Strategic management and business policy global 15th edition hunger test bank

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Strategic Management and Business Policy, 15e, Global Edition (Wheelen et al.)

Chapter 6 Strategy Formulation: Business Strategy 1) Strategy formulation or strategic planning begins with a(n) ________, which is the process of finding a strategic fit between external opportunities and internal strengths while working around external threats and internal weaknesses.

A) environmental analysis.

B) position analysis.

C) strategic evaluation.

D) objective analysis.

E) situation analysis.

Answer: E Difficulty: Easy Learning Obj.: 6.1: Utilize the SFAS matrix and a SWOT diagram to examine business strategy AACSB: Analytical thinking 2) One desired outcome of analyzing strategic factors is identifying niches where an organization can use its ________ to take advantage of a particular market opportunity.

A) differentiating capabilities.

B) distinctive competencies.

C) situational proficiency.

D) core competencies.

E) distinctive characteristics.

Answer: D Difficulty: Moderate Learning Obj.: 6.1: Utilize the SFAS matrix and a SWOT diagram to examine business strategy AACSB: Analytical thinking 3) An acronym for the assessment of the external and internal environments of the business corporation in the process of strategy formulation/strategic planning is A) PET. B) MBO. C) SWOT. D) SBU. E) ROI. Answer: C Difficulty: Easy Learning Obj.: 6.1: Utilize the SFAS matrix and a SWOT diagram to examine business strategy AACSB: Application of knowledge

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4) The T in SWOT represents A) threat.

B) tactic.

C) technique.

D) task.

E) time.

Answer: A Difficulty: Easy Learning Obj.: 6.1: Utilize the SFAS matrix and a SWOT diagram to examine business strategy AACSB: Application of knowledge 5) The text authors note that the essence of strategy is A) opportunity divided by capacity.

B) strength divided by opportunity.

C) threat divided by capacity.

D) threat divided by opportunity.

E) opportunity divided by threat.

Answer: A Difficulty: Difficult Learning Obj.: 6.1: Utilize the SFAS matrix and a SWOT diagram to examine business strategy AACSB: Application of knowledge 6) All of the following reflect criticisms of the SWOT analysis EXCEPT A) it is simply the opinions of those filling out the boxes.

B) virtually everything that is a strength is also a weakness.

C) it provides a rational link to strategy implementation.

D) virtually everything that is an opportunity is also a threat.

E) there is no tie to the view from the customer.

Answer: C Difficulty: Difficult Learning Obj.: 6.1: Utilize the SFAS matrix and a SWOT diagram to examine business strategy AACSB: Analytical thinking 7) In the development of an SFAS matrix, the first step is to A) enter the ratings of how the company's management is responding to each of the strategic factors.

B) calculate the weighted scores.

C) list the most important EFAS and IFAS items.

D) indicate short-term goals for the duration.

E) enter the weights for all of the internal factors.

Answer: C Difficulty: Difficult Learning Obj.: 6.1: Utilize the SFAS matrix and a SWOT diagram to examine business strategy AACSB: Application of knowledge

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8) The goal of strategy is to find a(n) ________ that is so well suited to the firm's competitive advantages that other organizations are not likely to challenge or dislodge it.

A) strategic fit.

B) propitious niche.

C) common thread.

D) business screen.

E) implicit strategy.

Answer: B Difficulty: Moderate Learning Obj.: 6.1: Utilize the SFAS matrix and a SWOT diagram to examine business strategy AACSB: Application of knowledge 9) According to the text, unique market opportunities that are available for only a particular time are called A) situational occasions.

B) critical openings.

C) strategy implementation.

D) strategic windows.

E) trigger points.

Answer: D Difficulty: Moderate Learning Obj.: 6.1: Utilize the SFAS matrix and a SWOT diagram to examine business strategy AACSB: Application of knowledge 10) One company that has successfully found a propitious niche is A) Coca-Cola.

B) PepsiCo. C) Frank J. Zamboni & Company.

D) Walmart.

E) Disney.

