Strengthening a Company's Competitive Position: Strategic Moves, Timing, and Scope of Operations
Multiple Choice Questions
1. Once a company has decided to employ one of the five basic competitive strategies, then it must also consider such additional strategic choices as
A. whether and when to go on the offensive and initiate aggressive strategic moves to improve the company's market position.
B. whether to bolster the company's market position by merging with or acquiring another company.
C. whether to form strategic alliances and collaborative partnerships to add to its accumulation of resources and competitive capabilities.
D. whether to integrate forward or backward into more stages of the industry value chain.
E. All of these choices are correct.
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the
2. A company's menu of strategic choices to supplement its decision to employ one of the five basic competitive strategies does not include
A. whether and when to employ defensive strategies to protect the company's market position.
B. whether to integrate backward or forward into more stages of the industry value chain.
C. whether to employ a preemptive strike type of green ocean strategy.
D. whether and when to go on the offensive and initiate aggressive strategic moves to improve the company's market position.
E. whether to bolster the company's market position via acquisition or merger and/or whether to enter into strategic alliances or partnership arrangements with other enterprises.
3. Which of the following is not among the principal offensive strategy options that a company can employ?
A. leapfrogging competitors by being the first adopter of next-generation technologies or first to market with next-generation products
B. offering an equally good or better product at a lower price
C. blocking the avenues open to challengers
D. attacking the competitive weakness of rivals
E. capturing unoccupied or less contested territory by maneuvering around
4. Which one of the following is an example of an offensive strategy?
A. blocking the avenues open to challengers
B. signaling challengers that retaliation is likely
C. pursuing continuous product innovation to draw sales and market share away from less innovative rivals
D. introducing new features or models to fill vacant niches in its overall product offering and better match the product offerings of key rivals
E. maintaining a war chest of cash and marketable securities
5. A hit-and-run or guerrilla warfare type offensive strategy
A. involves random offensive attacks used by a market leader to steal customers away from unsuspecting smaller rivals.
B. involves undertaking surprise moves to secure an advantageous position in a fast-growing and profitable market segment; usually the guerrilla signals rivals that it will use deep price cuts to defend its newly won position.
C. works best if the guerrilla is the industry's low-cost leader.
D. involves pitting a small company's own competitive strengths head-on against the strengths of much larger rivals.
E. involves unexpected attacks (usually by a small to medium-sized competitor) to grab sales and market share from complacent or distracted rivals.
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6. Launching a preemptive strike type of offensive strategy entails
A. cutting prices below a weak rival's costs.
B. moving first to secure an advantageous competitive assets that rivals can't readily match or duplicate.
C. using hit-and-run tactics to grab sales and market share away from complacent or distracted rivals.
D. attacking the competitive weaknesses of rivals.
E. leapfrogging into next-generation products and technologies, thus forcing rivals to play catch-up.
7. Which one of the following is not an offensive strategy option?
A. adopting or improving on good ideas of other companies (rivals or otherwise)
B. deliberately attacking those market segments where key rivals make big profits
C. launching a preemptive strike to capture a rare opportunity
D. offering an equally good or better product at a lower price
E. introducing new features or models to fill vacant niches in its overall product offering and better match the product offerings of key rivals
8. 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 offensive-minded challenger is strong
C. small local and regional companies with limited capabilities
D. struggling enterprises that are on the verge of going under
E. other offensive-minded companies with a sizable war chest of cash and marketable securities
9. A blue ocean type of offensive strategy
A. refers to initiatives by a market leader to steal customers away from unsuspecting smaller rivals.
B. involves a preemptive strike to secure an advantageous position in a fast-growing market segment.
C. entails attacking rivals head-on with deep price discounts and continuous product innovation.
D. 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.
E. involves the use of surprise hit-and-run guerrilla tactics to harass money-losing rivals and drive them into bankruptcy.
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10. A blue ocean strategy
A. is an offensive attack used by a market leader to steal customers away from unsuspecting smaller rivals.
B. involves a preemptive strike to secure an advantageous position in a fast-growing market segment.
C. works best when a company is the industry's low-cost leader.
D. offers growth in revenues and profits by discovering or inventing a new industry or distinct market segment that renders rivals largely irrelevant and allows a company to create and capture altogether new demand.
E. involves the use of highly creative, never-used-before strategic moves to attack the competitive weaknesses of rivals.
11. The purposes of defensive strategies include
A. discouraging deep price discounting on the part of ambitious rivals seeking to capture additional sales and market share.
B. lowering the risk of being attacked by rivals, weakening the impact of any attack that occurs, and influencing challengers to aim their offensive efforts at other rivals.
C. insulating a company from the impact of competitive pressures and industry driving forces.
D. weakening competitors in ways that make them largely irrelevant.
E. widening a company's competitive advantage over rivals.
12. Which one of the following is not a good example of a defensive strategy to protect a company's market share and competitive position?
A. adding new features or models and otherwise broadening the product line to close off vacant niches and gaps to opportunity-seeking challengers
B. thwarting the efforts of rivals to attack with lower prices by maintaining economy-priced options of its own
C. engaging in a preemptive strike strategy in an effort to discourage rivals from being aggressive
D. signaling challengers that retaliation is likely in the event that they launch an attack
E. making early announcements about impending new products or price changes to induce potential buyers to postpone switching
13. Which of the following is not an example of a defensive move to protect a company's market position and restrict a challenger's options for initiating competitive attack?
A. granting volume discounts or better financing terms to dealers/distributors and providing discount coupons to buyers to help discourage them from experimenting with other suppliers or brands
B. signaling challengers that retaliation is likely in the event they launch an attack
C. publicly committing the company to a policy of matching a competitors' terms or prices
D. maintaining a war chest of cash and marketable securities
E. challenging struggling runner-up firms that are on the verge of going under
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14. Which of the following is a potential defensive move to ward off challenger firms?
A. granting volume discounts, offering better financing terms to dealers/distributors, and providing discount coupons to buyers to help discourage them from experimenting with other suppliers or brands
B. signaling challengers that retaliation is likely in the event they launch an attack
C. making an occasional strong counter-response to the moves of weak competitors to enhance the firm's image as a tough defender
D. maintaining a war chest of cash and marketable securities
E. All of these choices are correct.
15. Being first to initiate a strategic move can have a high payoff in all but which one of the following instances?
A. when pioneering helps build a firm's image and reputation with buyers
B. when first-time customers remain strongly loyal to pioneering firms in making repeat purchases
C. when early commitments to new technologies, new-style components, new or emerging distribution channels, and so on can produce an absolute cost advantage over rivals
D. when moving first can constitute a preemptive strike, making imitation extra hard or unlikely
E. when pioneering leadership is more costly than followership
16. First-mover advantages are unlikely to be present in which one of the following instances?
A. when pioneering helps build a firm's image and reputation with buyers
B. when first-time customers remain strongly loyal to pioneering firms in making repeat purchases
C. when early commitments to new technologies, new-style components, new or emerging distribution channels, and so on can produce an absolute cost advantage over rivals
D. when moving first can constitute a preemptive strike, making imitation extra hard or unlikely
E. when rapid market evolution (due to fast-paced changes in technology or buyer preferences) presents opportunities to leapfrog a first-mover's products with more attractive next-version products
17. In which of the following instances are first-mover disadvantages not likely to arise?
A. when the costs of pioneering are much higher than being a follower and only negligible buyer loyalty or cost savings accrue to the pioneer
B. when rivals are employing offensive strategies rather than defensive strategies
C. when the products of an innovator are somewhat primitive and do not live up to buyer expectations
D. when buyers are skeptical about the benefits of a new technology or product being pioneered by a first mover
E. when rapid market evolution (due to fast-paced changes in technology or buyer preferences) gives fast followers and maybe even cautious late movers the opening to leapfrog a first mover's products with more attractive next-version products
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18. When the race among rivals for industry leadership is a marathon rather than a sprint,
A. it is best to be a fast follower than a first mover or a slow mover.
B.
C. fast followers find it easy to leapfrog the pioneer with even better next-generation products of their own.
D. a slow mover may not be unduly penalized and first-mover advantages can be fleeting.
E. being a first mover generally entails relatively low risk and carries a potentially big advantage.
F. there are nearly always big advantages to being a slow mover rather than an early mover, especially as concerns avoiding the "mistakes" of first or early movers.
19. Market conditions and factors that tend not to favor first movers include
A. growth in demand that depends on the development of complementary products or services that are not currently available and new industry infrastructure that is needed before buyer demand can surge.
B. quick market penetration and strong loyalty among first-time customers.
C. buyer behavior that is readily attracted to new technology or product features.
D. conditions that make imitation difficult and absolute cost advantages that accrue to those who make early commitments to new technologies, components, or distribution channels.
E. All of these choices are correct.
20. The difference between a merger and an acquisition is
A. a merger involves one company purchasing the assets of another company with cash, whereas an acquisition involves one company becoming the owner of another company by buying all of the shares of its common stock.
B. a merger is the combining of two or more companies into a single corporate entity (with the newly created company often taking on a new name), whereas an acquisition is a combination in which one company, the acquirer, purchases and absorbs the operations of another, the acquired.
