reduce its competitive vulnerabilities

B)Whether a company utilizes more best practices than rivals in performing its value chain activities

C)Which of the rated companies is competitively strongest and what size competitive advantage it enjoys

D)

Whether a company has a net competitive advantage or is a net competitive disadvantage relative to key rivals (with the size of the advantage/disadvantage being indicated by the differences among the companies' competitive strength scores)

E)

Which rival company is competitively weakest and the areas where it is most vulnerable to competitive attack—when a company has important competitive strengths in areas where one or more rivals are weak, it makes sense to consider offensive moves to exploit rivals' competitive weaknesses

20 INCORRECT Identifying the strategic issues that company managers need to address:

A)

involves using the results of both industry and competitive analysis and what has been learned from evaluating the company's present strategy, SWOT analysis, and the evaluations of the company's own competitiveness.

B)entails developing a "worry list" of "how to...", "whether to....", and "what to do about....."

C)

is important because it sets the agenda for deciding what actions to take next to improve the company's performance and business outlook—a good strategy must include actions to deal with all the strategic issues and problems that stand in the way of the company's future success.

D)entails locking in on what challenges the company has to overcome in order to be financially and competitively successful in the years ahead.

E)All of the above.

21 INCORRECT Which of the following statements is false?

A)The higher a company's costs are above those of close rivals, the more competitively vulnerable it becomes.

B)

Because the value chains of rival companies tend to be quite similar, costs outside a company's own value chain do not affect whether it is at a

cost advantage or disadvantage vis-à-vis key rivals.

C)

A company's cost competitiveness depends not only on the costs of internally performed value chain activities but also on the costs of activities performed by its suppliers and forward channel allies.

D)The stronger a company's financial performance and market position, the more likely it has a well-conceived, well-executed strategy.

E)

A competence is something a company is good at doing whereas a core competence is a proficiently performed internal activity that is central to a company's strategy and competitiveness.

CHAPTER 5The correct answer for each question is indicated by a .

1 INCORRECT A company's competitive strategy deals with:

A)the specific actions management plans to take to develop a better value chain than rivals.

B)how it plans to unify its functional and operating strategies into a cohesive effort aimed at successfully taking customers away from rivals.

C)

deals exclusively with the specifics of management's game plan for competing successfully—its specific efforts to please customers, its offensive and defensive moves to counter the maneuvers of rivals, its responses to whatever market conditions prevail at the moment, its initiatives to strengthen its market position, and its approach to securing a competitive advantage vis-à-vis rivals.

D)its plans for under-pricing rivals and achieving product superiority.

E)the specific actions management intends to take to strongly differentiate its product offering from the offerings of rival companies in the industry.

2 INCORRECT A company achieves competitive advantage whenever:

A)it has a product offering that is differentiated from the product offerings of rivals.

B)its customers exhibit a high degree of loyalty to the company's brand.

C)it has more core competencies than its rivals.

D)it has a better credit rating than rivals.

E)it has some type of edge over rivals in attracting customers and coping with competitive forces.

3 INCORRECT The five generic types of competitive strategies include:

A)offensive strategies, defensive strategies, differentiation strategies, low-cost strategies, and first-mover strategies.

B)low-cost leadership, broad differentiation, best-cost provider, focused low-cost, and focused differentiation.

C)offensive strategies, defensive strategies, striving to be a market leader, technological leadership strategies, and product innovation strategies.

D)

low-price strategies, premium price strategies, middle-of-the-road strategies, product leadership strategies, and market share leadership strategies.

E)

attacking competitor strengths, attacking competitor weaknesses, market leadership strategies, low-cost leadership strategies, and product superiority strategies.

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

A)using an everyday low pricing strategy to gain the biggest market share.

B)bigger profit margins than rival firms.

C)high buyer switching costs because of the company's differentiated product offering.

D)meaningfully lower overall costs than competitors.

E)a reputation for charging the lowest prices in the industry.

5 CORRECT

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

A)

buyers are large, have significant power to bargain down prices, use the product in much the same ways, and incur low costs in switching their purchases from one seller to another.

B)most rivals are trying to differentiate their product offering from those of rivals.

C)there are many ways to achieve higher product quality that have value to buyers.

D)buyers are not swayed by advertising and are not very brand-loyal.

E)most rivals are pursuing best-cost or broad differentiation strategies.

6 INCORRECT Which of the following is not a way that a company can try to manage the

costs of its value chain activities downward and thus be more cost-efficient than rivals?

A)Striving to capture all available economies of scale and taking full advantage of experience and learning-curve effects

B)

Having outsiders perform all those value chain activities in which a company odes not have either a core competence or a distinctive competence

C)Substituting the use of low-cost for high-cost raw materials or component parts

D)Using the company's bargaining power vis-à-vis suppliers to gain concessions and trying to operate facilities at full capacity

E)Adopting labor-saving operating methods and using online systems and sophisticated software to achieve operating efficiencies

7 INCORRECT Striving to be the industry's low-cost provider and achieving lower costs than

rivals entails:

A)doing a better job than rivals of performing value chain activities more cost-effectively.

B)

having a smaller labor force than rivals, paying lower wages than rivals, locating all facilities in countries where labor costs are low, and outsourcing many value chain activities to suppliers with world-class technological capabilities.

C)

revamping the firm's overall value chain to eliminate or bypass cost-producing activities that produce little value added insofar as customers are concerned.

D)aggressive use of activity-based costing, utilizing more best practices than rivals, and having a narrower product line than rivals.

E)Both A and C.

8 INCORRECT Which of the following is not an accurate characterization of a strategy to be

the industry's overall low-cost provider?

A)

A low-cost provider strategy works well in market situations where many buyers are price-sensitive and price competition among rival sellers is especially vigorous.

B)A low-cost provider strategy entails pursuing cost-saving initiatives that are difficult for rivals to copy or match.

C)A low-cost provider strategy entails making a product with minimal features so as to keeps cost per unit as low as absolutely possible.