Answer: C Difficulty: Difficult Learning Obj.: 6.1: Utilize the SFAS matrix and a SWOT diagram to examine business strategy AACSB: Analytical thinking 11) The matrix that summarizes an organization's strategic factors by combining the external factors from the EFAS Table with the internal factors from the IFAS Table is called a(n) A) Total Weighted Score.

B) SWOT Matrix.

C) SFAS Matrix.

D) TOWS Matrix.

E) Issues Priority Matrix.

Answer: C Difficulty: Moderate Learning Obj.: 6.1: Utilize the SFAS matrix and a SWOT diagram to examine business strategy AACSB: Application of knowledge 3 Copyright © 2018 Pearson Education, Ltd.

12) In a SFAS Matrix, A) all strategic factors are weighted equally.

B) the number of strategic factors can become unmanageable.

C) the same criticisms found in the SWOT Matrix are replicated.

D) a factor may be listed as both a strength and a weakness.

E) only internal strategic factors are included.

Answer: D Difficulty: Difficult Learning Obj.: 6.1: Utilize the SFAS matrix and a SWOT diagram to examine business strategy AACSB: Analytical thinking 13) If a mission does not provide a common thread for a corporation's businesses, managers might be unclear about where the company is heading.

Answer: TRUE Difficulty: Moderate Learning Obj.: 6.1: Utilize the SFAS matrix and a SWOT diagram to examine business strategy AACSB: Application of knowledge 14) SO strategies attempt to take advantage of opportunities by overcoming weaknesses.

Answer: FALSE Difficulty: Difficult Learning Obj.: 6.1: Utilize the SFAS matrix and a SWOT diagram to examine business strategy 15) SWOT is an acronym that stands for Strategy, Weaknesses, Opportunities, and Threats.

Answer: FALSE Difficulty: Easy Learning Obj.: 6.1: Utilize the SFAS matrix and a SWOT diagram to examine business strategy AACSB: Application of knowledge 16) Populating a SWOT chart, by itself, is just the start of a strategic analysis.

Answer: TRUE Difficulty: Moderate Learning Obj.: 6.1: Utilize the SFAS matrix and a SWOT diagram to examine business strategy AACSB: Analytical thinking 17) The goal of strategy is to find an extremely favorable niche so well suited to the firm's internal and external environment that other corporations are not likely to challenge or dislodge it.

Answer: TRUE Difficulty: Moderate Learning Obj.: 6.1: Utilize the SFAS matrix and a SWOT diagram to examine business strategy AACSB: Analytical thinking

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18) The first firm through a strategic window can occupy an extremely favorable niche and discourage competition (if the firm has the required internal strengths).

Answer: TRUE Difficulty: Moderate Learning Obj.: 6.1: Utilize the SFAS matrix and a SWOT diagram to examine business strategy AACSB: Analytical thinking 19) One company that has successfully found a propitious niche (extremely favorable niche) is Frank J. Zamboni & Company, the manufacturer of the machines that smooth the ice at ice skating rinks.

Answer: TRUE Difficulty: Difficult Learning Obj.: 6.1: Utilize the SFAS matrix and a SWOT diagram to examine business strategy AACSB: Analytical thinking 20) Niches can grow and change over time.

Answer: TRUE Difficulty: Moderate Learning Obj.: 6.1: Utilize the SFAS matrix and a SWOT diagram to examine business strategy AACSB: Analytical thinking 21) The SFAS Matrix summarizes an organization's strategic factors by combining the external factors from the IFAS Table with the internal factors from the EFAS Table.

Answer: TRUE Difficulty: Difficult Learning Obj.: 6.1: Utilize the SFAS matrix and a SWOT diagram to examine business strategy AACSB: Application of knowledge 22) What is a propitious niche? Provide an example of a firm that has been able to occupy a propitious niche successfully.

Answer: A propitious niche is an extremely favorable niche that is so well suited to the firm's competitive advantages that other corporations are not likely to challenge or dislodge it. A niche is propitious to the extent that it currently is just large enough for one firm to satisfy demand.