C. nonexistent; in both instances, two companies become one.
D. the brands of both companies are retained in a merger, whereas with an acquisition, there is only one surviving brand name.
E. a merger involves two or more companies deciding to adopt the same strategy, whereas an acquisition involves one company becoming the owner of another company but with each company still pursuing its own separate strategy.
21. Which of the following is not a typical strategic objective or benefit that drives mergers and acquisitions?
A. to gain quick access to new technologies or other resources and capabilities
B. to create a more cost-efficient operation out of the combined companies
C. to fundamentally alter a company's trajectory and improve its business outlook
D. to expedite shifting from one strategy to another and gain better access to additional financial capital
E. to extend a company's business into new product categories and/or expand a company's geographic coverage
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22. Mergers and acquisitions are often driven by such strategic objectives as to
A. expand a company's geographic coverage, extend its business into new product categories, or gain quick access to new technologies or other resources and capabilities.
B. weaken the bargaining power of either key suppliers or key customers.
C. reduce the company's vulnerability to industry driving forces.
D. facilitate a company's shift from one type of competitive strategy to another.
E. secure a higher credit rating and better access to additional financial capital.
23. Merger and acquisition strategies
A. are never prone to mistakes, such as deciding which activities to leave alone and which activities to meld into their own operations and systems.
B. may offer considerable cost-saving opportunities and can be beneficial in helping a company try to invent a new industry and lead the convergence of industries whose boundaries are being blurred by changing technologies and new market opportunities.
C. are a particularly effective way of pursuing blue ocean and outsourcing strategies.
D. seldom are a superior strategic alternative to forming alliances or partnerships with these same companies because of the financial drain of using the company's cash resources to accomplish the merger or acquisition.
E. are one of the best ways to help a company strongly differentiate its product offering and use a differentiation strategy to strengthen its market position.
24. Why do mergers and acquisitions sometimes fail to produce anticipated results?
A. they do not produce the hoped-for outcomes, and changes to existing operations may not eventuate.
B. cost savings may prove smaller than expected.
C. gains in competitive capabilities may take substantially longer to materialize or may never do so.
D. efforts to mesh corporate cultures can stall due to formidable resistance from organization members, and key employees can become disenchanted and leave.
E. All of these choices are correct.
25. Mergers and acquisitions
A. are nearly always successful in achieving their desired purpose (unlike strategic alliances and collaborative partnerships).
B. all too frequently do not produce the hoped-for outcomes.
C. are generally more effective in securing a new competitive advantage than in protecting an existing competitive advantage.
D. are highly risky because of the financial drain that comes from using the company's cash resources to pay for the costs of the merger or acquisition.
E. are usually more successful in helping a company's shift from one competitive strategy to another than in improving a company's competitive strength and resource capabilities.
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26.
Vertical integration strategies
A. extend a company's competitive and operating scope because its operations extend across more parts of the total industry value chain.
B. are one of the best strategic options for helping companies win the race for global market leadership.
C. are a cost-effective means of expanding a company's lineup of products and services.
D. are particularly effective in boosting a company's ability to expand into additional geographic markets, particularly the markets of foreign countries.
E. are a good strategy option for improving a company's supply chain management capabilities, pursuing efforts to remodel a company's value chain, achieving direct control over the costs of performing value chain activities, and gaining access to buyers.
27. The two most compelling reasons for a company to pursue vertical integration (either forward or backward) are to
A. expand into foreign markets and/or control more of the industry value chain.
B. broaden the firm's product line and/or avoid the need for outsourcing.
C. enable use of offensive strategies and/or gain a first-mover advantage over rivals in revamping the industry value chain.
D. strengthen the company's competitive position and/or boost its profitability.
E. achieve product differentiation and/or lengthen the company's value chain to include more activities performed in-house and thereby gain greater ability to reduce internal operating costs.
28. Vertical integration strategies can aim at
A. full integration (participating in all stages of the industry vertical chain).
B. partial integration (building positions in selected stages of the value chain).
C. tapered integration (involves both outsourcing and performing the activity internally).
D. forward integration (value chain activities performed by distributors) or backward toward suppliers.
E. All of these answer choices are correct.
29. A good example of forward vertical integration is a
A. producer of organic vegetables deciding to acquire a compost company.
B. footwear manufacturer developing own-branded retail stores.
C. crude oil refiner purchasing an oil well drilling and exploration company.
D. hospital opening a nursing home for the aged.
E. maker of prescription drugs acquiring a chemical manufacturer.
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30. The two best reasons for investing company resources in vertical integration (either forward or backward) are to
A. speed entry into foreign markets and/or exercise stronger control over operating costs.
B. broaden the firm's product line and/or enable the company to charge a premium price for its product/service.
C. gain a first-mover advantage in adopting new production technologies and/or employ potent defensive strategies.
D. strengthen the company's competitive position and/or boost its profitability.
E. achieve greater product differentiation and/or gain better access to prospective buyers.
31. For backward vertical integration into the business of suppliers to be a viable and profitable strategy, a company must
A. have considerable expertise in supply chain management, transportation logistics, and inventory control techniques.
B. be able to achieve the same scale economies as outside suppliers and match or beat suppliers' production efficiency with no drop in quality.
C. have large state-of-the-art production facilities so that it can fully capture all economies of scale in producing parts and components.
D. have core competences in R&D, product design and engineering, and distribution logistics so that it will have adequate capabilities to produce and distribute parts and components in a timely and cost-effective manner.
E. have a distinctive competence in production process technology and at least a core competence in manufacturing R&D.
32. Which one of the following statements about backward vertical integration is false?
A. What makes backward vertical integration such an attractive strategic option is the opportunity to capture the profit margins of suppliers and thereby increase the company's own profitability.
B. Backward vertical integration can produce a differentiation-based competitive advantage when a company, by performing activities internally rather than utilizing outside suppliers, ends up with a better-quality product/service offering, improves the caliber of its customer service, or in other ways enhances the performance of its final product.
C. For backward integration to be a viable and profitable strategy, a company must be able to (1) achieve the same scale economies as outside suppliers and (2) match or beat suppliers' production efficiency with no drop in quality.
D. The best potential for being able to reduce costs via a backward integration strategy exists in situations where suppliers have outsized profit margins, where the item being supplied is a major cost component, and where the requisite technological skills are easily mastered or can be gained by acquiring a supplier with the desired technological know-how.
E. Potential advantages of backward integration include sparing a company the uncertainty of being dependent on suppliers for crucial components or support services and lessening a company's vulnerability to powerful suppliers inclined to raise prices at every opportunity.
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33. The strategic impetus for forward vertical integration is to
A. gain better access to end users, improve market awareness, and/or include the end user's purchasing experience as a differentiating feature.
B. the opportunity to capture the profits being earned by forward distribution allies (and thereby increase the company's own profits)
C. reduce or eliminate disruptions in the delivery of the company's products to end users.
D. avoid channel conflict.
E. expand a company's geographic coverage.
34. Which of the following is typically the strategic impetus for forward vertical integration?
A. being able to control the wholesale/retail portion of the industry value chain
B. having fewer disruptions in the delivery of the company's products to end users
C. gaining better access to end users and better market visibility
D. broadening the company's product line
E. allowing the firm access to greater economies of scale
35. Bypassing regular sales channels in favor of Internet retailing can have strong appeal if it
A. raises distribution costs and ignores channel conflicts.
B. provides a relative cost disadvantage over rivals.
C. offers lower margins resulting in higher selling prices to end users.
D. includes partnering rather than competing with existing distributors.
E. All of these choices are correct.
36. Which of the following is not a strategic disadvantage of vertical integration?
A. Vertical integration boosts a firm's capital investment in the industry, thus increasing business risk if the industry becomes unattractive later.
B. Integrating 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.
C. Vertical integration limits a company's ability to achieve greater product differentiation and to exercise direct control over the costs of performing value chain activities.
D. Forward or backward integration often calls for radically different skills and business capabilities than the firm possesses.
E. Vertical integration poses all kinds of capacity-matching problems.
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37. Backward integration involves
A. performing industry value chain activities previously performed by suppliers or other companies engaged in earlier stages of the value chain.
B. linking with businesses within the array of value chain activities to eliminate competition and broaden the product offering.
C. capitalizing on company's underutilized managerial capabilities for achieving greater synergistic cost advantages.
D. reducing the opportunity for achieving greater product differentiation.
E. developing new skills and business capabilities.
38. Outsourcing strategies
A. are nearly always a more attractive strategic option than merger and acquisition strategies.
B. carry the substantial risk of raising a company's costs.
C. carry the substantial risk of making a company overly dependent on its suppliers.
D. increase a company's risk exposure to changing technology and/or changing buyer preferences.
E. involve farming out value chain activities presently performed in-house to outside specialists and strategic allies.
39. Outsourcing the performance of value chain activities presently performed in-house to outside vendors and suppliers makes strategic sense when
A. an activity can be performed better or more cheaply by outside specialists.
B. it allows a company to focus on its core business and leverage its key resources.
C. outsourcing won't adversely hollow out the company's technical know-how, competencies, or capabilities while it improves organizational flexibility and speeds time to market.
