Foundations of Strategy By Robert M.Grant Test Bank

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Foundations of Strategy By Robert M.Grant Test Bank

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WITH ANSWERS

Foundations of Strategy By Robert M.Grant Test Bank

Chapter 2

Industry Analysis

 

  1. Formally scanning and analysing the external environment continuously is the best approach.

@Pages and References: Pages 53-56

  1. T

*b. F

 

  1. To understand the effect of the external environment, one must be able to rank the factors in order of importance.

@Pages and References: Pages 53-56

*a. T

  1. F

 

  1. Consumer surplus is the extra product consumers get through special offers and bulk discounts, when suppliers make surplus product to generate extra sales.

@Pages and References: Pages 56-57

  1. T

*b. F

 

  1. Value is defined as the difference between the cost of supplying a product or service and the actual price paid by the customer for it, although not all value translates into profit.

@Pages and References: Pages 56-57

*a. T

  1. F

 

  1. The level of profit in an industry is determined by three factors: the value of products to customers, the intensity of competition, and the relative bargaining power of producers and suppliers.

@Pages and References: Pages 56-57

*a. T

  1. F

 

  1. When a firm dominates a specific segment in an industry, it is well-placed to earn a higher level of profit than the average.

@Pages and References: Pages 57-61

*a. T

  1. F

 

  1. We analyse industry structure because this is the primary factor in determining profitability.

@Pages and References: Pages 57-61

  1. T

*b. F

 

  1. Even pure monopolies have substitutes.

@Pages and References: Pages 57-61

*a. T

  1. F

 

  1. Michael Porters five sources model helps you identify and understand industry structure.

@Pages and References: Page 61

*a. T

  1. F

 

  1. For a specific product or service, the existence of close substitutes means that customers could switch to these substitutes if prices, service levels or other factors make it in their interests to do so.

@Pages and References: Pages 61-63

*a. T

  1. F

 

  1. In a contestable market there does not always need to be actual competition to keep prices relatively low just the threat of competitors entering the market.

@Pages and References: Pages 63-66

*a. T

  1. F

 

  1. Economies of scale, absolute cost advantages, high capital start-up costs, and access to channels of distribution are all examples of barriers to entry.

@Pages and References: Pages 63-66

*a. T

  1. F

 

  1. Retaliation against a new entrant may take the form of aggressive price-cutting, increased advertising, sales promotion, or vexatious litigation.

@Pages and References: Pages 63-66

*a. T

  1. F

 

  1. A high Concentration Ratio is typical of Oligopolistic industries, dominated by a few large players.

@Pages and References: Pages 66-68

*a. T

  1. F

 

  1. Excess capacity often leads firms to cut prices to hold on to existing business for fear that competitors will do the same first, leaving them with a lower market share, and adverse average costs.

@Pages and References: Pages 66-68

*a. T

  1. F

 

  1. Having high fixed costs makes it hard to make a profit in a recession, so is indicative of poor cost-control.

@Pages and References: Pages 66-68

  1. T

*b. F

 

  1. The bargaining power of one player in the industry relative to another player rests, ultimately, on a credible threat to refuse to deal with the other player.

@Pages and References: Pages 68-70

  1. T

*b. F

 

  1. There is no single absolute definition of what an Industry is.

@Pages and References: Pages 73-78

*a. T

  1. F

 

  1. Understanding the structure of the industry helps managers to work out how to make a profit in future and to possibly identify ways to change the industry structure to their advantage.

@Pages and References: Pages 73-78

*a. T

  1. F

 

  1. Porters 5 Forces model arguably has some deficiencies and does not answer all possible questions. But this is true of all models.