D)

A low-cost provider strategy is quite suitable for situations where there are few ways to achieve product differentiation that have value to buyers, where most buyers utilize the product in the same ways, and buyers incur low costs in switching their purchases from one seller to another.

E)

A low-cost provider strategy is a particularly powerful strategy when the industry's product is essentially the same from rival to rival, many buyers are price sensitive, and industry newcomers use low introductory prices to attract buyers and build a customer base.

9 INCORRECT A broad differentiation strategy:

A)

is an attractive competitive approach whenever buyers' needs and preferences are too diverse to be satisfied by a product that is essentially identical from seller to seller.

B)

can produce sustainable competitive advantage if the differentiating features possess strong buyer appeal and can't be copied or easily matched by rivals.

C)works best when the basis for differentiation is superior performance features and buyer switching costs are low.

D)

offers a better chance for gaining market share than low-cost or best-cost provider strategies, and typically allows a firm to charge the highest price in the industry.

E)Both A and B.

10 CORRECT Which of the following is not one of the four basic routes to achieving a

differentiation-based competitive advantage?

A)Appealing to high-income buyers who are willing and able to pay a premium price for a high-performing, multi-featured product

B)Incorporating features that raise product performance

C)Incorporating product attributes and user features that lower the buyer's overall costs of using the company's product

D)Delivering value to customers via competencies and competitive capabilities that rivals don't have or can't afford to match

E)Incorporating features that enhance buyer satisfaction in intangible or non-economic ways

11 INCORRECT The most appealing approaches to broad differentiation:

A)are those that hinge upon first-rate R&D and frequent product innovation.

B)involve features or attributes that (1) have considerable buyer appeal and (2) are hard or expensive for rivals to duplicate.

C)are those that either lower buyer switching costs or enhance the differentiator's brand image.

D)generally relate to product superiority or clever merchandising.

E)are typically based on either superior product quality or superior customer service.

12 INCORRECT Successful differentiation allows a firm to:

A)

gain buyer loyalty to its brand (because some buyers are strongly attracted to the differentiating features and bond with the company and its products).

B)earn the highest profit margins of any company in the industry.

C)attract many more buyers by charging a lower price than rivals and thereby take sales and market share away from rivals.

D)command a premium price for its product and/or increase unit sales (because additional buyers are won over by the differentiating features).

E)Both A and D.

13 INCORRECT In which one of the following market circumstances is a broad differentiation

strategy generally not well-suited?

A)When buyer needs and preferences are too diverse to be fully satisfied by a standardized product

B)When few rivals are pursuing a similar differentiation approach

C)When most competitors are using eye-catching ads to set their product offerings apart and build a brand image that is differentiated

D)When there are many ways to differentiate the product or service and many buyers perceive these differences as having value

E)When technological change is fast-paced and competition revolves around rapidly evolving product features

14 INCORRECT Which of the following is not one of the pitfalls of pursuing a differentiation

strategy?

A)Trying to charge too high a price premium for the differentiating features

B)Over-differentiating so that the features and attributes incorporated exceed buyer needs and requirements

C)Trying to create strong brand loyalty rather than being content with weak brand loyalty (which usually means lower costs and higher profitability)

D)Differentiating on features or attributes that rivals can easily copy

E)Overspending on efforts to differentiate the company's product offering

15 INCORRECT A strategy of being a best-cost provider:

A)is the easiest of the five generic types of competitive strategies to copy or imitate.

B)

combines a strategic emphasis on low cost with a strategic emphasis on more than minimally acceptable quality, service, features, and performance.

C)

is almost always more profitable than focused or market niche strategies because of the potential for selling more units and realizing higher revenues.

D)is the most attractive of all the competitive strategies because it combines the best features of the four other generic types of competitive strategies.

E)

is usually somewhat less profitable than either top-of-the-line differentiation or low-cost leadership strategies because it is based on achieving a weaker type of competitive advantage.

16 INCORRECT What sets focused (or market niche) strategies apart from low-cost leadership

and broad differentiation strategies is:

A)the extra attention paid to establishing a distinctive competence.

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

C)greater opportunity for brand loyalty.

D)their suitability for market situations where technological change is fast-paced and continuous product innovation is a key success factor.

E)their bold strategic intent of global market leadership via heavy advertising.

17 CORRECT A focused low-cost strategy (see Table 5.1):

A)

involves a marketing emphasis that communicates the attractiveness of a budget-priced product tailored to fit the expectations of buyers comprising the target market niche.

B)is the hardest of the five generic types of competitive strategies to employ successfully.

C)involves the use of deep price discounting to capture customers.

D)

entails trying to wrest market share away from rivals via extra advertising, above-average expenditures for promotional programs, and heavy use of point-of-sale merchandising techniques.

E)cannot be sustained over time unless the focuser is aggressive in entering other segments where it also can achieve a low-cost advantage.

18 INCORRECT A focused differentiation strategy aims at securing competitive advantage by:

A)providing buyers in the target market niche with the best performance features at the best price.

B)catering to buyers looking for a medium-quality product at an average price.

C)offering buyers in the target market niche a product which they perceive is uniquely well suited to their tastes and preferences.

D)developing unique product attributes.

E)convincing buyers that the company is a true leader in product innovation.

19 INCORRECT Which of the following are distinguishing features of a best-cost provider

strategy (see Table 5.1)?

A)The strategic target is price-conscious buyers

B)A marketing emphasis on charging a slightly higher price than rival brands having comparable features and attributes

C)A product line that stresses wide selection, many product variations, and emphasis on differentiating features

D)A competitive advantage based on more value for the money

E)Using constant product innovation, excellent R&D skills, and periodic technological breakthroughs to sustain the strategy

20 INCORRECT Based on the information in Table 5.1, which of the following is not a

distinguishing feature of a low-cost provider strategy?

A)The product line consists of a few basic models having minimal frills and acceptable quality

B)The production emphasis is on continuously searching for ways to reduce costs without sacrificing acceptable quality and essential features

C)The marketing emphasis is on making virtues out of product features that lead to low cost

D)

The strategic target is value-conscious buyers and sustaining the strategy depends on frequent advances in technology and occasional product innovations

E)Sustaining the strategy revolves around managing costs down year-after-year and delivering good value at economical prices

CHAPTER 6

The correct answer for each question is indicated by a .