D. it improves organizational flexibility and speeds time to market.
E. All of these choices are correct.
40. The big risk of employing an outsourcing strategy is
A. the increased time it takes to respond effectively to the fresh strategic moves of rival firms.
B. hollowing out the competitive capabilities a company needs to be a master of its own destiny.
C. impairing a company's capability to be a leader in product innovation.
D. increased vulnerability to shifts in buyer demand.
E. increased costs of differentiating the company's product/service from those of competitors.
41. Which of the following is not one of the key benefits of employing an outsourcing strategy?
A. It allows a company to concentrate on its core business, leverage its key resources and core competencies, and do even better what it already does best.
B It can hollow out a firm's own capabilities and lose touch with activities and expertise that contribute fundamentally to the firm's competitiveness and market success.
C. It reduces the company's risk exposure to changing technology and/or buyer preferences.
D. It improves organizational flexibility and speeds time to market.
E. It involves an activity that can be performed better or more cheaply by outside specialists.
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42. A strategic alliance
A. is a collaborative arrangement in which companies join forces to defeat mutual competitive rivals.
B. involves two or more companies joining forces to pursue vertical integration.
C. is a formal agreement between two or more companies in which there is strategically relevant collaboration of some sort, joint contribution of resources, shared risk, shared control, and mutual dependence.
D. is a partnership between two companies that is typically intended to eliminate the need to engage in outsourcing.
E. is usually a cheaper and more effective way for companies to join forces than is a merger.
43. The competitive attraction of entering into strategic alliances and collaborative partnerships is
A. in allowing companies to bundle resources and competencies that are more valuable in a joint effort than when kept separate.
B. reducing costs, transferring skills, and expanding the product line.
C. enabling greater vertical integration.
D. in allowing the partners to transfer intellectual property rights and proprietary information.
E. in helping the partners to increase their respective market shares.
44. Which one of the following is not a strategically beneficial reason a company may enter into strategic partnerships or cooperative arrangements with key suppliers, distributors, or makers of complementary products?
A. to acquire or improve access to new markets
B. to expedite the development of promising new technologies or products
C. to enable greater vertical integration
D. to improve supply chain efficiency
E. to overcome deficiencies in technical and manufacturing expertise and to create desirable new skill sets and capabilities
45. The reasons firms enter into strategic alliances is to
A. expedite the development of new technologies.
B. overcome deficits in their operation.
C. improve supply chain efficiency.
D. acquire or improve market access.
E. All of these choices are correct.
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46. Strategic alliances are more likely to be long lasting when
A. they involve collaboration with suppliers or distribution allies or when both parties conclude that continued collaboration is in their mutual interests.
B. the alliance involves partners based in countries with distinctly different cultures and consumer buying habits and preferences.
C. both partners are experienced with strategic alliances and routinely enter into collaborative agreements with firms in peripheral industries.
D. the alliance involves joining forces in R&D to develop new technologies cheaper than a company could develop the technology on its own.
E. each partner has considerable resource weaknesses in the marketplace.
47. Which of the following is not a typical reason that many alliances prove unstable or break apart?
A. diverging objectives and priorities
B. an inability to work well together
C. the emergence of more attractive technological paths
D. disagreement over how to divide the profits gained from joint collaboration
E. changing conditions that make the purpose of the alliance obsolete
48. Experience indicates that strategic alliances
A. are generally successful.
B. work well in cooperatively developing new technologies and new products but seldom work well in promoting greater supply chain efficiency.
C. work best when they are aimed at achieving a mutually beneficial competitive advantage for the allies.
D. stand a reasonable chance of helping a company reduce competitive disadvantage but very rarely form the basis of a durable competitive advantage over rivals.
E. are usually a company's best approach to building a distinctive competence.
49. Which of the following is not a typical reason that many alliances do not live up to expectations?
A. inability of partners to work well together
B. emergence of more attractive technological paths
C. changing conditions make the purpose of the alliance obsolete
D. disagreement over how to divide the added market share and profits gained from joint collaboration
E. diverging objectives and priorities
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50. The Achilles' heel (or biggest danger/pitfall) of relying heavily on alliances and cooperative strategies is
A. that partners will not divide profits from the alliance in an equitable manner.
B. becoming dependent on other companies for essential expertise and capabilities.
C. incurring excessive administrative expenses associated with engaging in collaborative efforts.
D. having to compromise the company's own priorities and strategies in reaching agreements with partners.
E. that strategic allies frequently become rivals in the marketplace.
Short Answer Questions
51. Identify and briefly explain five types of offensive strategies.
52. What is a blue ocean strategy, what is its appeal, and what is its drawback?
53. What is the purpose of defensive strategy? Give at least two examples of defensive moves.
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54. What are the strategic advantages of being a first mover? What are the strategic advantages of being a follower or late mover?
55. In what sorts of circumstances is it strategically advantageous to be a fast follower or late mover as opposed to a first mover?
56. Identify five objectives of a merger and acquisition strategy.
57. Under what sorts of circumstances are mergers with or acquisitions of other companies a better solution than entering into partnerships or alliances with these companies? How do mergers and/or acquisitions contribute to enhancing a company's position?
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58. Identify and briefly explain what is meant by each of the following terms:
a. outsourcing strategy
b. vertical integration strategy
c. first-mover advantage
d. first-mover disadvantage
e. horizontal and vertical scope
59. What are the strategic advantages of a backward vertical integration strategy?
60. What are the strategic advantages of a forward vertical integration strategy?
61. What are the strategic disadvantages of a vertical integration strategy?
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62. What are the merits of outsourcing the performance of certain value chain activities as opposed to performing them in-house? Under what circumstances does outsourcing make good strategic sense?
63. What are the most common reasons companies enter into strategic alliances and collaborative partnerships?
64. List four reasons that strategic alliances and collaborative partnerships might fail to live up to each partner's expectations.
65. Explain what is meant by hit-and-run or guerrilla warfare type offensive strategies.
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66. What does launching a preemptive strike entail? Under what circumstances is this offensive strategy most effective?
67. What types of companies are the best for offensive-minded challengers to target?
68. Explain the pros and cons of bypassing regular sales channels in favor of direct sales and Internet retailing.
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Chapter 06 Strengthening a Company's Competitive Position: Strategic Moves, Timing, and Scope of Operations Answer Key
Multiple Choice Questions
1. Once a company has decided to employ one of the five basic competitive strategies, then it must also consider such additional strategic choices as
A. whether and when to go on the offensive and initiate aggressive strategic moves to improve the company's market position.
B. whether to bolster the company's market position by merging with or acquiring another company.
C. whether to form strategic alliances and collaborative partnerships to add to its accumulation of resources and competitive capabilities.
D. whether to integrate forward or backward into more stages of the industry value chain.
E. All of these choices are correct.
Once a company has settled on which of the five generic competitive strategies to employ, attention turns to six other strategic actions it can take to complement its competitive approach and maximize the power of its overall strategy. The principal offensive strategy options include: (1) offering an equally good or better product at a lower price, (2) leapfrogging competitors by being the first to market with next-generation technology or products, (3) pursuing continuous product innovation to draw sales and market share away from less innovative rivals, (4) pursuing disruptive product innovations to create new markets, (5) adopting and improving on the good ideas of other companies, (6) using hit-and-run or guerrilla warfare tactics to grab sales and market share from complacent or distracted rivals, and (7) launching a preemptive strike to capture a rare opportunity or secure an industry's limited resources. Four of the six options discussed in Chapter 6 are listed above.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 06-01 Learn whether and when to pursue offensive or defensive strategic moves to improve a company's market position.
Topic: Launching Strategic Offensives to Improve a Company's Market Position
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2. A company's menu of strategic choices to supplement its decision to employ one of the five basic competitive strategies does not include
A. whether and when to employ defensive strategies to protect the company's market position.
B. whether to integrate backward or forward into more stages of the industry value chain.
C. whether to employ a preemptive strike type of green ocean strategy.
D. whether and when to go on the offensive and initiate aggressive strategic moves to improve the company's market position.
E. whether to bolster the company's market position via acquisition or merger and/or whether to enter into strategic alliances or partnership arrangements with other enterprises.
Four of the six options for strengthening a company's competitive position, discussed in Chapter 6, are listed in the answer choices. The principal offensive strategy options include: (1) offering an equally good or better product at a lower price, (2) leapfrogging competitors by being the first to market with next-generation technology or products, (3) pursuing continuous product innovation to draw sales and market share away from less innovative rivals, (4) pursuing disruptive product innovations to create new markets, (5) adopting and improving on the good ideas of other companies, (6) using hit-and-run or guerrilla warfare tactics to grab sales and market share from complacent or distracted rivals, and (7) launching a preemptive strike to capture a rare opportunity or secure an industry's limited resources. While the chapter discusses blue ocean strategy, there is no such thing as a "green ocean strategy."
AACSB: Analytical Thinking
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Learning Objective: 06-01 Learn whether and when to pursue offensive or defensive strategic moves to improve a company's market position.