@Pages and References: Page 78

*a. T

  1. F

 

  1. Understanding the external environment of a firm requires one ultimately to identify:

@Pages and References: Page 50

*a. The opportunities to make profit in the industry

  1. The five forces identified by Porters model
  2. The barriers to entry and to exit in that industry
  3. The expected level of profit in the mid-term for that industry

 

  1. Given the plethora of external influences, understanding the external environment requires managers to:

@Pages and References: Pages 53-56

*a. Use a framework or a system that allows them to organize information and rank factors

  1. Monitor their rivals closely to detect signals of change in their strategies
  2. Use all existing techniques to gather and analyze information
  3. Work on the matter full-time

 

  1. To understand the environment, the starting point of the analysis is:

@Pages and References: Pages 53-56

  1. Classifying the environmental influences by source
  2. Classifying the environmental influences by proximity
  3. Both a and b

*d. To identify the industry you are in; your customers, suppliers and competitors

 

  1. One can view the connection between the general environment and the industry environment as:

@Pages and References: Pages 53-56

  1. The general environment is diffuse, whereas the industry environment consists of a small number of close competitors
  2. The industry environment consists of customers, suppliers, rivals, and new entrants, whereas the general environment comprises everything else

*c. The industry environment includes customers, competitors and suppliers, whereas the general environment matters to the extent that it affects the industry environment

  1. The critical influence of the industry environment on the wider social environment

 

  1. The core of a firms business environment is determined by:

@Pages and References: Pages 53-56

*a. Its relationships with customers, competitors, and suppliers

  1. Its relationships with customers, rivals, government, and suppliers
  2. Its relationships with its major stakeholders
  3. Its vision and mission

 

  1. If top management understands the customers, suppliers, competitors and the general environment then:

@Pages and References: Pages 53-56

  1. It will be a successful company
  2. A successful strategy will emerge from these factors

*c. This is a good basis for assessing the industry, but has little bearing on predicting the success of an individual company

  1. They can save money by not employing management consultants

 

  1. Value is created when:

@Pages and References: Pages 56-57

  1. The price that the customer is willing to pay for a product exceeds the firms direct cost of production
  2. The surplus of value is distributed between customers and producers in the industry by the forces of competition
  3. The value of a product to consumers is more than they paid for it

*d. The price that the customer is willing to pay for a product exceeds the firms cost

 

  1. Once value is created, it is, in general:

@Pages and References: Pages 56-57

  1. Equally shared between customers and producers

*b. Not equally shared between customers and producers

  1. Distributed to the firms shareholders
  2. Reinvested into the firm or put aside as a reserve

 

  1. Consumer surplus is:

@Pages and References: Pages 56-57

  1. The difference between the price customers expect to pay, and the price they would have been willing to pay

*b. The total of all the differences between the price each customer actually pays and the maximum price they would have been willing to pay, all other things being equal

  1. The difference between the costs incurred in serving customers, and the revenue that they generate
  2. The amount of extra product consumers buy because of the difference between the normal price and a special offer price

 

  1. In an industry, the profits earned by firms are determined by:

@Pages and References: Pages 56-57

  1. The overall economic situation, and Porters five forces of competition
  2. The degree of concentration of the industry
  3. The existence of barriers to entry in the industry

*d. The value of the product for customers, the intensity of competition, and the relative bargaining powers of producers, their suppliers and their buyers

 

  1. The basic premise of industry analysis is that:

@Pages and References: Pages 57-61

  1. Competition can be assessed between monopoly and perfect competition within the spectrum of industry structures

*b. The level of profitability within an industry is largely determined by the industry structure

  1. The internal variables of the firm determine a firms performance within the industry
  2. Profits are squeezed by powerful suppliers

 

  1. Porters 5 Forces model is intended to be:

@Pages and References: Pages 57-61

  1. Used as an alternative to the earlier PEST model
  2. Used primarily as an academic tool

*c. Used in conjunction with PEST and other models

  1. Used to analyse industries in the 1980s and 1990s

 

  1. The idea with Porters 5 Forces is to:

@Pages and References: Pages 57-61

  1. Quantify the 5 forces, to ideally produce a mathematical model of the industry

*b. Identify which forces are relatively more powerful, and to assess their impact on competition and industry profitability

  1. Work out how management can eliminate these forces
  2. Use it to construct a plan to achieve monopoly power

 

  1. A barrier to entry is:

@Pages and References: Pages 63-66

  1. Anything that facilitates the entry of would-be new entrants in a specific industry
  2. Capital requirements, cost advantages, and product differentiation
  3. A law restricting trade

*d. Anything that makes entry into an industry as a new competitor more difficult, more costly, slower or even impossible

 