After a firm has found and filled that niche, it is not worth a potential competitor's time or money to also go after the same niche.

One company that has successfully found a propitious niche is Frank J. Zamboni & Company, the manufacturer of the machines that smooth the ice at ice skating rinks. Zamboni was the first company through this strategic window. Before the machine was invented, people had to clean and scrape the ice by hand to prepare the surface for skating. So long as Zamboni's company can produce the machines in the quantity and quality desired at a reasonable price, it's not worth another company's effort to go after Frank J. Zamboni's propitious niche.

Difficulty: Difficult Learning Obj.: 6.1: Utilize the SFAS matrix and a SWOT diagram to examine business strategy AACSB: Application of knowledge

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23) Which of the following is true of an organization's mission statement?

A) should be crafted late in the strategic implementation stage B) articulates how the organization will take advantage of opportunities by overcoming weaknesses C) does not have to be unique to the organization D) should be short so every employee can remember it E) does not provide direction for employees, but rather informs outsiders of what the organization does Answer: D Difficulty: Difficult Learning Obj.: 6.2: Develop a mission statement that addresses the five elements of good design AACSB: Analytical thinking 24) An effective mission statement not only needs to be specific to that organization; it must enable a common thread to highlight and focus the energy of everyone in the organization in the direction that the top management team believes is best for the business.

Answer: TRUE Difficulty: Moderate Learning Obj.: 6.2: Develop a mission statement that addresses the five elements of good design AACSB: Application of knowledge 25) One of the first steps in good strategy design should include crafting the mission statement for the organization.

Answer: TRUE Difficulty: Easy Learning Obj.: 6.2: Develop a mission statement that addresses the five elements of good design AACSB: Application of knowledge 26) What are the common elements of a well-crafted mission statement?

Answer: A well-crafted mission statement has five common elements. It must be short so that every employee can remember the statement. The design must be simple so that everyone in the company can understand what the senior leadership team desires. It has to provide direction to the activities of company employees. The statement should enable employees to knowing what the company does and what it does not do in an exact way. Finally, the statement should be measurable so that the company can visibly see progress.

Difficulty: Moderate Learning Obj.: 6.2: Develop a mission statement that addresses the five elements of good design AACSB: Application of knowledge

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27) Which strategy raises the questions of whether to compete on the basis of lower cost or differentiation and whether to compete for the biggest market or a niche market?

A) business B) corporate C) competitive D) functional E) focus Answer: C Difficulty: Moderate Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Application of knowledge 28) Business strategy focuses on A) ensuring that the company maintains the existing market share that it has historically enjoyed.

B) improving the competitive position of a corporation's products or services within the industry or market segment served.

C) providing adequate shareholders' return on investment.

D) preventing the competition from gaining a competitive edge by undermining their marketing plan.

E) recovering the competitive lead by using all available resources that the company can provide.

Answer: B Difficulty: Moderate Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Application of knowledge 29) Business strategy is composed of A) corporate and competitive strategy.

B) functional and divisional strategy.

C) competitive and cooperative strategy.

D) corporate and cooperative strategy.

E) divisional and competitive strategy.

Answer: C Difficulty: Difficult Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Application of knowledge

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30) Which of the following is not cited as one of the questions that development of a competitive strategy should raise?

A) Should we compete on the basis of lower cost?

B) Should we compete head-to-head with major competitors?

C) Should we differentiate our products or services on some basis other than cost?

D) Should we compete by garnering political support of influential leaders?

E) Should we compete in a niche market that we can satisfy which is superior to that of the competition?

Answer: D Difficulty: Difficult Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Analytical thinking 31) According to Porter, the generic competitive strategy that reflects the ability of the corporation or its business unit to design, produce, and market a comparable product more efficiently than its competitors is called A) competitive scope.

B) differentiation.

C) cost leadership.

D) diversification.

E) focus.

Answer: C Difficulty: Moderate Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Application of knowledge 32) What are the three generic competitive strategies that Porter promotes as the means for outperforming other corporations in a particular industry?