Topic: Launching Strategic Offensives to Improve a Company's Market Position
3. Which of the following is not among the principal offensive strategy options that a company can employ?
A. leapfrogging competitors by being the first adopter of next-generation technologies or first to market with next-generation products
B. offering an equally good or better product at a lower price
C. blocking the avenues open to challengers
D. attacking the competitive weakness of rivals
E. capturing unoccupied or less contested territory by maneuvering around
The principal offensive strategy options include: (1) offering an equally good or better product at a lower price; (2) leapfrogging competitors by being the first to market with next-generation technology or products; (3) pursuing continuous product innovation to draw sales and market share away from less innovative rivals; (4) pursuing disruptive product innovations to create new markets; (5) adopting and improving on the good ideas of other companies; (6) using hit-and-run or guerrilla warfare tactics to grab sales and market share from complacent or distracted rivals; and (7) launching a preemptive strike to capture a rare opportunity or secure an industry's limited resources. Blocking the avenues open to challengers is considered a defensive strategy.
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Blooms: Understand
6-20
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Difficulty: 1 Easy
Learning Objective: 06-01 Learn whether and when to pursue offensive or defensive strategic moves to improve a company's market position.
Topic: Launching Strategic Offensives to Improve a Company's Market Position
4. Which one of the following is an example of an offensive strategy?
A. blocking the avenues open to challengers
B. signaling challengers that retaliation is likely
C. pursuing continuous product innovation to draw sales and market share away from less innovative rivals
D. introducing new features or models to fill vacant niches in its overall product offering and better match the product offerings of key rivals
E. maintaining a war chest of cash and marketable securities
The principal offensive strategy options include pursuing continuous product innovation to draw sales and market share away from less innovative rivals. All of the other choices are not considered offensive strategies.
AACSB: Analytical Thinking
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Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 06-01 Learn whether and when to pursue offensive or defensive strategic moves to improve a company's market position.
Topic: Launching Strategic Offensives to Improve a Company's Market Position
5. A hit-and-run or guerrilla warfare type offensive strategy
A. involves random offensive attacks used by a market leader to steal customers away from unsuspecting smaller rivals.
B. involves undertaking surprise moves to secure an advantageous position in a fast-growing and profitable market segment; usually the guerrilla signals rivals that it will use deep price cuts to defend its newly won position.
C. works best if the guerrilla is the industry's low-cost leader.
D. involves pitting a small company's own competitive strengths head-on against the strengths of much larger rivals.
E. involves unexpected attacks (usually by a small to medium-sized competitor) to grab sales and market share from complacent or distracted rivals.
Guerrilla offensives are surprising moves that are particularly well suited to small or medium-sized challengers that have neither the resources nor the market visibility to mount a full-fledged attack on industry leaders.
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Learning Objective: 06-01 Learn whether and when to pursue offensive or defensive strategic moves to improve a company's market position.
Topic: Launching Strategic Offensives to Improve a Company's Market Position
6-21
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6. Launching a preemptive strike type of offensive strategy entails
A. cutting prices below a weak rival's costs.
B. moving first to secure an advantageous competitive assets that rivals can't readily match or duplicate.
C. using hit-and-run tactics to grab sales and market share away from complacent or distracted rivals.
D. attacking the competitive weaknesses of rivals.
E. leapfrogging into next-generation products and technologies, thus forcing rivals to play catchup.
By definition, a preemptive strike by a challenger means moving first to secure advantageous competitive assets that rivals cannot readily match or duplicate.
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Learning Objective: 06-01 Learn whether and when to pursue offensive or defensive strategic moves to improve a company's market position.
Topic: Launching Strategic Offensives to Improve a Company's Market Position
7. Which one of the following is not an offensive strategy option?
A. adopting or improving on good ideas of other companies (rivals or otherwise)
B. deliberately attacking those market segments where key rivals make big profits
C. launching a preemptive strike to capture a rare opportunity
D. offering an equally good or better product at a lower price
E. introducing new features or models to fill vacant niches in its overall product offering and better match the product offerings of key rivals
Deliberately attacking those market segments where key rivals make big profits is not one of the seven offensive strategy options.
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Learning Objective: 06-01 Learn whether and when to pursue offensive or defensive strategic moves to improve a company's market position.
Topic: Launching Strategic Offensives to Improve a Company's Market Position
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6-22
8. 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 offensive-minded challenger is strong
C. small local and regional companies with limited capabilities
D. struggling enterprises that are on the verge of going under
E. other offensive-minded companies with a sizable war chest of cash and marketable securities
The following are the best targets for offensive attacks: (1) market leaders that are vulnerable, (2) runner-up firms that possess weaknesses in areas where the challenger is strong, (3) struggling enterprises that are on the verge of going under, and (4) small local and regional firms that possess limited capabilities and resources.
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Learning Objective: 06-01 Learn whether and when to pursue offensive or defensive strategic moves to improve a company's market position.
Topic: Launching Strategic Offensives to Improve a Company's Market Position
9. A blue ocean type of offensive strategy
A. refers to initiatives by a market leader to steal customers away from unsuspecting smaller rivals.
B. involves a preemptive strike to secure an advantageous position in a fast-growing market segment.
C. entails attacking rivals head-on with deep price discounts and continuous product innovation.
D. 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.
E. involves the use of surprise hit-and-run guerrilla tactics to harass money-losing rivals and drive them into bankruptcy.
A blue ocean strategy seeks to gain a dramatic and durable competitive advantage by abandoning efforts to beat out competitors in existing markets and, instead, inventing a new industry or distinctive market segment that renders existing competitors largely irrelevant and allows a company to create and capture altogether new demand.
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Difficulty: 1 Easy
Learning Objective: 06-01 Learn whether and when to pursue offensive or defensive strategic moves to improve a company's market position.
Topic: Launching Strategic Offensives to Improve a Company's Market Position
6-23
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10. A blue ocean strategy
A. is an offensive attack used by a market leader to steal customers away from unsuspecting smaller rivals.
B. involves a preemptive strike to secure an advantageous position in a fast-growing market segment.
C. works best when a company is the industry's low-cost leader.
D. offers growth in revenues and profits by discovering or inventing a new industry or distinct market segment that renders rivals largely irrelevant and allows a company to create and capture altogether new demand.
E. involves the use of highly creative, never-used-before strategic moves to attack the competitive weaknesses of rivals.
A blue ocean strategy seeks to gain a dramatic and durable competitive advantage by inventing a new industry or distinctive market segment that renders existing competitors largely irrelevant and allows a company to create and capture altogether new demand.
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Difficulty: 1 Easy
Learning Objective: 06-01 Learn whether and when to pursue offensive or defensive strategic moves to improve a company's market position.
Topic: Launching Strategic Offensives to Improve a Company's Market Position
11. The purposes of defensive strategies include
A. discouraging deep price discounting on the part of ambitious rivals seeking to capture additional sales and market share.
B. lowering the risk of being attacked by rivals, weakening the impact of any attack that occurs, and influencing challengers to aim their offensive efforts at other rivals.
C. insulating a company from the impact of competitive pressures and industry driving forces.
D. weakening competitors in ways that make them largely irrelevant.
E. widening a company's competitive advantage over rivals.
The purposes of defensive strategies are to lower the risk of being attacked, weaken the impact of any attack that occurs, and influence challengers to aim their efforts at other rivals.
AACSB: Analytical Thinking
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Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 06-02 Recognize when being a first mover or a fast follower or a late mover can lead to competitive advantage.
Topic: Using Defensive Strategies to Protect a Company's Market Position and Competitive Advantage
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6-24
12. Which one of the following is not a good example of a defensive strategy to protect a company's market share and competitive position?
A. adding new features or models and otherwise broadening the product line to close off vacant niches and gaps to opportunity-seeking challengers
B. thwarting the efforts of rivals to attack with lower prices by maintaining economy-priced options of its own
C. engaging in a preemptive strike strategy in an effort to discourage rivals from being aggressive
D. signaling challengers that retaliation is likely in the event that they launch an attack
E. making early announcements about impending new products or price changes to induce potential buyers to postpone switching
Although the purposes of defensive strategies are to lower the risk of being attacked, weaken the impact of any attack that occurs, and influence challengers to aim their efforts at other rivals, launching a preemptive strike is an example of an offensive strategy.
AACSB: Analytical Thinking
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Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 06-02 Recognize when being a first mover or a fast follower or a late mover can lead to competitive advantage.
Topic: Using Defensive Strategies to Protect a Company's Market Position and Competitive Advantage
13. Which of the following is not an example of a defensive move to protect a company's market position and restrict a challenger's options for initiating competitive attack?
A. granting volume discounts or better financing terms to dealers/distributors and providing discount coupons to buyers to help discourage them from experimenting with other suppliers or brands
B. signaling challengers that retaliation is likely in the event they launch an attack
C. publicly committing the company to a policy of matching a competitors' terms or prices
D. maintaining a war chest of cash and marketable securities
E. challenging struggling runner-up firms that are on the verge of going under
Although the purposes of defensive strategies are to lower the risk of being attacked, weaken the impact of any attack that occurs, and influence challengers to aim their efforts at other rivals, challenging struggling runner-up firms that are on the verge of going under is an example of an offensive strategy.
