Capstone Chapter 6

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

focusing relentlessly on building a competitive advantage.

Once a company has decided to employ a particular generic competitive strategy, then it must make such additional strategic choices, such as:

All of these.

Which 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?

Whether to employ a market share leadership strategy.

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

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

The principal offensive strategy options include all of the following EXCEPT:

initiating a market threat and counterattack simultaneously to effect a distraction.

Which of the following is NOT a principal offensive strategy option?

Being the final competitor to market a next-generation product so as to guarantee the product is operationally sound.

An offensive to yield good results can be short if:

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

Which of the following rivals make the best targets for an offensive attack?

Firms with weaknesses in areas where the challenger is strong.

When challenging a struggling rival, it can:

All of these.

A blue-ocean strategy:

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

Which of the following is NOT a prime example of a blue-ocean market strategy?

Walmart’s logistics and distribution.

All firms are subject to offensive challenges from rivals. The intent of the best defensive move is to:

All of these.

Which of the following is NOT a purpose of a defensive strategy?

To increase the risk of having to defend an attack.

Which of the following ways are employed by defending companies to fend off a competitive attack?

Gain product line exclusivity to force competitors to use other distributors.

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

To dissuade challengers from attacking or diverting them into using less threatening options.

Which of the following signals would NOT warn challengers that strong retaliation is likely?

Announcing strong quarterly earnings potential to financial analysts.

Being first to initiate a particular strategic move can have a high payoff in all of the following EXCEPT when:

market uncertainties make it difficult to ascertain what will eventually succeed.

In which of the following instances is being a first-mover NOT particularly advantageous?

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

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

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

In which of the following cases are late-mover advantages (or first-mover disadvantages) NOT likely to arise?

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

Because when to make a strategic move can be just as important as what move to make, a company’s best option with respect to timing is:

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

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

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

For every emerging opportunity there exists:

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

Any company that seeks competitive advantage by being a first-mover must ask several hard questions prior to executing its strategy. Which question would it NOT ask?

Did the company pour too many resources into getting ahead of the market opportunity?

What does the scope of the firm refer to?

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

The range of product and service segments that the firm serves within its market is known as the firm’s:

horizontal scope.

The extent to which a firm’s internal activities encompass one, some, many, or all of the activities that make up an industry’s entire value chain system is known as:

vertical scope.

The difference between a merger and an acquisition is that:

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

The difference between a merger and an acquisition relates to:

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

Which of the following is NOT a typical strategic objective or benefit that drives mergers and acquisitions?

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

Mergers and acquisitions are often driven by such strategic objectives as:

expanding a company’s geographic coverage or extending its business into new product categories.

Merger and acquisition strategies:

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

What outcomes do horizontal merger and acquisition strategies intend?

All of these.

Mergers and acquisitions:

frequently do not produce the hoped-for outcomes.

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

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

Vertical integration strategies:

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

The two best reasons for investing company resources in vertical integration (either forward or backward) are to:

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

A good example of vertical integration is:

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

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

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

When firms are involved in a mix of in-house and outsourced activity in any given stage of the vertical chain, it is called:

tapered integration.

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

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

Vertical integration can lower costs by:

facilitating the coordination of production flows and avoiding bottlenecks.

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

Reduced business risk because of controlling a bigger portion of the overall industry value chain.

Backward vertical integration can produce:

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

The strategic impetus for forward vertical integration is to:

gain better access to end users and better market visibility.

Which of the following is typically the strategic impetus for forward vertical integration?

Gaining better access to end users and better market visibility.

Which of the following is NOT a strategic disadvantage of vertical integration?

Vertical integration reduces the opportunity for achieving greater product differentiation.

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

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

A strategy of vertical integration can have substantial drawbacks, including:

the environmental costs of coordinating operations across vertical chain activities.

A strategy of vertical integration can have both important strengths and weaknesses and depends on:

All of these.

An outsourcing strategy:

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

The two big drivers of outsourcing are:

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

Outsourcing the performance of value chain activities presently performed in-house to outside vendors and suppliers makes strategic sense EXCEPT when:

it restricts a company’s ability to assemble diverse kinds of expertise speedily and efficiently.

Which of the following is NOT one of the benefits of outsourcing value chain activities presently performed in-house?

Enables a company to gain better access to end users and better market visibility.

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

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

Outsourcing strategies can offer such advantages as:

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

The big risk of employing an outsourcing strategy is:

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

Strategic alliances:

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

A strategic alliance:

is a formal agreement between two or more companies in which there is strategically relevant collaboration of some sort, the joint contribution of resources, shared risk, shared control, and mutual dependence.

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

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

The formation of a new corporation, jointly owned by two or more companies agreeing to share in the revenues, expenses, and control, is known as:

a joint venture.

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

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

An alliance becomes "strategic" as opposed to just a convenient business arrangement when it serves strategic purposes such as when designed to help:

All of these.

The best strategic alliances:

are highly selective, focusing on particular value chain activities and on obtaining a particular competitive benefit, thereby enabling the firm to build on its strengths and to learn.

Which one of the following is NOT a strategically beneficial reason why a company may enter into strategic partnerships or cooperative arrangements with key suppliers, distributors, or makers of complementary products?

To enable greater opportunities for employee advancement.

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

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

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

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

Which of the following is NOT one of the factors that affects whether a strategic alliance will be successful and realize its intended benefits?

Minimizing the amount of resources that the partners commit to the alliance.

Capturing the benefits of strategic alliances is not easy, but success generally is a function of six factors, except when:

ensuring the division of work is directly apportioned to appropriate skill sets.

Which of the following is NOT a typical reason that many alliances prove unstable or break apart?

Disagreement over how to divide the profits gained from joint collaboration.

Experience indicates that strategic alliances:

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

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

becoming dependent on other companies for essential expertise and capabilities.

The principal advantages of strategic alliances over vertical integration or horizontal mergers/acquisitions is defined best by:

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

A company that has greater success in managing their strategic alliance can credit all of the following, EXCEPT:

creating organizational learning barriers across boundaries.

A company that fails in managing their strategic alliance probably has not:

All of these.

Alliance management is considered an organizational capability and:

develops over time, out of effort and learning.

The range of product and service segments that the firm serves within its market is known as the firm’s:

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