A) competitive scope, differentiation, and focus B) diversification, concentration, and competitive scope C) cost, competitive scope, and focus D) concentration, cost leadership, and differentiation E) cost leadership, differentiation, and focus Answer: E Difficulty: Easy Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Application of knowledge

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33) According to Porter, the generic competitive strategy that reflects the ability to provide unique and superior value to the buyer in terms of product quality, special features, or after-sale service is called A) competitive scope.

B) differentiation.

C) focus.

D) diversification.

E) cost leadership.

Answer: B Difficulty: Moderate Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Application of knowledge 34) According to Porter, the term that applies to the breadth of a company's or business unit's target market is called A) competitive scope.

B) differentiation.

C) focus.

D) diversification.

E) cost leadership.

Answer: A Difficulty: Moderate Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Application of knowledge 35) Walmart, as a discount retailer, is an example of a company following which of Porter's competitive strategies?

A) differentiation B) cost leadership C) differentiation focus D) competitive advantage E) cost focus Answer: B Difficulty: Easy Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Analytical thinking

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36) Apple is an example of a company following which of Porter's generic competitive strategies?

A) cost leadership B) differentiation C) cost focus D) competitive scope E) diversification Answer: B Difficulty: Moderate Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Analytical thinking 37) Which of Porter's competitive strategies recommends that a company emphasize a particular buyer group or geographic market and attempts to seek a cost advantage in its targeted segment?

A) differentiation B) cost leadership C) differentiation focus D) competitive advantage E) cost focus Answer: E Difficulty: Moderate Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Analytical thinking 38) In manufacturing toilet paper for grocery store chains (and avoiding competing directly against Charmin), Potlach has followed which of Porter's generic competitive strategies?

A) differentiation B) cost leadership C) differentiation focus D) competitive advantage E) cost focus Answer: E Difficulty: Moderate Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Analytical thinking

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39) Orphagenix, a small biotech firm, avoids head-to-head competition with large pharmaceutical companies by developing orphan drugs to target diseases that affect fewer than 200,000 people. This is an example of which of Porter's generic strategies?

A) differentiation B) cost leadership C) differentiation focus D) competitive advantage E) cost focus Answer: C Difficulty: Difficult Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Analytical thinking 40) Which of Porter's competitive strategies concentrates on seeking differentiation in a particular buyer group, product line segment, or geographic market?

A) segmentation focus B) cost leadership C) differentiation focus D) competitive advantage E) cost focus Answer: C Difficulty: Moderate Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Analytical thinking 41) When a company is concerned that the higher price it charges for its higher quality is too far above the price of the competition, the company is likely addressing a risk of following which competitive strategy?

A) cost leadership B) focus C) stuck-in-the-middle D) differentiation E) competitive scope Answer: D Difficulty: Difficult Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Analytical thinking

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42) Which of the following is not one of the risks of a cost leadership strategy?

A) The technology that the organization has been using changes.

B) Pricing for higher quality that is too far above the price of the competition.

C) Competitors can achieve viable imitations.

D) Other bases for cost leadership erode.

E) Proximity in differentiation is lost.

Answer: B Difficulty: Difficult Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Analytical thinking 43) Which strategy is a firm following if it provides a unique and superior value in a narrow market?

A) differentiation focus B) cost leadership C) differentiation D) cost focus E) stuck in the middle Answer: A Difficulty: Moderate Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Application of knowledge 44) According to Porter, a business unit in a competitive marketplace with no generic competitive strategy is A) achieving synergy.

B) practicing innovative leadership.

C) stuck in the middle.

D) not goal directed.

E) last in line.

Answer: C Difficulty: Easy Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Application of knowledge 45) Most entrepreneurial ventures follow A) differentiation strategies.

B) focus strategies.

C) no strategies.

D) cost leadership strategies.

E) stuck in the middle strategies.

Answer: B Difficulty: Moderate Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Application of knowledge 12 Copyright © 2018 Pearson Education, Ltd.