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Blooms: Understand
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Learning Objective: 06-02 Recognize when being a first mover or a fast follower or a late mover can lead to competitive advantage.
Topic: Using Defensive Strategies to Protect a Company's Market Position and Competitive Advantage
6-25
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14. Which of the following is a potential defensive move to ward off challenger firms?
A. granting volume discounts, offering better financing terms to dealers/distributors, and providing discount coupons to buyers to help discourage them from experimenting with other suppliers or brands
B. signaling challengers that retaliation is likely in the event they launch an attack
C. making an occasional strong counter-response to the moves of weak competitors to enhance the firm's image as a tough defender
D. maintaining a war chest of cash and marketable securities
E. All of these choices are correct.
Defensive strategies can be used to lower the risk of being attacked, weaken the impact of any attack that occurs, and influence challengers to aim their efforts at other rivals. All of the choices are example of types of defensive parries.
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Learning Objective: 06-02 Recognize when being a first mover or a fast follower or a late mover can lead to competitive advantage.
Topic: Using Defensive Strategies to Protect a Company's Market Position and Competitive Advantage
15. Being first to initiate a strategic move can have a high payoff in all but which one of the following instances?
A. when pioneering helps build a firm's image and reputation with buyers
B. when first-time customers remain strongly loyal to pioneering firms in making repeat purchases
C. when early commitments to new technologies, new-style components, new or emerging distribution channels, and so on can produce an absolute cost advantage over rivals
D. when moving first can constitute a preemptive strike, making imitation extra hard or unlikely
E. when pioneering leadership is more costly than followership
Being first to initiate a strategic move can have a high payoff for a company when: (1) pioneering helps build a firm's image and reputation with buyers; (2) early commitments to new technologies, new-style components, new or emerging distribution channels, and so on, can produce an absolute cot advantage over rivals; (3) first-time customers remain strongly loyal to pioneering firms in making repeat purchases; and (4) moving first constitutes a preemptive strike, making imitation extra hard or unlikely. It is illogical to expect that there are high payoffs when pioneering leadership is more costly than followership.
AACSB: Analytical Thinking
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Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 06-02 Recognize when being a first mover or a fast follower or a late mover can lead to competitive advantage.
Topic: Timing a Company's Offensive and Defensive Strategic Moves
6-26
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16. First-mover advantages are unlikely to be present in which one of the following instances?
A. when pioneering helps build a firm's image and reputation with buyers
B. when first-time customers remain strongly loyal to pioneering firms in making repeat purchases
C. when early commitments to new technologies, new-style components, new or emerging distribution channels, and so on can produce an absolute cost advantage over rivals
D. when moving first can constitute a preemptive strike, making imitation extra hard or unlikely
E. when rapid market evolution (due to fast-paced changes in technology or buyer preferences) presents opportunities to leapfrog a first-mover's products with more attractive next-version products
When rapid market evolution occurs, often involving furious technological change or product innovation, a first mover may become vulnerable to next-generation technology or products. Markets can be slow to accept the innovative product offering of a first mover, in which case a fast follower with substantial resources and marketing muscle can leapfrog a first mover.
AACSB: Analytical Thinking
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Difficulty: 2 Medium
Learning Objective: 06-02 Recognize when being a first mover or a fast follower or a late mover can lead to competitive advantage. Topic: Timing a Company's Offensive and Defensive Strategic Moves
17. In which of the following instances are first-mover disadvantages not likely to arise?
A. when the costs of pioneering are much higher than being a follower and only negligible buyer loyalty or cost savings accrue to the pioneer
B. when rivals are employing offensive strategies rather than defensive strategies
C. when the products of an innovator are somewhat primitive and do not live up to buyer expectations
D. when buyers are skeptical about the benefits of a new technology or product being pioneered by a first mover
E. when rapid market evolution (due to fast-paced changes in technology or buyer preferences) gives fast followers and maybe even cautious late movers the opening to leapfrog a first mover's products with more attractive next-version products
First-mover disadvantages (or late follower advantages) can arise in the following situations: (1) when pioneering leadership is more costly than followership, (2) when the products of an innovator are somewhat primitive and do not live up to buyer expectations, (3) when potential buyers are skeptical about the benefits of a new technology or product being pioneered by a first mover, or (4) when rapid market evolution (due to fast-paced changes in either technology or buyer needs and expectations) gives fast followers and maybe even cautious late movers the opening to leapfrog a first mover's products with more attractive next-version products. Whether or not rivals are employing offensive rather than defensive strategies has no bearing on first-mover disadvantages.
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Blooms: Analyze
Difficulty: 3 Hard
Learning Objective: 06-02 Recognize when being a first mover or a fast follower or a late mover can lead to competitive advantage. Topic: Timing a Company's Offensive and Defensive Strategic Moves
6-27
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18. When the race among rivals for industry leadership is a marathon rather than a sprint,
A. it is best to be a fast follower than a first mover or a slow mover.
B.
C. fast followers find it easy to leapfrog the pioneer with even better next-generation products of their own.
D. a slow mover may not be unduly penalized and first-mover advantages can be fleeting.
E. being a first mover generally entails relatively low risk and carries a potentially big advantage.
F. there are nearly always big advantages to being a slow mover rather than an early mover, especially as concerns avoiding the "mistakes" of first or early movers.
In weighing the pros and cons of being a first mover versus a fast follower versus a slow mover, it matters whether the race to market leadership in a particular industry is a marathon or a sprint. In marathons, a slow mover is not unduly penalized first-mover advantages can be fleeting, and there's ample time for fast followers and sometimes even late movers to catch up.
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Difficulty: 3 Hard
Learning Objective: 06-02 Recognize when being a first mover or a fast follower or a late mover can lead to competitive advantage.
Topic: Timing a Company's Offensive and Defensive Strategic Moves
19. Market conditions and factors that tend not to favor first movers include
A. growth in demand that depends on the development of complementary products or services that are not currently available and new industry infrastructure that is needed before buyer demand can surge.
B. quick market penetration and strong loyalty among first-time customers.
C. buyer behavior that is readily attracted to new technology or product features.
D. conditions that make imitation difficult and absolute cost advantages that accrue to those who make early commitments to new technologies, components, or distribution channels.
E. All of these choices are correct.
In situations when rapid market evolution including growth in demand occurs (due to fast-paced changes in either technology or buyer needs and expectations), fast followers and maybe even cautious late movers have an opening to leapfrog a first mover's products with more attractive next-version or even complementary products.
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Blooms: Understand
Difficulty: 3 Hard
Learning Objective: 06-02 Recognize when being a first mover or a fast follower or a late mover can lead to competitive advantage.
Topic: Timing a Company's Offensive and Defensive Strategic Moves
6-28
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20. The difference between a merger and an acquisition is
A. a merger involves one company purchasing the assets of another company with cash, whereas an acquisition involves one company becoming the owner of another company by buying all of the shares of its common stock.
B. a merger is the combining of two or more companies into a single corporate entity (with the newly created company often taking on a new name), whereas an acquisition is a combination in which one company, the acquirer, purchases and absorbs the operations of another, the acquired.
C. nonexistent; in both instances, two companies become one.
D. the brands of both companies are retained in a merger, whereas with an acquisition, there is only one surviving brand name.
E. a merger involves two or more companies deciding to adopt the same strategy, whereas an acquisition involves one company becoming the owner of another company but with each company still pursuing its own separate strategy.
By definition, a merger is the combination of two or more companies into a single corporate entity (with the newly created company often taking on a new name), whereas an acquisition is a combination in which one company purchases and absorbs the operations of another company.
AACSB: Analytical Thinking
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Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 06-03 Become aware of the strategic benefits and risks of expanding a company's horizontal scope through mergers and acquisitions.
Topic: Strengthening a Company's Market Position via Its Scope of Operations
21. Which of the following is not a typical strategic objective or benefit that drives mergers and acquisitions?
A. to gain quick access to new technologies or other resources and capabilities
B. to create a more cost-efficient operation out of the combined companies
C. to fundamentally alter a company's trajectory and improve its business outlook
D. to expedite shifting from one strategy to another and gain better access to additional financial capital
E. to extend a company's business into new product categories and/or expand a company's geographic coverage
Merger and acquisition strategies typically set sights on achieving any of five objectives: (1) extending the company's business into new product categories, (2) creating a more cost-efficient operation out of the combined companies, (3) expanding a company's geographic coverage, (4) gaining quick access to new technologies or complementary resources and capabilities, and (5) leading the convergence of industries whose boundaries are being blurred by changing technologies and new market opportunities. Expediting the shifting of one strategy to another, etc., is not commonly an objective of a merger and acquisition strategy.
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Learning Objective: 06-03 Become aware of the strategic benefits and risks of expanding a company's horizontal scope through mergers and acquisitions.
6-29
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Topic: Strengthening a Company's Market Position via Its Scope of Operations
22. Mergers and acquisitions are often driven by such strategic objectives as to
A. expand a company's geographic coverage, extend its business into new product categories, or gain quick access to new technologies or other resources and capabilities.