1 INCORRECT Which one 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 strategies?

A)What type of Web site strategy to employ and whether and when to employ offensive and defensive moves

B)Whether to bolster the company's market position and competitiveness via acquisition or merger

C)Whether to employ a low-end strategy or a middle-of-the-road strategy or a high-end strategy

D)Whether to integrate forward or backward into more stages of the industry value chain

E)Whether to enter into strategic alliances or collaborative partnerships

2 CORRECT

Which one of the following is not a factor that makes an alliance "strategic" as opposed to just a convenient business arrangement?

A)The alliance involves joint contribution of resources and is mutually beneficial.

B)The alliance helps block a competitive threat or open up new market opportunities.

C)The alliance helps mitigate a significant risk to a company's business.

D)The alliance helps build, enhance, or sustain a core competence or competitive advantage.

E)The alliance is critical to the company's achievement of an important objective.

3 INCORRECT Companies are motivated to enter into strategic alliances or cooperative

arrangements:

A)to expedite the development of promising new technologies or products.

B)

to bring together the personnel and expertise needed to create desirable new skill sets and capabilities to improve supply chain efficiency, and/or gain economies of scale in production and/or marketing.

C)to acquire or improve market access through joint marketing agreements.

D)

to help win the race against rivals for global market leadership or to seize opportunities on the frontiers of advancing technology and build the resource strengths and business capabilities to compete successfully in the industries and product markets of the future.

E)All of these.

4 INCORRECT The best strategic alliances:

A)aim at teaming up with world-class suppliers or else companies with world-class know-how in product innovation.

B)are those whose purpose is helping a company master a new technology.

C)are those formed to enable the partners to be consistent first movers or fast followers.

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

E)aim at insulating the partners against the impacts of the five competitive forces and industry driving forces.

5 INCORRECT Companies racing against rivals for global market leadership often utilize

strategic alliances and collaborative partnerships with companies in foreign countries in order to:

A)better master new technologies, combat the bargaining power of foreign suppliers and foreign buyers, and facilitate global vertical integration.

B)build a bigger customer base quickly and better differentiate their proiduct offerings.

C)win stronger brand name recognition among foreign buyers.

D)

get into critical country markets quickly and accelerate the process of building a potent global market presence, gain inside knowledge about unfamiliar markets and cultures, and access valuable skills and competencies that are concentrated in particular geographic locations.

E)gain better control over their foreign-related transportation and logistics costs.

6 INCORRECT Which of the following is not a typical reason that many alliances prove

unstable or break apart?

A)Inability to work well together

B)Mounting competition between one or more allies in the marketplace

C)Changing conditions that render the purpose of the alliance obsolete and the emergence of more attractive technological paths

D)Disagreement over how to divide the added market share and profits gained from joint collaboration

E)Diverging objectives and strategic priorities

7 INCORRECT Mergers and acquisitions are a much used strategy because they are an

effective means of:

A)revamping a company's value chain.

B)facilitating the employment of both offensive and defensive strategies.

C)

creating a more cost-efficient operation, expanding a company's geographic coverage, and extending a company's business into new product categories.

D)

gaining quick access to new technologies or other resources and competitive capabilities and trying to invent a new industry and lead the convergence of industries whose boundaries are being blurred by changing technologies and new market opportunities.

E)Both C and D.

8 INCORRECT Which one of the following statements about merger and acquisition

strategies is true?

A)

Merger and acquisition strategies are nearly always a superior strategic alternative to forming alliances or partnerships with these same companies.

B)

Merger and acquisition strategies tend to be far more successful that forming strategic alliances and cooperative partnerships with other companies.

C)

Merger and acquisition strategies often do not produce the hoped-for outcomes—examples of mergers/acquisitions where the results have been disappointing include the merger of AOL and Time Warner, the merger of Daimler Benz and Chrysler, Hewlett-Packard's acquisition of Compaq Computer, Ford's acquisition of Jaguar, and Best Buy's acquisition of Musicland.

D)

Mergers and acquisition strategies are a very high-risk strategy because of the financial drain of using the company's cash resources to accomplish the merger or acquisition.

E)Merger and acquisition strategies are one of the best ways for helping a company strengthen its brand image.

9

INCORRECT Which of the following is not a potential advantage of backward vertical integration?

A)Adding to a company's differentiation capabilities and perhaps achieving a differentiation-based competitive advantage

B)Reduced risk of disruptions in the supply and delivery of crucial materials and components

C)

Reduced costs for items purchased from suppliers (if internal manufacture is more economical than buying from powerful suppliers who have big profit margins and provided entry barriers into a supplier's business are low or can be hurdled)

D)

Enhanced R&D capability, better opportunity to establish a core competence in supply chain management, more flexibility in incorporating state-of-the-art parts and components, and better overall product quality

E)Reduced vulnerability to powerful suppliers (who may be inclined to raise prices at every opportunity)

10 INCORRECT Which of the following is typically the strategic impetus for forward vertical

integration?

A)To charge lower retail prices and thereby attract a bigger, more loyal clientele of customers

B)To make it easier to expand the company's product line

C)To gain better access to end users and better market visibility

D)To achieve greater control over advertising and in-store retail merchandising

E)To gain better access to greater economies of scale

11 CORRECT Which of the following is not a strategic disadvantage of vertical integration?

A)It greatly reduces the opportunity for capturing maximum scale economies and achieving the lowest possible operating costs.

B)Vertical integration poses all kinds of capacity-matching problems.

C)It boosts a firm's capital investment in the industry and thus increases business risk if the industry becomes unattractive later.

D)

Integrating forward or backward can entail taking on the performance of value chain activities that require radically different skills and business capabilities than the firm possesses.

E)

Vertical integration backward into parts and components manufacture can impair a company's operating flexibility when it comes to changing out the use of certain parts and components (it is easier to change out

parts and components made by outside suppliers than those made in-house).