46) Morgan Motor Car Company manufactures classic British sports cars. Which of Porter's strategies is this company following?

A) differentiation focus B) cost leadership C) stuck in the middle D) differentiation E) cost focus Answer: A Difficulty: Moderate Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Analytical thinking 47) Walt Disney Company competes successfully in the entertainment industry using which of Porter's competitive strategies?

A) differentiation focus B) stuck in the middle C) cost leadership D) differentiation E) cost focus Answer: D Difficulty: Difficult Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Analytical thinking 48) The focus strategies will likely predominate when many small- and medium-sized local companies compete for relatively small shares of the total market in a(n) A) united industry.

B) fragmented industry.

C) consolidated industry.

D) isolated industry.

E) integrated industry.

Answer: B Difficulty: Difficult Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Analytical thinking

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49) As an industry matures while overcoming fragmentation and becomes dominated by a small number of large companies, it tends to become a(n) A) united industry.

B) fragmented industry.

C) consolidated industry.

D) isolated industry.

E) integrated industry.

Answer: C Difficulty: Moderate Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Analytical thinking 50) A method developed in the mid-1990s as an efficient means to quickly consolidate a fragmented industry can be referred to as a A) merger.

B) strategic rollup.

C) cost strategy.

D) differentiation strategy.

E) focus strategy.

Answer: B Difficulty: Moderate Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Application of knowledge 51) As an industry becomes hypercompetitive, firms initially respond by A) raising entry barriers.

B) moving into untapped markets.

C) attacking the strongholds of other firms.

D) competing on cost and quality.

E) working their way to a situation of perfect competition.

Answer: D Difficulty: Difficult Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Analytical thinking 52) The book Hypercompetition was written by A) Porter.

B) D'Aveni.

C) Mintzberg.

D) Maslow.

E) Drucker.

Answer: B Difficulty: Easy Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Application of knowledge

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53) The last stage of a hypercompetitive industry is reached when the remaining large global competitors A) raise entry barriers.

B) move into untapped markets.

C) attack the strongholds of other firms.

D) compete on cost and quality.

E) work their way to a situation of perfect competition in which no one has any advantage and profits are minimal.

Answer: E Difficulty: Moderate Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Analytical thinking 54) According to D'Aveni's book, Hypercompetition, which of the following statements is true?

A) Except for a few stable industries, strategy initiatives do not provide sustainable competitive advantage.

B) Hypercompetition is rare.

C) It is enough to gain competitive advantage by being the lowest cost competitor.

D) The theory of hypercompetition is not supported by any research.

E) The American home appliance industry was immune to hypercompetition.

Answer: A Difficulty: Difficult Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Analytical thinking 55) Which of Porter's broad mass market competitive strategies requires tight cost control, frequent detailed control reports, and cost minimization in areas like R&D, service and advertising?

A) focus B) differentiation C) cost leadership D) focus differentiation E) concentration Answer: C Difficulty: Difficult Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Analytical thinking

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56) Research suggests that a differentiation strategy is more likely to generate higher profits than a lower cost strategy because differentiation creates A) a better entry barrier.

B) a better exit barrier.

C) a better niche market.

D) a more sustainable competitive advantage.

E) no clear long-term strategy.

Answer: A Difficulty: Difficult Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Application of knowledge 57) Differentiation is a viable strategy for earning above-average returns in a specific business because the resulting increased value to the customer A) lowers costs.

B) lowers price sensitivity.

C) lowers customer loyalty.

D) lowers market share.

E) lowers entry barriers.

Answer: B Difficulty: Moderate Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Analytical thinking 58) Competitive scope is A) the breadth of the company's target market.

B) a business strategy.

C) the common thread found in the firm's mission statement.

D) the foundation of the choice between cost leadership and differentiation strategies.

E) an element of the marketing mix.

Answer: A Difficulty: Moderate Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Application of knowledge 59) Which of Porter's competitive strategies is likely to predominate in a fragmented industry?