B. weaken the bargaining power of either key suppliers or key customers.
C. reduce the company's vulnerability to industry driving forces.
D. facilitate a company's shift from one type of competitive strategy to another.
E. secure a higher credit rating and better access to additional financial capital.
Merger and acquisition strategies typically set sights on achieving any of five objectives: (1) extending the company's business into new product categories, (2) creating a more cost-efficient operation out of the combined companies, (3) expanding a company's geographic coverage, (4) gaining quick access to new technologies or complementary resources and capabilities, and (5) leading the convergence of industries whose boundaries are being blurred by changing technologies and new market opportunities.
AACSB: Analytical Thinking
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Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 06-03 Become aware of the strategic benefits and risks of expanding a company's horizontal scope through mergers and acquisitions.
Topic: Strengthening a Company's Market Position via Its Scope of Operations
23. Merger and acquisition strategies
A. are never prone to mistakes, such as deciding which activities to leave alone and which activities to meld into their own operations and systems.
B. may offer considerable cost-saving opportunities and can be beneficial in helping a company try to invent a new industry and lead the convergence of industries whose boundaries are being blurred by changing technologies and new market opportunities.
C. are a particularly effective way of pursuing blue ocean and outsourcing strategies.
D. seldom are a superior strategic alternative to forming alliances or partnerships with these same companies because of the financial drain of using the company's cash resources to accomplish the merger or acquisition.
E. are one of the best ways to help a company strongly differentiate its product offering and use a differentiation strategy to strengthen its market position.
Combining the operations of two companies via merger or acquisition is an attractive strategic option for achieving operating economies, including cost savings by combining and downsizing support activities, and leading the convergence of industries whose boundaries are being blurred by changing technologies and new market opportunities.
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Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 06-03 Become aware of the strategic benefits and risks of expanding a company's horizontal scope through mergers and acquisitions.
Topic: Strengthening a Company's Market Position via Its Scope of Operations
6-30
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24. Why do mergers and acquisitions sometimes fail to produce anticipated results?
A. they do not produce the hoped-for outcomes, and changes to existing operations may not eventuate.
B. cost savings may prove smaller than expected.
C. gains in competitive capabilities may take substantially longer to materialize or may never do so.
D. efforts to mesh corporate cultures can stall due to formidable resistance from organization members, and key employees can become disenchanted and leave.
E. All of these choices are correct.
Despite many successes, mergers and acquisitions do not always produce the hoped-for outcomes. This is because: (1) cost savings may prove smaller than expected, (2) gains in competitive capabilities may take substantially longer to realize or, worse, may never materialize, (3) efforts to mesh the corporate cultures can stall due to formidable resistance from organization members, (4) key employees at the acquired company can quickly become disenchanted and leave, (5) the morale of company personnel who remain can drop to disturbingly low levels because they disagree with newly instituted changes, (6) differences in management styles and operating procedures can prove hard to resolve, and (7) managers appointed to oversee the integration of a newly acquired company can make mistakes in deciding which activities to leave alone and which activities to meld into their own operations and systems.
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Learning Objective: 06-03 Become aware of the strategic benefits and risks of expanding a company's horizontal scope through mergers and acquisitions.
Topic: Horizontal Merger and Acquisition Strategies
25. Mergers and acquisitions
A. are nearly always successful in achieving their desired purpose (unlike strategic alliances and collaborative partnerships).
B. all too frequently do not produce the hoped-for outcomes.
C. are generally more effective in securing a new competitive advantage than in protecting an existing competitive advantage.
D. are highly risky because of the financial drain that comes from using the company's cash resources to pay for the costs of the merger or acquisition.
E. are usually more successful in helping a company's shift from one competitive strategy to another than in improving a company's competitive strength and resource capabilities.
Despite many successes, mergers and acquisitions do not always produce the hoped-for outcomes. A number of mergers and acquisitions have been notably unsuccessful.
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Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 06-03 Become aware of the strategic benefits and risks of expanding a company's horizontal scope through mergers and acquisitions.
Topic: Horizontal Merger and Acquisition Strategies
6-31
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26. Vertical integration strategies
A. extend a company's competitive and operating scope because its operations extend across more parts of the total industry value chain.
B. are one of the best strategic options for helping companies win the race for global market leadership.
C. are a cost-effective means of expanding a company's lineup of products and services.
D. are particularly effective in boosting a company's ability to expand into additional geographic markets, particularly the markets of foreign countries.
E. are a good strategy option for improving a company's supply chain management capabilities, pursuing efforts to remodel a company's value chain, achieving direct control over the costs of performing value chain activities, and gaining access to buyers.
Vertical integration extends a firm's competitive and operating scope within the same industry. It involves expanding the firm's range of value chain activities backward into sources of supply and/or forward toward end users. A vertically integrated firm is one that performs value chain activities along more than one stage of an industry's overall value chain.
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Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 06-04 Learn the advantages and disadvantages of extending a company's scope of operations via vertical integration.
Topic: Vertical Integration Strategies
27. The two most compelling reasons for a company to pursue vertical integration (either forward or backward) are to
A. expand into foreign markets and/or control more of the industry value chain.
B. broaden the firm's product line and/or avoid the need for outsourcing.
C. enable use of offensive strategies and/or gain a first-mover advantage over rivals in revamping the industry value chain.
D. strengthen the company's competitive position and/or boost its profitability.
E. achieve product differentiation and/or lengthen the company's value chain to include more activities performed in-house and thereby gain greater ability to reduce internal operating costs.
The two best reasons for investing company resources in vertical integration are to strengthen the firm's competitive position and/or to boost its profitability. Vertical integration has no real payoff unless it produces sufficient cost savings to justify the extra investment, adds materially to a company's technological and competitive strengths, and/or helps differentiate the company's product offering.
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Learning Objective: 06-04 Learn the advantages and disadvantages of extending a company's scope of operations via vertical integration.
Topic: Vertical Integration Strategies
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28. Vertical integration strategies can aim at
A. full integration (participating in all stages of the industry vertical chain).
B. partial integration (building positions in selected stages of the value chain).
C. tapered integration (involves both outsourcing and performing the activity internally).
D. forward integration (value chain activities performed by distributors) or backward toward suppliers.
E. All of these answer choices are correct.
All of the answer choices are among the objectives of a vertical integration strategy.
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Learning Objective: 06-04 Learn the advantages and disadvantages of extending a company's scope of operations via vertical integration.
Topic: Vertical Integration Strategies
29. A good example of forward vertical integration is a
A. producer of organic vegetables deciding to acquire a compost company.
B. footwear manufacturer developing own-branded retail stores.
C. crude oil refiner purchasing an oil well drilling and exploration company.
D. hospital opening a nursing home for the aged.
E. maker of prescription drugs acquiring a chemical manufacturer.
All of the answer choices, except footwear manufacturer developing own-branded retail stores, are examples of backward integration.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 06-04 Learn the advantages and disadvantages of extending a company's scope of operations via vertical integration.
Topic: Vertical Integration Strategies
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
6-33
30. The two best reasons for investing company resources in vertical integration (either forward or backward) are to
A. speed entry into foreign markets and/or exercise stronger control over operating costs.
B. broaden the firm's product line and/or enable the company to charge a premium price for its product/service.
C. gain a first-mover advantage in adopting new production technologies and/or employ potent defensive strategies.
D. strengthen the company's competitive position and/or boost its profitability.
E. achieve greater product differentiation and/or gain better access to prospective buyers.
The two best reasons for investing company resources in vertical integration are to strengthen the firm's competitive position and/or to boost its profitability.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 06-04 Learn the advantages and disadvantages of extending a company's scope of operations via vertical integration.
Topic: Vertical Integration Strategies
31. For backward vertical integration into the business of suppliers to be a viable and profitable strategy, a company must
A. have considerable expertise in supply chain management, transportation logistics, and inventory control techniques.
B. be able to achieve the same scale economies as outside suppliers and match or beat suppliers' production efficiency with no drop in quality.
C. have large state-of-the-art production facilities so that it can fully capture all economies of scale in producing parts and components.
D. have core competences in R&D, product design and engineering, and distribution logistics so that it will have adequate capabilities to produce and distribute parts and components in a timely and cost-effective manner.
E. have a distinctive competence in production process technology and at least a core competence in manufacturing R&D.
Backward vertical integration works best in situations where: (1) suppliers have very large profit margins, (2) where the item being supplied is a major cost component, and/or (3) the requisite technological skills are easily mastered or acquired. Backward integration has no payoff unless it produces sufficient cost savings to justify the extra investment, adds materially to a company's technological and competitive strengths, and/or helps differentiate the company's product offering.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 06-04 Learn the advantages and disadvantages of extending a company's scope of operations via vertical integration.
Topic: Vertical Integration Strategies
6-34
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32. Which one of the following statements about backward vertical integration is false?
A. What makes backward vertical integration such an attractive strategic option is the opportunity to capture the profit margins of suppliers and thereby increase the company's own profitability.
B. Backward vertical integration can produce a differentiation-based competitive advantage when a company, by performing activities internally rather than utilizing outside suppliers, ends up with a better-quality product/service offering, improves the caliber of its customer service, or in other ways enhances the performance of its final product.