  1. If an industry earns a return on capital in excess of its cost of capital:

@Pages and References: Pages 63-66

  1. Incumbents will earn abnormal profit, and build entry barriers
  2. The government needs to make sure that competition will increase

*c. It is likely to attract the attention of firms looking to enter the industry, which may eventually lead to the return on capital falling

  1. It will attract firms outside the industry, but the incumbents will have erected entry barriers

 

  1. Industries such as pharmaceuticals earn very high returns on investment. Such industries:

@Pages and References: Pages 63-66

  1. Tend to be protected from competition by legal restrictions
  2. Can only maintain such high returns for short periods
  3. Always exist when intangible products are traded

*d. Tend to have high entry barriers and differentiated products

 

  1. Economies of scale are a barrier to entry because:

@Pages and References: Pages 63-66

  1. New entrants do not know where they are positioned on their learning curve
  2. New entrants do not yet understand the scale economies so they cannot precisely determine their selling price
  3. New entrants face a risk of price retaliation from the incumbents which could occur immediately on a large scale

*d. New entrants face the cost and risk of creating large scale capacity to start with or a severe cost disadvantage if they enter on a smaller scale

 

  1. For a manufacturer access to distribution is a barrier to entry because:

@Pages and References: Pages 63-66

*a. New entrants face a disadvantage from retailers who are reluctant to carry their new products

  1. Retailers have limited capacity of distribution to offer to new entrants
  2. Retailers are risk-averse
  3. Carrying new products induces fixed costs

 

  1. Barriers to entry are effective:

@Pages and References: Pages 63-66

*a. Yes, because long-term empirical evidence shows that industries with high barriers to entry exhibit higher returns on investment on average

  1. Yes, because once established they are irreversible
  2. No, because firms can overcome these barriers by modifying their strategies
  3. No, because higher returns attract more new entrants who want to benefit from higher returns than in non-protected industries

 

  1. Barriers to exit are:

@Pages and References: Pages 73-78

*a. The non-recoverable costs of quitting or scaling down capacity in an industry

  1. Legal restrictions which prevent a firm from leaving an industry
  2. The opposite of barriers to entry
  3. Of no consequence if you dont plan to leave the industry

 

  1. Firms in any industry can be said to operate in two major markets:

@Pages and References: Pages 68-70

  1. The labour market and the output market

*b. As a buyer in the supplier market, and as a seller in the customer market

  1. The labor market and the input markets
  2. The product market divided at least in two segments (such as mid-size car and SUV market segments)

 

  1. The overall bargaining power of buyers depends on:

@Pages and References: Pages 68-70

  1. The buyers price sensitivity
  2. The intensity of rivalry among sellers and the willingness of the buyer to exploit this

*c. The buyers price sensitivity and the relative bargaining power between the seller and the buyer

  1. The intensity of rivalry among buyers and the ability to vertically integrate

 

  1. Bargaining power rests, ultimately, on:

@Pages and References: Pages 68-70

  1. The negotiating skills of the buyer versus the seller
  2. Historic and accidental events
  3. The respective effectiveness and cohesion of top management teams

*d. The perceived or real threat for one party to refuse to deal with the other party

 

  1. The relative bargaining power of buyers depends on:

@Pages and References: Pages 68-70

  1. The size and concentration of buyers relative to suppliers
  2. A buyers access to information about products and costs
  3. The ability or threat to integrate vertically

*d. All of the above

 

  1. The bargaining power of suppliers is likely to be high:

@Pages and References: Pages 70-73

  1. When the suppliers industry is concentrated
  2. When suppliers are supplying differentiated products
  3. When our (the customers) industry is relatively fragmented

*d. All of the above

 

  1. The analytical tools described in the text:

@Pages and References: Pages 73-78

  1. Must be used if one is to understand the industry structure

*b. Are simply that; just tools. Their value depends on the skill with which they are deployed

  1. Should really only be used by academics
  2. Both a and c

 

  1. To forecast industry profitability consistently accurately, professional analysts have to:

@Pages and References: Pages 73-75

  1. Look at the link between performance and industry structure, then to identify major trends and to examine the link between these trends and the forces of competition
  2. Look at the probability of new entries in the industry, to determine the major trends, and to forecast the probable overall industry profit
  3. Determine the five largest players in the industry and their relative bargaining power in regards to their buyers and customers, and to identify their strengths and weaknesses