A) cost leadership B) differentiation C) cost focus D) stuck in the middle E) cooperative Answer: C Difficulty: Difficult Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Analytical thinking

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60) Strict targets to improve efficiency are likely to be found in organizations following which of Porter's generic competitive strategies?

A) cost leadership B) differentiation C) stuck in the middle D) differentiation focus E) cooperative Answer: A Difficulty: Moderate Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Analytical thinking 61) According to Barney, under which condition would tacit collusion most likely be successful?

A) There is a large number of identifiable competitors.

B) Costs vary among firms.

C) One firm tends to act as the price leader.

D) Sales are characterized by a low frequency of large orders.

E) There are low barriers to entry in the industry.

Answer: C Difficulty: Difficult Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Application of knowledge 62) When a company following a differentiation strategy ensures that the higher price it charges for its higher quality is not priced too far above the price of the competition, the company is using the process of A) low-cost differentiation.

B) cost leadership.

C) cost proximity.

D) basic differentiation.

E) price fixing.

Answer: C Difficulty: Difficult Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations 63) When firms follow each other's lead to reduce the level of competition such as GE and Westinghouse did in steam turbines, it is referred to as A) explicit collusion.

B) a strategic alliance.

C) a mutual service consortium.

D) conscious parallelism.

E) partnering.

Answer: D Difficulty: Difficult Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Application of knowledge 17 Copyright © 2018 Pearson Education, Ltd.

64) A secret salary cap was the contention in a 2012 collusion lawsuit filed against A) KFC. B) The National Football League.

C) GE. D) Major League Baseball.

E) ESPN. Answer: B Difficulty: Moderate Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Application of knowledge 65) Tacit collusion A) involves direct communication among competing firms.

B) is most likely to be successful if there are many competitors.

C) is seen with conscious parallelism as practiced by GE and Westinghouse in the pricing of turbine engines.

D) is not illegal.

E) is most effective when the industry does not have a firm that acts as a price leader.

Answer: C Difficulty: Difficult Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Application of knowledge 66) Collusion A) may be explicit or tacit.

B) may be tacit and therefore legal.

C) is rarely practiced by competing firms.

D) cannot occur without direct communication among firms.

E) is a popular competitive strategy.

Answer: A Difficulty: Difficult Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Application of knowledge 67) The active cooperation of firms within an industry to reduce output and raise prices to get around the normal law of supply and demand is referred to as A) a strategic alliance.

B) collusion.

C) a strategic roll up.

D) a merger.

E) licensing.

Answer: B Difficulty: Moderate Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Application of knowledge

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68) The two general types of cooperative strategies are A) competitive and functional.

B) collusion and competitive.

C) strategic alliances and collusion.

D) strategic alliances and competitive.

E) competitive and collusive alliances.

Answer: C Difficulty: Easy Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Application of knowledge 69) If it is to be successful, Porter advises that a division possess strong marketing abilities, product engineering, a creative flair, strong capability in basic research and a corporate reputation for quality or technological leadership, for which one of the following generic competitive strategies?

A) focus B) differentiation C) overall cost leadership D) vertical growth E) concentration Answer: B Difficulty: Difficult Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations 70) Product engineering, creative flair, and strong cooperation from channels are commonly required skills and resources for which of Porter's generic strategies?

A) cost leadership B) differentiation C) cost leadership focus D) differentiation focus E) collusion Answer: B Difficulty: Easy Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Reflective thinking 71) Intense supervision of labor, sustained capital investment and access to capital are commonly required skills and resources for which of Porter's generic competitive strategies?

A) cost leadership B) differentiation C) cost leadership focus D) differentiation focus E) collusion Answer: A Difficulty: Easy Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Reflective thinking 19 Copyright © 2018 Pearson Education, Ltd.

72) Amenities to attract highly skilled labor, scientists, or creative people are a common organizational requirement for which of Porter's generic competitive strategies?

A) cost leadership B) differentiation C) cost leadership focus D) differentiation focus E) collusion Answer: B Difficulty: Difficult Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Reflective thinking 73) Incentives based on meeting strict quantitative targets are a common organizational requirement for which of Porter's generic competitive strategies?