C. For backward integration to be a viable and profitable strategy, a company must be able to (1) achieve the same scale economies as outside suppliers and (2) match or beat suppliers' production efficiency with no drop in quality.
D. The best potential for being able to reduce costs via a backward integration strategy exists in situations where suppliers have outsized profit margins, where the item being supplied is a major cost component, and where the requisite technological skills are easily mastered or can be gained by acquiring a supplier with the desired technological know-how.
E. Potential advantages of backward integration include sparing a company the uncertainty of being dependent on suppliers for crucial components or support services and lessening a company's vulnerability to powerful suppliers inclined to raise prices at every opportunity.
Backward vertical integration can produce a differentiation-based competitive advantage when performing activities internally contributes to a better-quality product/service offering, improves the caliber of customer service, or in other ways enhances the performance of a final product. Other potential advantages of backward integration include sparing a company the uncertainty of being dependent on suppliers for crucial components or support services and lessening a company's vulnerability to powerful suppliers inclined to raise prices at every opportunity. For backward integration to be a viable and profitable strategy, a company must be able to (1) achieve the same scale economies as outside suppliers and (2) match or beat suppliers' production efficiency with no decline in quality. Furthermore, the best potential for being able to reduce costs via a backward integration strategy exists in situations where suppliers have very large profit margins, where the item being supplied is a major cost component, and where the requisite technological skills are easily mastered or acquired.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 3 Hard
Learning Objective: 06-04 Learn the advantages and disadvantages of extending a company's scope of operations via vertical integration.
Topic: Vertical Integration Strategies
6-35
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33. The strategic impetus for forward vertical integration is to
A. gain better access to end users, improve market awareness, and/or include the end user's purchasing experience as a differentiating feature.
B. the opportunity to capture the profits being earned by forward distribution allies (and thereby increase the company's own profits).
C. reduce or eliminate disruptions in the delivery of the company's products to end users.
D. avoid channel conflict.
E. expand a company's geographic coverage.
Vertical integration into forward stages of the industry value chain allows manufacturers to gain better access to end users, improve market visibility, and include the end user's purchasing experience as a differentiating feature.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 06-04 Learn the advantages and disadvantages of extending a company's scope of operations via vertical integration.
Topic: Vertical Integration Strategies
34. Which of the following is typically the strategic impetus for forward vertical integration?
A. being able to control the wholesale/retail portion of the industry value chain
B. having fewer disruptions in the delivery of the company's products to end users
C. gaining better access to end users and better market visibility
D. broadening the company's product line
E. allowing the firm access to greater economies of scale
Vertical integration into forward stages of the industry value chain allows manufacturers to gain better access to end users, improve market visibility, and include the end user's purchasing experience as a differentiating feature.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 06-04 Learn the advantages and disadvantages of extending a company's scope of operations via vertical integration.
Topic: Vertical Integration Strategies
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
6-36
35. Bypassing regular sales channels in favor of Internet retailing can have strong appeal if it
A. raises distribution costs and ignores channel conflicts.
B. provides a relative cost disadvantage over rivals.
C. offers lower margins resulting in higher selling prices to end users.
D. includes partnering rather than competing with existing distributors.
E. All of these choices are correct.
Bypassing regular wholesale/retail channels in favor of direct sales and Internet retailing can have appeal if it lowers distribution costs, produces a relative cost advantage over certain rivals, offers higher margins, or results in lower selling prices to end users. In addition, sellers are compelled to include the Internet as a retail channel when a sufficiently large number of buyers in an industry prefer to make purchases online. Furthermore, in industries where the strong support and goodwill of dealer networks is essential, companies may conclude that it is important to avoid channel conflict and that their website should be designed to partner with dealers rather than compete with them.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 06-04 Learn the advantages and disadvantages of extending a company's scope of operations via vertical integration.
Topic: Vertical Integration Strategies
36. Which of the following is not a strategic disadvantage of
vertical integration?
A. Vertical integration boosts a firm's capital investment in the industry, thus increasing business risk if the industry becomes unattractive later.
B. Integrating 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.
C. Vertical integration limits a company's ability to achieve greater product differentiation and to exercise direct control over the costs of performing value chain activities.
D. Forward or backward integration often calls for radically different skills and business capabilities than the firm possesses.
E. Vertical integration poses all kinds of capacity-matching problems.
Among the most serious drawbacks to vertical integration are: (1) vertical integration increases a firm's capital investment in its industry, (2) integrating into more industry value chain segments increases business risk if industry growth and profitability sour, (3) vertically integrated companies are often slow to embrace technological advances or more-efficient production methods, (4) integrating backward potentially results in less flexibility in accommodating shifting buyer preferences, (5) vertical integration poses all kinds of capacity matching problems, and (6) integration forward or backward often requires the development of new skills and business capabilities. Expanding a company's ability to achieve greater product differentiation, etc., is actually one of the strategic advantages of vertical integration.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 06-04 Learn the advantages and disadvantages of extending a company's scope of operations via vertical integration.
6-37
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
Topic: Vertical Integration Strategies
37. Backward integration involves
A. performing industry value chain activities previously performed by suppliers or other companies engaged in earlier stages of the value chain.
B. linking with businesses within the array of value chain activities to eliminate competition and broaden the product offering.
C. capitalizing on company's underutilized managerial capabilities for achieving greater synergistic cost advantages.
D. reducing the opportunity for achieving greater product differentiation.
E. developing new skills and business capabilities.
By definition, backward integration involves performing industry value chain activities previously performed by suppliers or other enterprises engaged in earlier stages of the industry value chain.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 06-04 Learn the advantages and disadvantages of extending a company's scope of operations via vertical integration.
Topic: Vertical Integration Strategies
38. Outsourcing strategies
A. are nearly always a more attractive strategic option than merger and acquisition strategies.
B. carry the substantial risk of raising a company's costs.
C. carry the substantial risk of making a company overly dependent on its suppliers.
D. increase a company's risk exposure to changing technology and/or changing buyer preferences.
E. involve farming out value chain activities presently performed in-house to outside specialists and strategic allies.
Outsourcing involves contracting out certain value chain activities to outside specialists and strategic allies.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 06-05 Understand the conditions that favor farming out certain value chain activities to outside parties.
Topic: Outsourcing Strategies: Narrowing the Scope of Operations
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
6-38
39. Outsourcing the performance of value chain activities presently performed in-house to outside vendors and suppliers makes strategic sense when
A. an activity can be performed better or more cheaply by outside specialists.
B. it allows a company to focus on its core business and leverage its key resources.
C. outsourcing won't adversely hollow out the company's technical know-how, competencies, or capabilities while it improves organizational flexibility and speeds time to market.
D. it improves organizational flexibility and speeds time to market.
E. All of these choices are correct.
The advantages of outsourcing include: (1) an activity can be performed better or more cheaply by outside specialists; (2) said activity is not crucial to the firm's ability to achieve sustainable competitive advantage and won't hollow out its capabilities, core competencies, or technical knowhow; (3) it improves organizational flexibility and speeds time to market; (4) it reduces the company's risk exposure to changing technology and/or buyer preferences; and (5) it allows a company to concentrate on its core business, leverage its key resources and core competencies, and do even better what it already does best.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 06-05 Understand the conditions that favor farming out certain value chain activities to outside parties.
Topic: Outsourcing Strategies: Narrowing the Scope of Operations
40. The big risk of employing an outsourcing strategy is
A. the increased time it takes to respond effectively to the fresh strategic moves of rival firms.
B. hollowing out the competitive capabilities a company needs to be a master of its own destiny.
C. impairing a company's capability to be a leader in product innovation.
D. increased vulnerability to shifts in buyer demand.
E. increased costs of differentiating the company's product/service from those of competitors.
The biggest danger of outsourcing is that a company will farm out the wrong types of activities and thereby hollow out its own capabilities.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 06-05 Understand the conditions that favor farming out certain value chain activities to outside parties.
Topic: Outsourcing Strategies: Narrowing the Scope of Operations
6-39
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
41. Which of the following is not one of the key benefits of employing an outsourcing strategy?
A. It allows a company to concentrate on its core business, leverage its key resources and core competencies, and do even better what it already does best.
B. It can hollow out a firm's own capabilities and lose touch with activities and expertise that contribute fundamentally to the firm's competitiveness and market success.
C. It reduces the company's risk exposure to changing technology and/or buyer preferences.
D. It improves organizational flexibility and speeds time to market.
E. It involves an activity that can be performed better or more cheaply by outside specialists.
The advantages of outsourcing include: (1) an activity can be performed better or more cheaply by outside specialists; (2) said activity is not crucial to the firm's ability to achieve sustainable competitive advantage and won't hollow out its capabilities, core competencies, or technical knowhow; (3) it improves organizational flexibility and speeds time to market; (4) it reduces the company's risk exposure to changing technology and/or buyer preferences; and (5) it allows a company to concentrate on its core business, leverage its key resources and core competencies, and do even better what it already does best.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 06-05 Understand the conditions that favor farming out certain value chain activities to outside parties.