*d. Develop a deep understanding of how the industry creates value now and in the future, whether they use the tools described in the chapter or not

 

  1. An industrys current profitability:

@Pages and References: Pages 73-75

*a. On its own tends to be a poor predictor of future profitability

  1. Is an excellent predictor of its future profitability
  2. Explains the past in that industry
  3. Is determined by the forces of competition and so many other factors that gaining insights into its causes is almost impossible

 

  1. Suppose that an industrys profitability is zero or negative overall:

@Pages and References: Pages 73-75

  1. Then all firms in the industry are performing badly
  2. Then no firm in the industry can be performing well
  3. Then the biggest firm in the industry is performing badly

*d. Then even so its entirely possible that some firms are making very good profits

 

  1. Understanding the competitive forces in an industry is:

@Pages and References: Pages 73-75

  1. A largely futile exercise for managers
  2. Is of academic interest, but does not bring any value for strategic management
  3. A way to enable managers to allocate their resources where competition is the strongest

*d. A way to enable managers to position the firm where its particular capabilities can be deployed to best advantage

 

  1. Changing the industry structure is:

@Pages and References: Pages 73-75

  1. Not really within the power of a single firm
  2. An endeavour that firms are undertaking on a permanent basis with great success
  3. A risky strategic move that may backfire, because of retaliation from the industrys incumbents

*d. Sometimes possible even by small firms, if the mix of drivers for change and existing structure make it susceptible to change

 

  1. The market and the industry are:

@Pages and References: Pages 78-81

*a. Related but not the same thing

  1. Unrelated and different
  2. Exactly the same concept, and can be used interchangeably
  3. Exclusively used in marketing and strategic management respectively

 

  1. Market and industry are:

@Pages and References: Pages 78-81

  1. Very specific economics terms which must be rigidly adhered to
  2. Are concepts which require careful consideration of their philosophical underpinning to use correctly

*c. Somewhat flexible in scope depending on what aspect of business you are considering

  1. Close concepts where market is identified with broader sectors, while industries refer to specific technologies

 

  1. A markets boundaries are defined by:

@Pages and References: Pages 73-78

  1. The geographies of the markets that are supplied by the incumbents
  2. The type of product which is sold, and the type of customers willing to pay for the product
  3. Substitutability on the demand side and on the supply side

*d. Substitutability on both the demand side and the supply side, combined with an element of judgment depending on context and purpose

 

  1. In practice, drawing the boundaries of industries and markets is:

@Pages and References: Pages 73-78

  1. A matter of personal preference on behalf of top managers
  2. Almost impossible to carry out with rigor because it requires many rules of thumb and approximations

*c. Largely a matter of judgment and experience contingent on the purpose of the analysis

  1. Critical to the output of the analysis and therefore should only be undertaken with the help of an academic or consultant

 

  1. A 6th force Complements should arguably be added to Porters 5 Forces Model because:

@Pages and References: Page 78

  1. Porters original analysis was inadequate

*b. Its clear that since Porter devised his model, Complementers have evidently become more important

  1. Porters model was developed over 30 years ago, so is old-fashioned
  2. Answers b and c

 

  1. Porters 5 Forces model was based on a static, stable view of industry which ignores dynamic forces:

@Pages and References: Page 78

  1. Because industries in Porters day were not very dynamic

*b. Which can easily be dealt with by taking a dynamic perspective of the forces e.g. Innovation is a consequence of Rivalry

  1. And so has outlived its usefulness, and should be replaced with something more up to date
  2. Which was Porters intention, because you have to walk before you can run

 

  1. Analysing key success factors leads one to ask the following two questions:

@Pages and References: Page 87

*a. What do customers want which we could supply profitably and what should the firm do to survive competition?

  1. What do customers want and what type of operational changes should a firm implement to survive competition?
  2. Which of the five forces of competition are critical for a firms survival and how could the firm deal with them?
  3. How should managers analyse information collected from the market and what should they do about it?

