Strategies Exam 2 Questions

a) strategic intent

By examining the activity map of Southwest Airlines, one can identify the areas of ______ around which it has developed its business strategy. These themes include limited passenger service, high aircraft utilization, and highly productive ground and gate crews

a) strategic intent

b) core competency

c) differentiation

d) data analytics

b) a competitor may be able to better use flexible manufacturing systems to make shoes with an individualized fit

New Balance Athletic Shoes target Baby Boomers' needs for well-fitting shoes. The company is unique in that it offers a very broad range of shoe widths. A realistic potential risk New Balance runs in this focused differentiation strategy includes the possibility that:

a) baby boomers may find that they do not need well-fitting shoes, because they will become increasingly sedentary as they age

b) a competitor may be able to better use flexible manufacturing systems to make shoes with an individualized fit

c) athletic shoes may go out of style

d) New Balance shoes may being to appeal to a wider market, thus losing New Balance’s focus advantage

b) a competitor may focus on a more narrowly defined segment and thereby “out-focus” the focuser

Suppose another firm found a way to offer IKEA's customers (young buyers interested in stylish furniture at low cost) additional sources of differentiation while charging the same price or to provide the same service with the same sources of differentiation at a lower price. What category of competitive risk to a focus strategy would this be?

a) An industry-wide competitor decides that the market segment served by IKEA is worth entering

b) a competitor may focus on a more narrowly defined segment and thereby “out-focus” the focuser

c) the needs of the customers is this narrow segment have become more similar to those of industry-wide competitors

d) Experience can narrow customers’ perceptions of the value of the firm’s differentiated features

c) integrated cost leadership/differentiation

Zara has pioneered "cheap chic" in clothing apparel. Zara offers current and desirable fashion goods at relatively low prices. To implement the strategy, Zara uses sophisticated designers and effective means of managing costs. These are all characteristics of which business level strategy?

a) cost leadership

b) differentiation

c) integrated cost leadership/differentiation

d) stuck in the middle 

Recently, the only type of car available for Anthony to rent on a business trip was a compact, fuel-efficient Japanese import. Anthony was surprised at the comfort and performance of the car. He is in the market for a new car and had previously considered only buying another luxury SUV. Now, he is thinking about the significant cost savings he would have if he bought the compact vehicle rather than a new SUV. This is an example of the competitive risk that:

a) a competitor’s products can convey a product’s differentiated features to a customer at a significantly reduced price

b) a product imitation can cause customers to perceive that competitors offer essentially the same goods

c) experience can narrow a customer’s perceptions of the value of a product’s differentiated features

d) brand loyalty insulates a company from rivalry with competitors

d) Cost less will go out of business, and durable will gain higher power over its customers

Durable Ceramics, Inc., provides inexpensive ceramic tile to builders of institutional buildings such as schools, prisons, and public administration buildings. It has always competed on a cost leadership basis. Most of its products are purchased by a few commercial construction firms, so it is fairly dependent on these construction firms for selling its product. Durable Ceramic's next most- efficient competitor, Cost-Less Ceramics, Inc., earns average returns, whereas Durable earns above-average returns. The commercial construction firms are putting pressure on Durable to reduce its prices. If Durable reduces its prices below those of Cost-Less's prices, it is likely that:

a) both Durable and Cost-Less will devise additional ways to become more efficient in their production processes

b) Durable will be unable to absorb the lower cost and will go out of business

c) both Cost-less and Durable will go out of business, leaving the customers with fewer alternative sources of low-cost tile

d) Cost less will go out of business, and durable will gain higher power over its customers

d) counterfeiting

A manufacturer of jewelry imitates the style of a popular and expensive brand using manufactured stones rather than real gemstones and lesser grade metals rather than silver and gold. The manufacturer packages the jewelry in boxes of the same color imprinted with an almost identical logo. About 85 percent of the company's sales are through Internet sales. This example illustrates the competitive risk of ____ that threatens companies that use the differentiation strategy.