A) cost leadership B) differentiation C) cost leadership focus D) differentiation focus E) collusion Answer: A Difficulty: Moderate Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Reflective thinking 74) One skill required of the cost leadership strategy is a strong marketing ability.

Answer: FALSE Difficulty: Easy Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations 75) Business strategy focuses on improving the competitive position of a company's or business unit's products or services within the specific industry or market segment that the company or business unit serves.

Answer: TRUE Difficulty: Easy Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Application of knowledge 76) Cost leadership is the ability of a company or business unit to design, produce, and market a comparable product more efficiently than its competitors.

Answer: TRUE Difficulty: Moderate Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Application of knowledge

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77) A cost leader's lower costs allow it to continue to earn profits during times of heavy competition.

Answer: TRUE Difficulty: Moderate Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Analytical thinking 78) An example of a company following a cost focus strategy is Potlach Corporation, which makes house brands of toilet paper for Safeway and other grocery store chains.

Answer: TRUE Difficulty: Moderate Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Analytical thinking 79) One risk of a cost leadership strategy is that the technology for production or of products may change.

Answer: TRUE Difficulty: Moderate Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Analytical thinking 80) An example of a company that was "stuck in the middle" was K-Mart as the company tried to imitate both Walmart's low-cost strategy and Target's differentiation strategy.

Answer: TRUE Difficulty: Moderate Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Analytical thinking 81) Although Porter agrees that it is possible for a company to achieve low cost and differentiation simultaneously, he suggests that no company has been able to achieve this.

Answer: FALSE Difficulty: Difficult Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Analytical thinking 82) Most entrepreneurial ventures attempt to follow focus strategies.

Answer: TRUE Difficulty: Moderate Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Application of knowledge 83) The strategic rollup was developed in the mid-1990s as an efficient way to quickly consolidate a fragmented industry with the resulting large firm creating economies of scale.

Answer: TRUE Difficulty: Moderate Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Analytical thinking 21 Copyright © 2018 Pearson Education, Ltd.

84) Rollups are not synonymous with traditional mergers and acquisitions.

Answer: TRUE Difficulty: Easy Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Application of knowledge 85) One danger of D'Aveni's concept of hypercompetition is that it may lead to an overemphasis on short-term tactics over long-term strategy.

Answer: TRUE Difficulty: Difficult Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Analytical thinking 86) The ability to market a comparable product or service more efficiently than competitors is the one skill not required in a cost leadership strategy.

Answer: FALSE Difficulty: Easy Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Analytical thinking 87) Tight cost control is an organizational requirement for a cost leadership strategy.

Answer: TRUE Difficulty: Moderate Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Analytical thinking 88) The only way to gain competitive advantage within an industry is to use a competitive strategy.

Answer: FALSE Difficulty: Easy Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Analytical thinking 89) Those companies using cooperative strategies are generally not able to gain a competitive advantage.

Answer: FALSE Difficulty: Difficult Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Application of knowledge 90) The two general types of cooperative strategies are collusion and strategic alliances.

Answer: TRUE Difficulty: Difficult Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Application of knowledge 22 Copyright © 2018 Pearson Education, Ltd.

91) In tacit collusion, there is no direct communication among competing firms.

Answer: TRUE Difficulty: Difficult Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Application of knowledge 92) Collusion is the active cooperation of firms within an industry to reduce output and raise prices in order to get around the normal economic law of supply and demand.

Answer: TRUE Difficulty: Moderate Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Application of knowledge 93) What are Porter's three generic competitive strategies?

Answer: Porter's three generic competitive strategies are overall cost leadership, differentiation, and focus. Cost leadership is the ability of a company or a business unit to design, produce, and market a comparable product or service more efficiently than its competitors. Differentiation is the ability of a company to provide unique and superior value to the buyer. Differentiation may include areas such as product quality, special features, or after-sale service. Focus is the ability of a company to provide unique and superior value to a particular buyer group, segment of the market line, or geographic market.