 

  1. The question What do customers want?:

@Pages and References: Page 87

  1. Is not relevant because customers will show their preferences through their behaviour

*b. Must be asked by managers, and an accurate answer obtained and understood, since its the driving force behind generating profit

  1. Can be outsourced to a Market Research company
  2. Is best answered by ensuring that certain managers are educated in Marketing

 

  1. The question What does a firm need to survive competition?:

@Pages and References: Page 87

  1. Can be addressed through analysis of competitors using all possible means, even at the edge of legality and ethics
  2. Can be addressed by studying very carefully the two largest rivals in the industry

*c. Requires an understanding of the current and future basis of competition specific to the industry

  1. Can never be answered clearly, because competitors will not divulge what they are doing

 

  1. The value to managers of understanding key success factors is:

@Pages and References: Page 87

  1. Self-evident
  2. Legitimate because it is accepted by the academic world
  3. That it generates generic strategies which guarantee success

*d. To help maintain a strategic perspective of what needs to be done to survive, and help them avoid degenerating into a fire fighting approach

 

 

Chapter 4

The Nature and Sources of Competitive Advantage

 

  1. One firm possesses a competitive advantage over other firms when it earns or has the potential to earn a persistently higher profit margin.

@Pages and References: Page 174

  1. T

*b. F

 

  1. In the long run competition eliminates differences in profitability between firms.

@Pages and References: Pages 174-175

*a. T

  1. F

 

  1. A firm can create competitive advantage by responding better than rivals to changes in its environment or by maintaining strategic differences from its rivals that customers accept.

@Pages and References: Pages 174-175

*a. T

  1. F

 

  1. Entrepreneurship can be defined as the ability to identify and rapidly respond to opportunities in the environment.

@Pages and References: Pages 175-176

*a. T

  1. F

 

  1. For some firms, speed of new product development appears to be the only real source of competitive advantage in todays economy.

@Pages and References: Pages 175-176

*a. T

  1. F

 

  1. Innovation can be narrowly interpreted as bringing new products or processes to market, but also more broadly as introducing new ways of doing business into an industry or market (new business models).

@Pages and References: Pages 176-179

*a. T

  1. F

 

  1. A Blue ocean strategy refers to the creation of entirely new markets.

@Pages and References: Pages 176-179

*a. T

  1. F

 

  1. Isolating mechanisms are forces tending to equalize profit rates among firms, i.e. phenomena that erode a firms competitive advantages.

@Pages and References: Pages 179-185

  1. T

*b. F

 

  1. For a firm to imitate the strategy of another firm, it must do four things: identify the target firm, incentivize the rival, diagnose the sources of competitive advantage, and acquire the resources needed.

@Pages and References: Pages 179-185

  1. T

*b. F

 

  1. Starting a price war immediately a firm enters your industry is an entry deterrent tactic that may dissuade other potential entrants for years to come.

@Pages and References: Page 181

*a. T

  1. F

 

  1. To pre-empt an entrant, a firm can occupy existing and potential strategic niches to reduce the range of opportunities open to potential entrants.

@Pages and References: Page 181

*a. T

  1. F

 

  1. Causal ambiguity is the failure to clearly understand the source of a rivals competitive advantages in particular which of the rivals distinctive features are causes and which are effects of another feature.

@Pages and References: Pages 181-182

*a. T

  1. F

 

  1. Because some resources are valuable and not perfectly uniform (they are unique, not homogenous) acquiring or developing these can take years before a firm achieves and sustains higher profitability.

@Pages and References: Pages 182-185

*a. T

  1. F

 

  1. In industries like finance where genuinely unique resources or capabilities are hard to find, imitation is fast and sustainable competitive advantage is hard to achieve.

@Pages and References: Pages 182-185

*a. T

  1. F

 

  1. Firms can achieve competitive advantage by supplying a product at lower cost than competitors or by effectively differentiating their product so that the customer is willing to pay a higher price.