12 CORRECT Which of the following is not an advantage of outsourcing the performance

of certain value chain activities to outsiders?

A)

Being able to reduce distribution costs by eliminating the use of wholesale distributors and retail dealers and, instead, selling direct to end-users at the company's Web site.

B)Allowing a company to concentrate on its core business, leverage its key resources, and do even better what it already does best

C)

Improving the company's ability to innovate by allying with "world-class" suppliers who have cutting edge intellectual capital and are first-to-market with next-generation parts and components

D)Being able to speedily and efficiently assemble diverse kinds of competitively valuable expertise

E)Obtaining higher quality and/or cheaper components or services

13 INCORRECT Which of the following is not one of the principal offensive strategy options?

A)Pursuing continuous product innovation to draw sales and market share away from less innovative rivals

B)Trying to take market share away from the industry leaders by significantly undercutting the prices they are charging

C)Offering an equally good or better product at a lower price

D)

Leapfrogging competitors by being the first adopter of next-generation technologies or being first to market with next generation products Attacking the competitive weakness of rivals

E)Adopting and improving on the good ideas of other companies (rivals or otherwise)

14 INCORRECT A blue ocean type of offensive strategy:

A)is a pre-emptive strike type of price-cutting offensive used by a market leader to steal customers away from higher-priced rivals.

B)

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

C)involves deliberately attacking those market segments where a key rival makes big profits.

D)involves using innovative advertising and deep price discounts to grab sales and market share from complacent or distracted rivals.

E)employs highly creative, never-used-before strategic moves to attack the competitive weaknesses of rivals.

15 INCORRECT A preemptive strike type of offensive strategy entails:

A)attacking an industry leader's most profitable market segment via deep price discounts and heavy advertising.

B)moving first to secure an advantageous position that rivals are foreclosed or discouraged from duplicating.

C)using a distinctive competence that rivals can't match to take sales and market share away from competitively weak rivals.

D)

surprise introductions of new and very innovative products to secure market share leadership and then informing shocked rivals that the attacker will use deep price cuts, if necessary, to defend its newly-won market-leading position.

E)

leading the industry in introducing next-generation products and putting rivals in the position of being market followers and having to scramble to imitate the leader's innovations.

16 INCORRECT Which one of the following is not a good type of rival for an offensive-

minded company to target?

A)Market leaders that are vulnerable

B)Runner-up firms with weaknesses in areas where the challenger is strong.

C)Small local and regional companies with limited capabilities

D)Other offensive-minded companies with a sizable war chest of cash and marketable securities

E)Struggling enterprises that are on the verge of going under

17 CORRECT Defensive strategies:

A)

serve the purpose of helping protect competitive advantage, lowering the risk of being attacked, weakening the impact of any attack that occurs, and influencing would-be challengers to aim their attacks elsewhere; they often entail actions that signal would-be challengers that retaliation is likely.

B)are the best ways to counter the efforts of firms trying to make market inroads with substitute products.

C)

tend to work more frequently than offensive strategies because they are usually less risky and are more likely to succeed if they are predicated on actions to capture first-mover advantages via preemptive strikes that

foreclose imitation by rivals.

D)

employ efforts to block challengers from using end-run offensives and pre-emptive strike strategies and they are most likely to succeed when the defensive actions to thwart challengers stress vigorous price-cutting and added advertising.

E)

work best when they involve a combination of vertical integration, acquisition of other firms, outsourcing certain value chain activities, and strategic alliances with suppliers.

18 INCORRECT One very important advantage of a product-information-only Web site

strategy is:

A)lower advertising costs.

B)avoiding the extra costs associated with operating Web site e-stores.

C)

avoiding channel conflict—trying to sell online in direct competition with retail dealers signals both a weak strategic commitment to dealers and a willingness to cannibalize dealers' sales and growth potential.

D)added ability to create a positive image of the company.

E)lower sales force costs.

19 INCORRECT Two big appeals of a brick-and-click strategy are:

A)lower customer service costs and more ability to achieve strong product differentiation.

B)

economically expanding a company's geographic reach and giving existing and potential customers another choice of how to communicate with the company, shop for company products, make purchases, and/or resolve customer service problems.

C)

the low-cost economics of establishing a Web site and the ability to use existing company store locations as "distribution centers" for filling customer orders and then scheduling them for same-day delivery.

D)

an ability to use a well-known brand name to draw buyer traffic to the company's Web site and then use the company's local store locations as pickup points for the items customers order on the Web site.

E)the low-cost economics of establishing a Web site and low order-filling and delivery costs.

20 INCORRECT In which of the following situations is being first to initiate a particular move

not likely to result in a positive payoff?

A)When pioneering helps build up a firm's image and reputation with buyers

B)When first-time buyers remain strongly loyal to a pioneering firm in making repeat purchases

C)When late movers can copy a successful pioneer's moves quickly and at lower cost

D)When moving first can constitute a preemptive strike, making imitation extra hard or unlikely

E)When moving first can result in a cost advantage over rivals

CHAPTER 8The correct answer for each question is indicated by a .

1 INCORRECT The most important drivers shaping a company's most appealing strategic

options tend to revolve around:

A)

whether to try to strongly or weakly differentiate the company's product offering from the offerings of rivals and how to bolster its brand image and reputation with buyers.

B)which strategic group the company is in and whether is a market leader, a close runner-up, a potential market contender, or an also-ran.

C)

the nature of industry and competitive conditions and the firm's own resource strengths and weaknesses, competitive capabilities, opportunities and threats, and market position.

D)a company's internal strengths and weaknesses and its external opportunities and threats.

E)

whether it is more adept at lowering costs or at differentiating its product, the company's competitive strength vis-à-vis rivals, and a company's financial strength.

2 INCORRECT Which of the following is not an aspect of the strategy-making challenge

associated with competing in emerging industries?