a) customer sensitivity to price differentials

b) threat by the cost leader

c) customer experience

d) counterfeiting

a) multipoint competition

Both Coca-Cola and P&G engage in multimarket competition by competing across different product categories and geographic markets, aiming to capture market share and maintain a competitive edge in each market they operate in. Which term describes the phenomenon where firms compete against each other in multiple product or geographic markets?

a) multipoint competition

b) cooperative competition

c) monopolistic competition

d) oligopolistic competition

a) strategic action

Tesla recognized the potential of electric vehicle technology early on and made a move to focus on EVs, aiming to disrupt the automotive industry and lead the transition towards sustainable transportation. Which type of action was this that involved a significant commitment of organizational resources and is difficult to implement and reverse?

a) strategic action

b) tactical action

c) competitive action

d) strategic response

a) awareness

Coca-Cola recognizes that its actions and initiatives have a direct impact on its competitors and vice versa. For example, when Coca-Cola introduces a new product or launches a marketing campaign, it is aware that PepsiCo and other competitors will likely respond with their own product innovations or promotional activities. Which driver of competitive behavior refers to the extent to which competitors recognize the degree of their mutual interdependence?

a) awareness

b) motivation

c) ability

d) market commonality

An example of two firms that face each other in multiple markets is Apple and Samsung. Both compete in various industries and markets, including smartphones, tablets, smartwatches, and other consumer electronics. Both companies are major players in the global smartphone market and are known for their flagship devices, such as the iPhone from Apple and the Galaxy series from Samsung. Compared with firms that compete in only one market, among firms that face one another in multiple markets in this way, there is

a) similar competitive rivalry

b) less competitive rivalry

c) more competitive rivalry

d) no competitive rivalry

b) can launch competitive actions more quickly

There are many large financial institutions, like Charles Schwab or Fidelity, that offer the advantage of easy- to- use websites and applications to manage a client's assets. Though, not all competitive advantages accrue to large-sized firms. A major advantage of smaller firms is that they

a) are more likely to have organizational slack

b) can launch competitive actions more quickly

c) have more loyal and diverse workforces

d) can wait for larger firms to make mistakes in introducing innovative products

b) lack credibility among customers

Apply makes very high-end cell phones, tablets, wearables, and has built a brand through their record in computing. Without quality, the firm's products would

a) compete effectively on the basis of low price

b) lack credibility among customers

c) be exported to developing countries because they are not competitive in the United States or developed countries

d) be associated with predatory competition

b) standard cycle market

Because Coca-Cola, Nestlé, and PepsiCo all sell a product (bottled water) that is essentially the same and all three giant companies are engaged in battles for market share using incremental changes in their products and seeking loyalty to brand names, it is MOST likely that the bottled water market is a(n)

a) slow cycle market

b) standard cycle market

c) fast cycle market

d) intermediate cycle market

b) strategic action

Procter & Gamble (P&G) is a multinational consumer goods company that competes in various product categories such as household cleaning, personal care, and beauty products. They are constantly adapting their competitive advantages in the industries they operate in. Which term describes a strategic or tactical action that a firm takes to build or defend its competitive advantages or improve its market position?

a) competitive response

b) strategic action

c) tactical response

d) strategic response

b) motivation

Apple recognized the potential of the mobile phone market and responded with the launch of the iPhone in 2007. This move disrupted the industry, challenging established players like Nokia and BlackBerry. Apple's innovative approach and focus on user experience resonated with consumers, leading to the iPhone's immense success and market dominance. What term describes their incentive to take action or respond to competitors based on perceived gains and losses?

a) awareness

b) motivation

c) ability

d) market commonality

c. believes that he has placed his firm in a slow-cycle industry where concerns about protecting unique competencies dominate concerns about market share

The CEO of the Wholesome Food retail grocery chain, which specializes in organic and natural produce and meat, has stated, "The key to success is to find your niche and focus on it, regardless of what anyone else does." The CEO

a) realizes that he must understand competitors in order to predict their competitive actions and responses

b) understands that he is the market leader in his niche and, thus, has a sustainable competitive advantage

c) believes that he has placed his firm in a slow-cycle industry where concerns about protecting unique competencies dominate concerns about market share

d) realizes that his firm has such lower resources than other competitors that his chain is competitively invisible to them

c) Ahrens will respond aggressively because of the high multipoint contact between Hilliard and Ahrens