@Pages and References: Pages 185-186

*a. T

  1. F

 

  1. The two main sources of competitive advantage are cost leadership and differentiation.

@Pages and References: Pages 185-186

*a. T

  1. F

 

  1. Differentiation means offering many product features that distinguish your product from everyone elses.

@Pages and References: Pages 191-197

  1. T

*b. F

 

  1. Porters value chain is mostly used to analyse the success or otherwise of cost leadership strategies.

@Pages and References: Pages 191-197

  1. T

*b. F

 

  1. Singapore Airlines appears to have competitive advantages from:

@Pages and References: Pages 171-174

  1. Lower costs than many of its rivals
  2. Better plane utilization rates than its rivals
  3. Better service levels than many of its rivals

*d. All of the above

 

  1. Competitive advantage can be defined as:

@Pages and References: Page 174

  1. The difference between a firms return on assets and its return on sales
  2. A firms ability to earn a persistently higher profit margin than its rivals

*c. A firms ability to earn a persistently higher profit rate than its rivals

  1. A firms ability to outwit its competitors

 

  1. A firm with a competitive advantage other than superior profitability may have?

@Pages and References: Page 174

  1. A rising market share
  2. Strong and rising customer loyalty, or good executive perks, or both
  3. Invested in new technologies its rivals do not have

*d. Some or all of the above

 

  1. Competitive advantage:

Pages and References: Pages 174-175

  1. Exists only when an industry is in long term equilibrium

*b. Emerges from external and internal sources

  1. Both a and b
  2. Neither a nor b

 

  1. If an industry has a stable environment and firms pursue similar strategies:

@Pages and References: Pages 174-175

*a. Firms with similar resources and capabilities should have similar profit rates

  1. Firms with similar resources and capabilities should have similar structures
  2. Firms without similar resources and capabilities will have left the industry
  3. Strategists may as well shoot themselves, this industry is so boring

 

  1. A firms ability to turn change in its external environment into profit:

@Pages and References: Pages 175-176

  1. Requires just one key resource: information

*b. Depends on its ability to respond by changing its capabilities appropriately

  1. Is the test of a Sustained Focus strategy
  2. Is always measured by its market share

 

  1. Requirements for quick organizational response to a turbulent environment are:

@Pages and References: Pages 175-176

  1. Flexible manufacturing systems and a good gut feel for customer trends
  2. Excellent resources and capabilities
  3. Short product launch cycle times and excellent quality control

*d. Quick, accurate information, and short product launch cycle times

 

  1. Zaras response to very fast-changing fashion demands was:

@Pages and References: Pages 175-176

  1. To fight on price by cutting costs to the absolute minimum
  2. To have thousands of products in stock at all times

*c. To cut the product launch cycle from concept to store to three weeks

  1. To hire the best designers and decide new fashions in advance

 

  1. Strategic innovation means introducing:

@Pages and References: Pages 176-179

  1. New products
  2. New markets
  3. New technologies

*d. All of the above, or introducing new ways of doing business

 

  1. Apples ITunes success was an example of:

@Pages and References: Pages 176-179

  1. A great new IT product: compatible hardware, software and content all working together
  2. The decline of the conventional recorded music industry

*c. An innovative and legal business model replacing the conventional (legal) recorded music business model

  1. Apples non-stop stream of wacky gimmicks

 

  1. Strategic innovation involves:

@Pages and References: Pages 176-179

  1. Limitless financial and organizational resources
  2. Spending more on Research & Development than your competitors
  3. Top managers total dedication to achieving timely innovations

*d. Pioneering in at least one of the three dimensions: new industry, new customer segment, or new source of competitive advantage

 

  1. Once established, competitive advantage is:

@Pages and References: Pages 179-185

  1. Relatively stable over time

*b. Subject to erosion by competitors or entrants

  1. A firms reward for leading the industry
  2. Easily maintained unless entry barriers are high

 

  1. Isolating mechanisms are:

@Pages and References: Pages 179-185

*a. Barriers that slow or stop the equalization of profits between firms, such as barriers to imitation

  1. Mechanisms that speed up the equalization of profits between firms
  2. Barriers that prevent potential entrants from grabbing a significant market share in the industry
  3. Mechanisms that limit or enhance the ex post equilibration of rents among individual firms, depending on their relative bargaining powers

 

  1. To successfully imitate the strategy of another firm, an organization must:

@Pages and References: Pages 179-185

*a. Identify and diagnose the rivals advantage, believe in its ability to deliver a superior return, and, finally, acquire the resource