A)Strong learning and experience curve effects may be present, allowing significant price reductions as volume builds and costs fall

B)

Many potential buyers expect first-generation products to be rapidly improved and delay their purchase until technology and product design mature

C)

The marketing challenge is to induce first-time purchase and overcome customer concerns about product features, performance reliability, and conflicting claims of rival firmsWhether to compete locally, regionally, nationally, internationally or

D) globally

E)

There are often uncertainties surrounding an emerging industry's technology and there may also be no consensus regarding which product attributes will prove decisive in winning buyer favor

3 INCORRECT Which one of the following is not likely to be a suitable strategy option for

companies competing in rapid-growth industries?

A)Driving down costs per unit so as to enable price reductions that attract droves of new customers

B)

Pursuing rapid product innovation, both to set a company's product offering apart from rivals and to incorporate attributes that appeal to growing numbers of customers

C)Gaining access to additional distributional channels and sales outlets

D)Expanding the product line to add models/styles that appeal to a wider range of buyers

E)Putting top priority on heavy advertising and other marketing-related actions calculated to strongly differentiate its product offering from rivals

4 INCORRECT Which one of the following statements does not represent one of the typical

fundamental changes in an industry as it approaches maturity?

A)Firms encounter growing difficulty in coming up with new product innovations and developing new uses and applications for the product

B)

The established rules of competition disintegrate, market conditions become quite turbulent, and business risk increases because of growing uncertainty about whether the industry will stagnate

C)

Industry profitability falls temporarily or permanently, international competition increases, and mergers and acquisitions that drive industry consolidation to a smaller number of larger players

D)Greater head-to-head competition for market share and increased competitive emphasis on lowering costs and improving service

E)New scale economies develop and overall costs per unit produced and sold drop significantly

5 INCORRECT In a maturing market where growth rates are getting smaller, rival firms can

often improve their competitive position in the marketplace by:

A)closely imitating the strategies of the market leaders and being adept fast followers.

B)aggressively cutting prices, trimming product quality, and spending heavily on advertising to strengthen their brand image.

C)

pruning marginal products and models, improving value chain efficiency, trimming costs, emphasizing cost reduction, acquiring rival firms at

bargain prices, building new or more flexible competitive capabilities, and expanding internationally.

D)making greater use of outsourcing, significantly widening their product lines, and being cautious about expanding into new geographic markets.

E)

shifting to a differentiation strategy based on superior customer service, vertically integrating backward to gain better control of the supply chain, and buying out money-losing rivals at bargain prices.

6 CORRECT

For a company to succeed in competing in stagnant or declining industries, it is well advised to:

A)

pursue one of three strategic courses: (1) rely on a focus strategy that involves identifying, creating, and exploiting growth segments within the overall industry, (2) pursue differentiation strategies keyed to quality improvement and product innovation, or (3) work diligently and persistently to drive costs down and become the low-cost leader.

B)

depend heavily on defensive strategies rather than offensive strategies and be patient and willing to wait the hard times out until the market turns around (as it usually does) and business conditions improve.

C)pursue short-term cash flow maximization rather than long-term profit maximization.

D)steer a middle course between low-cost and differentiation and pursue a best-cost provider strategy.

E)draw cash out of the business quickly via a fast-exit strategy.

7 INCORRECT A company that decides to stick with a stagnant or declining industry:

A)

is well-advised to pursue aggressive expansion into the markets of foreign countries and commit its full energies to being the global market leader.

B)

may still be successful if it aggressively expands its production capacity, launches a price war that drives weak rivals out of business, and achieves a market share of at least 35 percent.

C)is doomed to have declining revenues and profits.

D)

may be able to grow and prosper if market demand decays very slowly and it has the competitive capabilities to take market share away from weaker competitors

E)is well-advised to pursue backward and forward vertical integration in order to gain maximum control over the entire industry value chain.

8 CORRECT

A slow-exit type of end-game strategy involves:

A)

a gradual phasing down of operations coupled with an objective of generating the greatest possible harvest of cash from the business for as

long as possible.

B)selling off assets gradually and liquidating the business over a period of 5-10 years.

C)

gradually reducing the size of the company's customer base, starting with the least profitable customers and moving steadily toward the most profitable customers—with the intent of selling out to the highest bidder when the business starts to become unprofitable.

D)

withdrawing, one by one, from the various country markets where the firm competes and gradually retreating to the country market where sales and profits are highest.

E)pruning the operating budget by 5-10 percent annually and outsourcing more and more value chain activities to outside suppliers.

9 INCORRECT In trying to cope with a turbulent, high-velocity market environment, a

company:

A)

should usually put a strong emphasis on short-term profitability rather than worrying excessively about building and strengthening the company's long-term market position—the direction of market change is too volatile and unknowable to put much time into worrying about the long-term.

B)

can assume any of three strategic postures—it can react to change, it can anticipate change, and it can lead change; typically all three postures will have to be employed at one time or another (though not in the same proportion).

C)

should strive to be a fast follower and occasionally a slow-mover (like when the actions of early movers involve adoption of a radically different technological approach)—being an aggressive first mover carries too much risk and can dismay shareholders.

D)generally needs to put most of its strategic emphasis on defensive-type strategies because offensive strategies are so risky.

E)is well-advised to compete with a broad differentiation or best-cost strategy.

10 INCORRECT Which one of the following strategic moves and initiatives is unlikely to be

an attractive option for competing in a turbulent, high velocity market environment?

A)Initiating fresh actions every few months, not just when a competitive response is needed to counter or match what rivals are doing

B)Relying on strategic partnerships with outside suppliers and with companies making tie-in products

C)

Investing aggressively in R&D to stay on the leading edge of technological know-how and keeping the company's products fresh and exciting enough to stand out in the midst of all the change that is taking place

D)

Avoiding the perils of first-mover disadvantages and, instead, putting heavy emphasis on developing strong defensive strategies to neutralize the changes occurring in the marketplace

E)Developing quick response capabilities

11 INCORRECT Competing in fragmented industries:

A)

entails operating under conditions where there are many, many buyers of the product and the quantity sold to any one buyer constitutes a tiny fraction of total industry sales volume.