Hilliard Pharmaceuticals and Ahrens Vitamins, Inc., have high market commonality, both geographically and in the market segments in which they compete. Hilliard, the number two firm in the industry, has undertaken a major strategic attack upon Ahrens, the market leader. Which of the following statements is MOST likely to be true?

a) Ahrens will not respond aggressively since this is a strategic move and not a tactical action

b) as the market leader, Ahrens has little to fear from an attack by Hilliard and will not expend organizational slack on a major response

c) Ahrens will respond aggressively because of the high multipoint contact between Hilliard and Ahrens

d) Ahrens will respond after a long delay as the nutrition supplement industry is a slow-cycle industry

c) Bubble-Up’s smaller size may make it more flexible in introducing innovations than Mega-Toy

Bubble-Up, Inc., is a small manufacturer of educational toys for children under age 10. It has co-existed with three other competitors in the educational toy industry for over 20 years, each of them maintaining a stable market share. There is a widespread rumor that Mega-Toy, Inc., the market leader in the broad children's toy market, has decided to target educational toys. Which of the following statements is MOST likely true?

a) The owners of Bubble-UP are unconcerned about Mega-Toy’s entry to the market because of the resource dissimilarity between the firms

b) Bubble-up’s greater organizational slack will allow it to aggressively attack Mega-Toy

c) Bubble-Up’s smaller size may make it more flexible in introducing innovations than Mega-Toy

d) competitive rivalry will not increase for Bubble-Up because Mega-Toy is not dependent on the educational toy market

Lobelia's Nursery and Garden Resource Center has long provided high-quality, typical types of seasonal bedding plants to customers in the Mobile, Alabama, metropolitan area. It has traditionally competed with the other plant nurseries within a 50-mile radius of Mobile. Recently, Lobelia has opened a branch in Fairfax, Virginia. Lobelia's research shows that most Fairfax nurseries have only one location. Lobelia can expect the local Fairfax nurseries to:
be unmotivated to respond because their market position is not threatened by a new competitor from out of town.
respond with fierce attacks because of resource dissimilarity.
respond aggressively because of high market dependence.
take no competitive response because of the lack of mutual interdependence among the nurseries

a) be unmotivated to respond because their market position is not threatened by a new competitor from out of town

b) respond with fierce attacks because of resource dissimilarity

c) respond aggressively because of high market dependence

d) take no competitive response because of the lack of mutual interdependence among the nurseries

Rapid-Built Homes specializes in low-cost prefabricated, modular homes that can be erected in a matter of days anywhere in the country. Rapid-Built focuses on entire subdivisions of homes developed by real estate speculators. ModernModular Homes (ModMod) specializes in modular homes designed by architects, which can be built anywhere in the country. The buyers usually build the home themselves from kits on their own lots. ModMod sells fewer than 100 house kits per year. ModMod is run by two professors of architecture as a sideline business. According to the framework of competitive analysis, Rapid-Built and ModMod:

a) are direct mutually acknowledged competitors

b) have high resource similarity

c) have high market commonality

d) are probably not engaged in intense competitive rivalry

d) lower its prices

Akamai Technologies is a dominant player in the content delivery network (CDN) market. Akamai is not very diversified (i.e., is dependent on the CDN market). If rival CDN providers such as Limelight Networks and Level 3 Communications lower their basic CDN service prices, which of the following would Akamai likely do?

a) raise its prices

b) do nothing since it is the market leader

c) exit the industry

d) lower its prices

a) sharing resources among businesses with a common feature

GE operates in various industries such as aviation, healthcare, power, renewable energy, and more. While these industries may seem unrelated at first glance, they are interconnected through GE's core competencies in areas such as technology, engineering, and innovation. They use related constrained diversification. What is the primary purpose of related constrained diversification?