  1. Identify and diagnose the rivals advantage, and then acquire the resource
  2. Benchmark the rivals activities and resources, believe in a superior return, and build the rivals resource in-house
  3. Benchmark the rivals activities and resources, identify the rivals weaknesses, and, finally, believe in its ability to deliver a superior return

 

  1. How can a firm hide its superior profits?

@Pages and References: Pages 179-181

  1. By masking its results so that rivals fail to see its success
  2. By avoiding disclosing financial performance
  3. By temporarily lowering prices, so that the firm forgoes short term profits but succeeds in dissuading potential entrants

*d. Any of the above

 

  1. A firm can pre-empt imitation by:

@Pages and References: Page 181

  1. Vigorous legal action
  2. Threatening to imitate its imitators

*c. Introducing new products to fill each niche, investing in capacity ahead of market growth and filing many patents

  1. None of these: imitators should be welcomed

 

  1. Rivals can be pre-empted from entering a firms markets using the above methods only if:

@Pages and References: Page 181

  1. There are significant economies of scale in this industry

*b. There is significant first-mover advantage in this industry

  1. Brand names matter to consumers in this industry
  2. Answers a and b

 

  1. To imitate the competitive advantage of another company, a firm must first:

@Pages and References: Pages 181-182

*a. Understand the basis of its rivals success

  1. Collect comprehensive information about its rival
  2. Analyse its rivals marketing strategy

*d. None of the above

 

  1. Is it easy for Sears Holdings (Kmart) to understand Wal-Marts competitive advantages?

@Pages and References: Pages 181-182

*a. No, it is not that easy

  1. Yes: just walk into any Wal-Mart store
  2. Any professional retailer could
  3. Answers b and c

 

  1. Causal ambiguity and uncertain imitability are:

@Pages and References: Pages 181-182

  1. Two academic phrases to describe a state of confusion
  2. Related because causal ambiguity causes uncertain imitability (the rival doesnt know what to imitate)
  3. Anyone who tries to imitate something they dont fully understand is asking for trouble

*d. All of the above

 

  1. Overall, the Singapore Airlines case shows:

@Pages and References: Pages 181-182

  1. SAs biggest resource is the innate culture of its staff
  2. SAs biggest resource is the location of its hub

*c. That rivals may copy parts of your business strategy but some unique resources and causal ambiguity can successfully hide your key distinctive capabilities

  1. Answers a and b

 

  1. The fundamental choice for capability acquisitions is the decision to either:

@Pages and References: Pages 182-185

  1. Buy them or sell them
  2. Develop them or maintain them

*c. Buy them or build them

  1. Buy them or copy them

 

  1. The development of collateralized debt obligations, by Drexel Burnham Lambert, shows that:

@Pages and References: Pages 182-185

  1. Well-paid bankers always come up with good ideas
  2. The financial system can be very fragile

*c. Financial products are easily copied so first movers must quickly establish a large track record of successful trades

  1. A financial crisis was inevitable

 

  1. Cost leadership means a firm must:

@Pages and References: Pages 185-186

  1. Exploit all sources of cost advantage before tailoring the product to each customer

*b. Exploit all sources of cost advantage in providing customers with a standardised product

  1. Exploit all sources of cost advantage in providing each customer with their minimum requirements
  2. Exploit all sources of cost advantage while providing every customer an individual service

 

  1. Differentiation is when a firm:

@Pages and References: Pages 185-186

  1. Offers customers something valuable and unique

*b. Offers customers something valuable and unique other than a low price

  1. Offers customers a uniquely low price
  2. Offers customers products with many additional features

 

  1. The seven drivers of cost advantage:

@Pages and References: Pages 185-186

  1. Must be equally examined in all firms
  2. Can be a useful framework within which to compare a firms cost improvements in the last few years

*c. Can be a useful framework within which to compare a firms costs with its competitors

  1. Can be a useful framework within which to compare a firms profit margins with its competitors

 

  1. A value chain analysis:

@Pages and References: Pages 185-186

*a. Is an alternative framework within which to compare costs with your competitors