B)

can entail such characteristics as low entry barriers, an absence of economies of large-scale production, an exploding number of technological paths, a need for the product/service to be delivered/available in neighborhood locations, and/or a market situation where very large numbers of firms can easily coexist trying to accommodate differing buyer tastes, expectations, and pocketbooks.

C)

is very conducive to the use of low-cost leadership and broad-appeal differentiation strategies (because it is in a fragmented industry environment that these strategies most readily lead to industry domination).

D)

tends to be more profitable and more likely to result in sustainable competitive advantage when a company employs a focused differentiation strategy instead of a focused low-cost strategy.

E)

tends to be more profitable when a company employs a broad differentiation strategy and develops a product offering that appeals to buyers in many different market segments.

12 CORRECT Which of the following is unlikely to be a promising option for competing in

a fragmented industry?

A)

Employing deep price discounting, extensive advertising, and other muscle-flexing maneuvers to gain market dominance in a select few country markets

B)Specializing by product type or becoming a low-cost operator

C)Specializing by customer type

D)Focusing on a limited geographic area

E)Constructing and operating "formula" facilities at many different locations

13 INCORRECT Companies that are determined to grow their revenues and earnings at a rapid

or above-average pace year-after-year:

A)

typically form an array of strategic alliances with foreign firms to accelerate access to the markets of foreign countries and diversify their product lines so as to offer buyers a wide selection.

B)have to be aggressive first-movers and strive to build a dominant market share via merger and acquisition.

C)usually have to pursue global strategies and enter as many new foreign markets each year as their resources will permit.

D)

need to have a portfolio of strategic initiatives that range from strengthening their existing businesses to entering businesses with promising growth opportunities to planting the seeds for entirely new ventures.

E)

are usually industry leaders that employ muscle-flexing strategies, that have a strategic intent of being the global market leader, and that are heavily prone to using offensive strategies to build new profit sanctuaries.

14 CORRECT To sustain their market positions, industry leaders usually need to consider

which of the following strategic options?

A)A stay-on-the-offensive strategy, a fortify-and-defend strategy, or a muscle-flexing strategy

B)A multiple profit sanctuary strategy, a preemptive strike strategy, a growth-via-acquisition strategy, or a rapid diversification strategy

C)A global expansion strategy, a fortify-and-defend strategy, a market consolidation strategy, or an every-day low price strategy

D)A "formula facilities" strategy, a 900-pound gorilla strategy, a market dominance strategy, a home-run strategy

E)A first-mover strategy, a harvesting strategy, a price war strategy, or a dominant profit sanctuary strategy

15 INCORRECT The strategic options most suitable for runner-up competitors include:

A)a strategy of imitating the strategic actions and approaches of the industry leader.

B)a "try harder" strategy, a stay-on-the-offensive strategy, a slow-exit strategy, and a retreat-to-a-vacant-niche strategy.

C)

a growth-via-acquisition strategy, a vacant niche strategy, a specialist strategy, a superior product strategy, a distinctive image strategy, or a content follower strategy.

D)a price war strategy, a "mover-and-shaker" offensive, a sell-out quickly strategy, an fast follower strategy, or a preemptive strike strategy.

E)

a "try harder" strategy, an international expansion strategy based on exporting, a muscle-flexing strategy, and a home-field advantage strategy.

16 INCORRECT An ambitious runner-up firm that aspires to join the ranks of industry front-

runners needs a strategy aimed at:

A)achieving strong product differentiation based on superior product performance and superior customer service.

B)hitting a home-run with a radically new product and thereby gaining a reputation as a true product innovator.

C)building a competitive advantage of its own and making some waves in the marketplace.

D)

attacking the leaders head-on with a series of guerilla initiatives in many different geographic regions, thereby throwing industry leaders off-balance and creating an opening for the challenger to launch a preemptive strike.

E)gaining buyer attention by significantly outspending rivals on advertising.

17 INCORRECT Potentially attractive turnaround strategy options for a struggling business

include:

A)a merger and acquisition strategy, a stay-on-the-offensive strategy, attacking rivals' profit sanctuaries, or a price war strategy.

B)

selling off assets to raise cash for saving the rest of the business, revising the existing strategy, launching efforts to boost revenues, and/or launching efforts to reduce costs.

C)a fortify-and-defend strategy, a product line expansion strategy, a retreat-to-a-vacant-niche strategy, and a price discounting strategy.

D)acquiring several smaller rivals so as to build a critical mass of customers and get in position to capture economies of scale.

E)a fast-follower strategy, a product line expansion strategy, a cost-reduction strategy, and a geographic concentration strategy.

18 INCORRECT The overriding objective of a harvesting strategy is to:

A)raise price to a level that will yield the highest possible profit margins.

B)cut the operating budget to the bone.

C)sell off pieces of the pieces and thereby raise sufficient cash to save the remaining part of the business.

D)maximize short-term cash flows from operations for as long as possible.

E)generate the highest possible revenues for the longest possible time.

19 INCORRECT In which of the following instances is a harvesting strategy not a reasonable

strategic option for a weak business?

A)

When a company is in a weak competitive position, its profit prospects are not good, and rejuvenating the business would be costly or at best marginally profitable

B)When a company is trapped in a fragmented industry and can readily outsource some key value chain activities to trusted strategic allies

C)

When reduced levels of competitive effort will not trigger an immediate or rapid decline in sales and the enterprise can re-deploy the freed resources to other higher-opportunity areas

D)When industry demand is stagnant or declining and there's little hope that either market conditions will improve

E)When trying to maintain or grow the company's present sales is becoming increasingly costly

20 INCORRECT Which of the following does not qualify as a "commandment" for crafting

successful business strategies?

A)Place top priority on crafting and executing strategic moves that will enhance a company's competitive position for the long-term.

B)

Avoid stuck-in-the-middle strategies that represent compromises between lower costs and greater differentiation and between broad and narrow market appeal.

C)Strive to open up very meaningful gaps in quality or service or performance features when pursuing a differentiation strategy.