a) sharing resources among businesses with a common feature

b) transferring core competencies across different businesses

c) expanding into unrelated industries

d) reducing costs and increasing efficiency

a) this is a horizontal acquisition

Dragonfly Publishers of children's books has purchased White Rabbit, another publisher of children's books. Both companies' books are sold to the same retail stores and schools. Their content is different, since Dragonfly produces children's literature, whereas White Rabbit focuses on child-level scientific and nature topics. Which of the following statements is probably TRUE about this acquisition?

a) this is a horizontal acquisition

b) this is an example of virtual integration

c) dragonfly is beginning to build a conglomerate

d) economies of scope are unlikely to result from this acquisition

Advanced Steel Inc. needs a particular type of brick to line its kilns in order to safely achieve the high temperatures needed for the unusually strong steel it produces. The clay to make this brick is very rare, and only two brick plants in the US make this type of brick. Advanced Steel has decided to buy one of these brick plants. This is an example of

a) backward integration

b) forward integration

c) horizontal integration

d) virtual integration

Progressive Steel, Inc., needs a particular type of brick to line its kilns in order to safely achieve the high temperatures needed for the unusually strong steel it produces. The clay to make this brick is very rare, and only two brick plants in the United States make this type of brick. Progressive Steel owns one of these brick plants and buys all of its production. The other brick manufacturer has recently developed an inexpensive new technology whereby ordinary clay can be used to make this fire brick. This significantly reduces the production cost of this type of brick. Which of the following statements is true?

a) Progressive steel has less flexibility now than if it were not vertically integrated

b) this is an example of a capacity balance problem

c) this is a result of conflicts of interest between the managers of the brick plant and the executives of Progressive Steel

d) the market power for Progressive Steel has been reducing vertical integration

a) through reduced disclosure to outside parties

VirtuTech Solutions, A technology start-up wants to build out a new portion of their business. They choose to fund the business in a combination of retained earnings and privately reaching out to contacts to acquire capital. An ability to efficiently allocate capital through an internal market may help the firm protect the competitive advantages it develop

a) through reduced disclosure to outside parties

b) by the ability to not report losses to investors

c) by the ability to increase pay to managers without shareholders being aware

d) through the ability to reinvest cash in dividends to shareholders

B) related constrained

Golden Grains Artisan Bakery is a family-owned business that specializes in a single product line of artisanal bread and makes several other baked goods. It is a business that earns less than 70 percent of revenue from its dominant business and has direct connections between its businesses. Golden Grains is engaging in which type of diversification?

a) unrelated

b) related constrained

c) related linked

d) dominant business

b) dominant business

Revenues for United Parcel Service (UPS) come from the following business segments: 60 percent from U.S. package delivery operations, 22 percent from international package delivery, and 18 percent from non-packaging operations. Which of the following best describes the corporate-level strategy of UPS?

a) single business

b) dominant business

c) related constrained

d) related linked

b) have golden parachutes

During the 1990s top executives of Titanic, Inc., followed a pattern of aggressive acquisitions and diversification. Now, Titanic is performing poorly and earning below average returns. Lusitania, a large conglomerate firm, is in the final stages of purchasing Titanic. Lusitania has announced that it will fire Titanic's current top executives. The Titanic executives may not be worried about their impending job loss if they:

a) plan to take poison pills

b) have golden parachutes

c) have silver handcuffs

d) have ironclad contracts

A firm practicing unrelated diversification can make better capital allocations to its subsidiary businesses than the external capital market can for all the following reasons EXCEPT:

a. corporate headquarters can allocate capital according to more specific criteria than is possible with external market allocations.

b. corporate headquarters has more complete information about the subsidiary businesses than the external capital market.

c. corporate headquarters can more effectively discipline underperforming management teams through resource allocation than can the external market.

d. corporate headquarters can direct the acquisition of other firms with innovative products instead of allocating capital to research and development. As the number of links among businesses increase, the level of diversification becomes more

Apple is the largest manufacturer of cell phones and tablets in the United States. They spend many of their resources on R&D and making decisions about diversification. Among the value-neutral incentives to diversify, some of the incentives come from the firm's external environment while others are internal to the firm. External incentives to diversify include

a) uncertain future cash flows

b) pressure from stockholders who are demanding that the firm diversify

c) changes in antitrust regulations and tax laws

d) a firm’s low performance