  1. Is an alternative framework within which to compare cost improvements in the last few years
  2. Is an alternative framework within which to compare a firms profit margins with its competitors
  3. Is a framework for analyzing the chain of production of a good from nature to the final consumer

 

  1. The value chain analysis of Singapore Airlines shown is:

@Pages and References: Pages 185-186

  1. A fully-worked professional analysis that could be sold to SA
  2. A first cut analysis, the result of ten minutes work

*c. A good start on analysis but now needs to be followed up with hard figures of cost comparisons between SA and its rivals

  1. A waste of time; SA does not have a cost leadership strategy anyway

 

  1. The central task of a differentiation strategy is:

@Pages and References: Pages 185-186

  1. To see how you can tweak the product by adding new features that differentiate it from rival products
  2. To add valuable new features to your product so long as the extra value to customers exceeds the extra cost to you of supplying it

*c. To ask how all your customers interactions with your product could be enhanced even more

d, All of the above

 

  1. Increasing flight reliability at Singapore Airlines:

@Pages and References: Pages 192-197

*a. Is likely to be the outcome of several linked activities

  1. Is basically down to the age of the planes
  2. Depends on the incentives given to ground and air crew for planes to take off on time
  3. Answers b and c

 

  1. Porters value chain:

@Pages and References: Pages 192-197

  1. Can only be used to analyse cost leadership strategies
  2. Can be used to look at the current and additional costs of changes in a differentiation strategy
  3. Can be used to examine the current and additional service levels offered to customers in a differentiation strategy

*d. Answers b and c

 

  1. It is quite natural to combine cost leadership and differentiation strategies:

@Pages and References: Pages 192-197

  1. Into a strategy where you focus on doing both
  2. No: Porter says they are mutually exclusive
  3. If you do, you will probably end up being stuck in the middle

*d. Answers b and c

 

  1. Being stuck in the middle gives low profits because:

@Pages and References: Pages 192-197

  1. The firm loses those customers who want the lowest prices
  2. The firm loses those customers who want the best product on the market
  3. Employees become confused about what the firms goals and strategy really are

*d. All of the above

 

  1. A typical cost leadership strategy involves:

@Pages and References: Pages 192-197

  1. A firm producing a few limited-feature standard products, or providing a very standardised service
  2. A medium or small firm with minimal overheads, and cheaply acquired (sometimes second-hand) assets

*c. Answers a and b

  1. Being the firm with the highest market share, and, often, the best-known brand in the industry

 

  1. A cost leadership strategy:

@Pages and References: Pages 192-197

  1. Requires a commodity product

*b. Requires a firm to commoditize their product i.e. no frills even if the industrys product is differentiable (e.g. cars or airlines)

  1. Can be achieved with a unique brand image
  2. Can only be achieved in the modern world by outsourcing to cheap-labor countries

 

  1. In many industries the market leaders

@Pages and References: Pages 192-197

*a. Manage to reconcile low costs with some effective differentiation

  1. Are the cost leaders
  2. Have very well-differentiated brands
  3. Answers b and c

 

  1. The success of Japanese Total Quality Management:

@Pages and References: Pages 192-197

  1. Shows that it is possible to pursue Cost Leadership and Differentiation strategies simultaneously

*b. Refutes the perceived trade-off between low cost products and high quality products

  1. Has made Porters analysis outdated
  2. Answers b and c

 

  1. Porter says that firms get stuck in the middle because:

@Pages and References: Pages 192-197

  1. The mindsets of cost-minimization and differentiation are culturally opposed, and firms cannot optimize the investments needed for both at once

*b. As A above and firms need very different organizational processes to achieve the lowest costs or effective differentiation in the industry

  1. Many firms are run by CEOs who think strategically, but fail to act strategically
  2. Many firms have had several different CEOs, each determined to pursue different strategies

 

  1. Overall, the Singapore Airlines case shows that:
  2. Firms do face the stark choices of being stuck in the middle that Porter cites

*b. Firms can create cultures that do motivate staff to continually eliminate waste, reduce costs and improve customer service

  1. Firms that create causal ambiguity cause creative ambiguity
  2. Cost leadership and low costs are the same thing

 

 

 

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