Topic: Outsourcing Strategies: Narrowing the Scope of Operations
42. A strategic alliance
A. is a collaborative arrangement in which companies join forces to defeat mutual competitive rivals.
B. involves two or more companies joining forces to pursue vertical integration.
C. is a formal agreement between two or more companies in which there is strategically relevant collaboration of some sort, joint contribution of resources, shared risk, shared control, and mutual dependence.
D. is a partnership between two companies that is typically intended to eliminate the need to engage in outsourcing.
E. is usually a cheaper and more effective way for companies to join forces than is a merger.
A strategic alliance is a formal agreement between two or more separate companies in which there is strategically relevant collaboration of some sort, joint contribution of resources, shared risk, shared control, and mutual dependence.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 06-06 Gain an understanding of how strategic alliances and collaborative partnerships can bolster a company's collection of resources and capabilities.
Topic: Strategic Alliances and Partnerships
6-40
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
43. The competitive attraction of entering into strategic alliances and collaborative partnerships is
A. in allowing companies to bundle resources and competencies that are more valuable in a joint effort than when kept separate.
B. reducing costs, transferring skills, and expanding the product line.
C. enabling greater vertical integration.
D. in allowing the partners to transfer intellectual property rights and proprietary information.
E. in helping the partners to increase their respective market shares.
Among most common reasons companies enter into strategic alliances is to bundle the resources and competencies (such as personnel and expertise needed to create desirable new skill sets and capabilities) that are more valuable in a joint effort than when going it alone.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 06-06 Gain an understanding of how strategic alliances and collaborative partnerships can bolster a company's collection of resources and capabilities.
Topic: Strategic Alliances and Partnerships
44. Which one of the following is not a strategically beneficial reason a company may enter into strategic partnerships or cooperative arrangements with key suppliers, distributors, or makers of complementary products?
A. to acquire or improve access to new markets
B. to expedite the development of promising new technologies or products
C. to enable greater vertical integration
D. to improve supply chain efficiency
E. to overcome deficiencies in technical and manufacturing expertise and to create desirable new skill sets and capabilities
The most common reasons companies enter into strategic alliances are to expedite the development of promising new technologies or products, to overcome deficits in their own technical and manufacturing expertise, to bring together the personnel and expertise needed to create desirable new skill sets and capabilities, to improve supply chain efficiency, to gain economies of scale in production and/or marketing, and to acquire or improve market access through joint marketing agreements. Enabling greater vertical integration is not among those reasons.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 06-06 Gain an understanding of how strategic alliances and collaborative partnerships can bolster a company's collection of resources and capabilities.
Topic: Strategic Alliances and Partnerships
6-41
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
45. The reasons firms enter into strategic alliances is to
A. expedite the development of new technologies.
B. overcome deficits in their operation.
C. improve supply chain efficiency.
D. acquire or improve market access.
E. All of these choices are correct.
The most common reasons companies enter into strategic alliances are to expedite the development of promising new technologies or products, to overcome deficits in their own technical and manufacturing expertise, to bring together the personnel and expertise needed to create desirable new skill sets and capabilities, to improve supply chain efficiency, to gain economies of scale in production and/or marketing, and to acquire or improve market access through joint marketing agreements. Enabling greater vertical integration is not among those reasons.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 06-06 Gain an understanding of how strategic alliances and collaborative partnerships can bolster a company's collection of resources and capabilities.
Topic: Strategic Alliances and Partnerships
46. Strategic alliances are more likely to be long lasting when
A. they involve collaboration with suppliers or distribution allies or when both parties conclude that continued collaboration is in their mutual interests.
B. the alliance involves partners based in countries with distinctly different cultures and consumer buying habits and preferences.
C. both partners are experienced with strategic alliances and routinely enter into collaborative agreements with firms in peripheral industries.
D. the alliance involves joining forces in R&D to develop new technologies cheaper than a company could develop the technology on its own.
E. each partner has considerable resource weaknesses in the marketplace.
Alliances are more likely to be long lasting when (1) they involve collaboration with partners that do not compete directly; (2) a trusting relationship has been established; and (3) both parties conclude that continued collaboration is in their mutual interest, perhaps because new opportunities for learning are emerging.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 06-06 Gain an understanding of how strategic alliances and collaborative partnerships can bolster a company's collection of resources and capabilities.
Topic: Strategic Alliances and Partnerships
6-42
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47. Which of the following is not a typical reason that many alliances prove unstable or break apart?
A. diverging objectives and priorities
B. an inability to work well together
C. the emergence of more attractive technological paths
D. disagreement over how to divide the profits gained from joint collaboration
E. changing conditions that make the purpose of the alliance obsolete
Typical reasons why strategic alliances prove to be difficult include: (1) diverging objectives and priorities, (2) inability of partners to work well together, (3) changing conditions that make the purpose of the alliance obsolete, (4) emergence of more attractive technological paths, and (5) marketplace rivalry between one or more allies.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 06-06 Gain an understanding of how strategic alliances and collaborative partnerships can bolster a company's collection of resources and capabilities.
Topic: Strategic Alliances and Partnerships
48. Experience indicates that strategic alliances
A. are generally successful.
B. work well in cooperatively developing new technologies and new products but seldom work well in promoting greater supply chain efficiency.
C. work best when they are aimed at achieving a mutually beneficial competitive advantage for the allies.
D. stand a reasonable chance of helping a company reduce competitive disadvantage but very rarely form the basis of a durable competitive advantage over rivals.
E. are usually a company's best approach to building a distinctive competence.
Experience indicates that alliances stand a reasonable chance of helping a company reduce competitive disadvantage, but very rarely have they proved a strategic option for gaining a durable competitive edge over rivals.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 06-06 Gain an understanding of how strategic alliances and collaborative partnerships can bolster a company's collection of resources and capabilities.
Topic: Strategic Alliances and Partnerships
6-43
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
49. Which of the following is not a typical reason that many alliances do not live up to expectations?
A. inability of partners to work well together
B. emergence of more attractive technological paths
C. changing conditions make the purpose of the alliance obsolete
D. disagreement over how to divide the added market share and profits gained from joint collaboration
E. diverging objectives and priorities
Typical reasons why strategic alliances prove to be difficult include: (1) diverging objectives and priorities, (2) inability of partners to work well together, (3) changing conditions that make the purpose of the alliance obsolete, (4) emergence of more attractive technological paths, and (5) marketplace rivalry between one or more allies.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 06-06 Gain an understanding of how strategic alliances and collaborative partnerships can bolster a company's collection of resources and capabilities.
Topic: Strategic Alliances and Partnerships
50. The Achilles' heel (or biggest danger/pitfall) of relying heavily on alliances and cooperative strategies is
A. that partners will not divide profits from the alliance in an equitable manner.
B. becoming dependent on other companies for essential expertise and capabilities.
C. incurring excessive administrative expenses associated with engaging in collaborative efforts.
D. having to compromise the company's own priorities and strategies in reaching agreements with partners.
E. that strategic allies frequently become rivals in the marketplace.
The Achilles' heel of alliances and cooperative strategies is becoming dependent on other companies for essential expertise and capabilities. To be a market leader (and perhaps even a serious market contender), a company must ultimately develop its own resources and capabilities in areas where internal strategic control is pivotal to protecting its competitiveness and building competitive advantage.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 3 Hard
Learning Objective: 06-06 Gain an understanding of how strategic alliances and collaborative partnerships can bolster a company's collection of resources and capabilities.
Topic: Strategic Alliances and Partnerships
Short Answer Questions
6-44
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
51. Identify and briefly explain five types of offensive strategies.
Answers may vary. The seven types are provided in Feedback.
Feedback: The principal offensive strategy options include: (1) offering an equally good or better product at a lower price, (2) leapfrogging competitors by being the first to market with nextgeneration technology or products, (3) pursuing continuous product innovation to draw sales and market share away from less innovative rivals, (4) pursuing disruptive product innovations to create new markets, (5) adopting and improving on the good ideas of other companies, (6) using hit-and-run or guerrilla warfare tactics to grab sales and market share from complacent or distracted rivals, and (7) launching a preemptive strike to capture a rare opportunity or secure an industry's limited resources.
AACSB: Analytical Thinking Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 06-01 Learn whether and when to pursue offensive or defensive strategic moves to improve a company's market position.
Topic: Strengthening a Company's Competitive Position: Strategic Moves, Timing, and Scope of Operation
52. What is a blue ocean strategy, what is its appeal, and what is its drawback?
Answers may vary.
Feedback: A blue ocean strategy seeks to gain a dramatic and durable competitive advantage by abandoning efforts to beat out competitors in existing markets and, instead, inventing a new industry or distinctive market segment that renders existing competitors largely irrelevant and allows a company to create and capture altogether new demand. Blue ocean strategies provide a company with a great opportunity in the short run. But they don't guarantee a company's long-term success, which depends more on whether a company can protect the market position it opened up.
AACSB: Analytical Thinking Blooms: Remember
Difficulty: 3 Hard
Learning Objective: 06-01 Learn whether and when to pursue offensive or defensive strategic moves to improve a company's market position.
Topic: Launching Strategic Offensives to Improve a Company's Market Position
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
6-45