D)Be judicious in cutting prices without an established cost advantage.

E)Sell or close a crisis-ridden business immediately—turnaround strategies are doomed to fail

CHAPTER 9The correct answer for each question is indicated by a .

1 CORRECT

Which one of the following is not one of the elements of crafting corporate strategy for a diversified company?

A)Picking the new industries to enter and deciding on the means of entry

B)Initiating actions to boost the combined performance of the businesses the firm has enteredStandardizing the resource fits across the group of businesses the

C) company has diversified into

D)Establishing investment priorities and steering corporate resources into the most attractive business units

E)Pursuing opportunities to leverage cross-business value chain relationships and strategic fits into competitive advantage

2 INCORRECT Important reasons for a company to consider diversification include:

A)a desire to avoid putting all of its "eggs" in one industry basket.

B)diminishing market opportunities and stagnating sales in its principal business.

C)

opportunities to leverage existing competencies and capabilities by expanding into businesses where these same resource strengths are key success factors and valuable competitive assets attractive.

D)

an opportunity to lower costs by entering closely-related businesses and/or opportunity to transfer a powerful and well-respected brand name to the products of other businesses and thereby increase the sales and profits of these newly-entered businesses.

E)All of these.

3 CORRECT

To judge whether a particular diversification move has good potential for building added shareholder value, the move should pass the following tests:

A)the attractiveness test, the barrier-to-entry test, and the growth test.

B)the strategic fit test, the resource fit test, and the profitability test.

C)the barrier-to-entry test, the growth test, and the shareholder value test.

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

E)the resource fit test, the strategic fit test, the profitability test, and the shareholder value test.

4 CORRECT

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

A)

evaluating whether the diversification move will produce a 1 + 1 = 3 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.

B)assessing whether the diversification move will make the company better off by increasing its resource strengths and competitive capabilities.

C)

evaluating whether the diversification move will make the company better off by making it less subject to the bargaining power of customers and/or suppliers.

D)assessing whether the diversification move will make the company better off by increasing its profit margins and returns on investment.

E)All of these.

5 CORRECT

Which of the following is not accurate as concerns entering a new business via acquisition, internal start-up, or a joint venture?

A)

The big dilemma of entering an industry via acquisition of an existing company is whether to pay a premium price for a successful company or to buy a struggling company at a bargain price.

B)

Acquisition is generally the most profitable way to enter a new industry, tends to be more suitable for an unrelated diversification strategy than a related diversification strategy, and usually requires less capital than entering an industry via internal start-up.

C)

Acquisition is the most popular means of diversifying into another industry, has the advantage of being quicker than trying to launch a brand-new operation, and offers an effective way to hurdle entry barriers.

D)

Joint ventures are an attractive way to enter new businesses when the opportunity is too complex, uneconomical, or risky for one company to pursue alone, when the opportunities in a new industry require a broader range of competencies and know-how than a company can marshal on its own, and/or when it aids entry into a foreign market.

E)

The big drawbacks to entering a new industry via internal start-up include the costs of overcoming entry barriers, building an organization from the ground up, and the extra time it takes to build a strong and profitable competitive position.

6 CORRECT

The defining characteristic of related diversification (as opposed to unrelated diversification) is:

A)that each business the company has diversified into are utilizing similar competitive strategies.

B)the presence of cross-business value chain relationships and strategic fits.

C)that each business the company has diversified into has very similar core competencies and competitive capabilities.

D)that the company has about the same number of cash cow businesses as it does cash hog businesses.

E)the existence of cross-industry resource fits and similar key success factors from industry to industry.

7 CORRECT

The strategic appeal of related diversification is that:

A)

it allows a firm to reap the competitive advantage benefits of skills transfer, lower costs (due to economies of scope), cross-business use of a powerful brand name, and/or cross-business collaboration in creating stronger competitive capabilities.

B)

it is less capital intensive than unrelated diversification because related diversification emphasizes getting into cash cow businesses (as opposed to cash hog businesses).

C)it involves diversifying into industries having the same kinds of key success factors.

D)it is less risky than unrelated diversification because it avoids the acquisition of cash hog businesses.

E)

it facilitates the achievement of greater economies of scale since the company only enters those businesses that serve the same types of buyer groups and/or buyer needs.

8 CORRECT

Which of the following is the best example of related diversification?

A)A manufacturer of golf shoes diversifying into the production of fishing rods and fishing lures

B)A homebuilder acquiring a building materials retailer

C)A steel producer acquiring a manufacturer of farm equipment

D)

A producer of snow skis and ski boots acquiring a maker of ski apparel and accessories (outerwear, goggles, gloves and mittens, helmets and toboggans)

E)A publisher of college textbooks acquiring a publisher of magazines

9 CORRECT

Economies of scope:

A)stem from the cost-saving efficiencies of scattering a company's manufacturing/assembly plants over a wider geographic area.

B)have to do with the cost-saving efficiencies of operating across a bigger portion of an industry's total value chain.

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

D)refer to the cost-savings that flow from being able to combine the value chains of different businesses into a single value chain.

E)are like economies of scale and arise from being able to lower costs via a larger volume operation.

10 CORRECT Cross-business strategic fits can exist:

A)in the R&D and technology portion of the value chains of related businesses.

B)in the supply-chain portion of the value chains of related businesses.

C)in the manufacturing or production portions of the value chains of related businesses.

D)in the sales and marketing portion of the value chains of related businesses.

E)All of the above—since cross-business strategic fits can exist anywhere along the values chains of related businesses.

11 CORRECT The defining characteristic of unrelated diversification (as opposed to related

diversification) is:

A)

the presence of cross-business resource fit (whereas the defining characteristic of related diversification is the presence of cross-business strategic fit).

B)

that the value chains of different businesses are so dissimilar that no competitively valuable cross-business relationships are present (in other words, the value chains of a company's businesses offer no opportunities to benefit from skills or technology transfer across businesses, economies of scope, cross-business use of a powerful brand name, and/or cross-business collaboration in creating stronger competitive capabilities).

C)

the presence of cross-business strategic fit (whereas the defining characteristic of related diversification is the presence of cross-business resource fit).

D)that the company's businesses are in different industries.

E)the presence of cross-business financial fit.

12 CORRECT Which one of the following is not part of the task of critiquing a diversified

company's strategy, assessing its business makeup, and deciding how to improve overall company performance?

A)

Checking whether each business a company has diversified into can pass the profitability test, the capital gains test, the growth rate test, and the resource strength test

B)Checking for strategic fits and resource fits

C)

Ranking the performance prospects of the businesses from best to worst and determining what the corporate parent's priority should be in allocating resources to its various businesses

D)Assessing the attractiveness of the industries the company has diversified into, both individually and as a group

E)

Assessing the competitive strength of the company's business units and determining how many are strong contenders in their respective industries

13 CORRECT Calculating quantitative attractiveness ratings for the industries a company

has diversified into involves:

A)

determining the strength of the five competitive forces in each industry, calculating the ability of the company to overcome or contend successfully with each force, and obtaining overall measures of the firm's ability to compete successfully in each of its industries.

B)

determining each industry's average profit margins, calculating how far the firm's profit margins are above/below the industry averages, and then using these values to draw conclusions about industry attractiveness.

C)

rating the attractiveness of each industry's strategic and resource fits, summing the attractiveness scores, and determining whether the overall scores for the industries as a group are appealing or not.

D)

selecting a set of industry attractiveness measures, weighting the importance of each measure (with the sum of the weights adding to 1.0), 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 evaluate the attractiveness of all the industries, both individually and as a group.

E)

identifying each industry's average price, rating the difficulty of charging an above-average price in each industry, and deciding whether the company's prospects for being able to charge above-average prices make the industry attractive or unattractive.

14 CORRECT The basic purpose of calculating competitive strength scores for each of a

diversified company's business units is to:

A)

determine which business unit has the greatest number of resource strengths, competencies, and competitive capabilities and which one has the least.

B)

assess how strongly positioned each business unit is in its industry and the extent to which it already is or can become a strong market contender.

C)rank the each business unit's strategic fits from highest to lowest.

D)rank the each business unit's resource fits from highest to lowest.

E)rank each business unit's strategy from best to worst.

15 CORRECT

The 9-cell industry attractiveness-competitive strength matrix:

A)is a valuable tool for ranking a company's different businesses from best to worst based on strategic fit.

B)shows which of a diversified company's businesses have good/poor resource fit.

C)indicates which businesses have the highest/lowest economies of scale and which have the highest/lowest economies of scope.

D)

uses quantitative measures of industry attractiveness and competitive strength to plot each business's location on the matrix—the thesis underlying the matrix is that there are good reasons to concentrate the company's resources on those businesses having relatively strong competitive positions in industries with relatively high attractiveness and to invest minimally or even divest those businesses with relatively weak competitive positions in industries with relatively low attractiveness.

E)pinpoints which of a diversified company's businesses are resource-rich cash cows and which are resource-poor cash hogs.

16 CORRECT Checking a diversified company's business line-up for the competitive

advantage potential of cross-business strategic fits involves searching for and evaluating how much benefit a diversified company can gain from value chain match-ups that present:

A)opportunities to combine the performance of certain activities,thereby reducing costs and capturing economies of scope.

B)opportunities to transfer skills, technology, or intellectual capital from one business to another, thereby leveraging use of existing resources.

C)opportunities to share use of a well-respected brand name.

D)

opportunities for sister businesses to collaborate in creating valuable new competitive capabilities (such as enhanced supply chain management capabilities, quicker first-to-market capabilities, or greater product innovation capabilities).

E)All of the above.

17 CORRECT Checking a diversified company's business lineup for resource fit does not

involve which one of the following "tests?"

A)

Determining whether a company has or can develop the specific resource strengths and competitive capabilities needed to be successful in each of its businesses.

B)

Determining whether recently acquired businesses are acting to strengthen the company's resource base and competitive capabilities or whether they are causing its competitive and managerial resources to be stretched too thinly.

C)Determining whether each business adequately contributes to achieving companywide performance targets.

D)Determining whether the company has enough cash hog businesses to supply capital to its cash cow businesses.

E)

Determining whether the company has adequate financial strength to fund the needs of its various businesses and maintain a healthy credit rating.

18 ANSWERED Ranking a diversified company's businesses in terms of priority for resource

allocation and new capital investment:

A)

should be done chiefly on the basis of appealing industry attractiveness and resource fit and secondarily on the basis of competitive strength and strategic fit with other businesses.

B)

entails arraying the various businesses from the biggest cash hog down to the biggest cash cow; big cash hogs get the highest priority for resource allocation and big cash cows get the lowest priority.

C)

should be done principally on the basis of which businesses offer the best prospects (given their industry attractiveness and competitive strength) and, also, have solid and appealing strategic fits and resource fits.

D)should be based chiefly on relative market share, recent profitability, and potential for achieving cash cow status.

E)

should be based primarily on cross-business resource fit considerations, each business unit's relative market share, and each business's projected ability to cover its debt payments and generate positive cash flows.

19 CORRECT Once a firm has diversified and established itself in several different

businesses, then its main strategic alternatives include all but which one of the following?

A)Broadening the firm's business scope by diversifying into additional businesses

B)Shifting from a multi-country to a global strategy

C)Restructuring the company's business lineup and putting a whole new face on the company's business makeup

D)Pursuing multinational diversification and striving to globalize the operations of several of the company's business units

E)Retrenching to a narrower base of business operations by divesting some of its present businesses

20 CORRECT A multinational diversification strategy can be particularly attractive to a

diversified company because it allows the company to pursue maximum competitive advantage potential via actions to:

A)fully capture economies of scale and cross-business economy of scope opportunities.

B)capitalize on opportunities for both cross-business and cross-country collaboration and coordination.

C)leverage use of a well-known and competitively powerful brand name.

D)transfer competitively valuable resources both from one business to another and from one country to another.

E)All of these.