Difficulty: Moderate Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Application of knowledge 94) Discuss competitive strategy differences between a fragmented and a consolidated industry.

Answer: In a fragmented industry, there are many small- and medium-sized local companies competing for relatively small shares of the total market. Focus strategies will likely predominate in a fragmented industry. Fragmented industries are typical for products in the early stages of their life cycle. If few economies are to be gained through size, no large firms will emerge and entry barriers will be low—allowing a stream of new entrants into the industry.

As an industry matures, fragmentation is overcome and the industry tends to become a consolidated industry dominated by a few large companies. Although many industries begin fragmented, battles for market share and creative attempts to overcome local or niche market boundaries often increase the market share of a few companies. After product standards become established for minimum quality and features, competition shifts to a greater emphasis on cost and service. Slower growth, overcapacity, and knowledgeable buyers combine to put a premium on a firm's ability to achieve cost leadership or differentiation along the dimensions most desired by the market. Research and development shifts from product to process improvements. Overall product quality improves, and costs are reduced significantly.

Difficulty: Moderate Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Application of knowledge

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95) What is the impact of hypercompetition on competitive advantage?

Answer: Hypercompetition reflects the increasing difficulty of sustaining a competitive advantage over time. As a result of this erosion of competitive advantage, companies must constantly work to improve their advantage. Firms must constantly seek new ways to lower costs and add value to their products and services.

Difficulty: Easy Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Application of knowledge 96) What are cooperative strategies?

Answer: Cooperative strategies are used to gain competitive advantage within an industry by working with other firms. The two general types of cooperative strategies are collusion and strategic alliances. Collusion is the active cooperation of firms within an industry to reduce output and raise prices in order to get around the normal economic law of supply and demand. A strategic alliance is a partnership of two or more corporations or business units to achieve strategically significant objectives that are mutually beneficial.

Difficulty: Moderate Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Application of knowledge 97) Jet airplane manufacturers often enter into strategic alliances to A) obtain new capabilities.

B) obtain access to specific markets.

C) reduce financial risk.

D) reduce political risk.

E) preserve autonomy.

Answer: C Difficulty: Moderate Learning Obj.: 6.4: Identify the types of strategic alliances AACSB: Application of knowledge 98) The "cell" chip created by IBM, Sony Electronics, and Toshiba was a result of pooling their resources in a A) joint venture.

B) licensing arrangement.

C) value-chain partnership.

D) mutual service consortium.

E) competitive advantage.

Answer: D Difficulty: Difficult Learning Obj.: 6.4: Identify the types of strategic alliances AACSB: Application of knowledge

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99) Disadvantages of joint ventures include all of the following EXCEPT A) loss of control.

B) lower profits.

C) probability of conflicts with partners.

D) likely transfer of technological advantage to the partner.

E) mutual dependence.

Answer: E Difficulty: Moderate Learning Obj.: 6.4: Identify the types of strategic alliances AACSB: Application of knowledge 100) When Facebook partnered with nine news organizations to allow the news organizations (including powerhouses like the New York Times and NBC News) to post stories on the Facebook site, they engaged in A) a joint venture.

B) a licensing arrangement.

C) a value-chain partnership.

D) a mutual service consortium.

E) a competitive advantage.

Answer: C Difficulty: Difficult Learning Obj.: 6.4: Identify the types of strategic alliances AACSB: Analytical thinking 101) In licensing arrangements, which of the following is not true?

A) The licensee can gain technical expertise.

B) Companies can be aided in entering new countries directly.

C) The licensee might become a competitor to the licensing firm if they license their distinctive competencies.

D) Companies should never license their distinctive competencies.

E) The licensee is usually following a differentiation strategy.

Answer: E Difficulty: Difficult Learning Obj.: 6.4: Identify the types of strategic alliances AACSB: Application of knowledge 102) Which of the following is not a reason companies or business units may form a strategic alliance?

A) to obtain access to specific markets B) to reduce financial risk C) to reduce political risk D) to set prices in the industry E) to learn new capabilities Answer: D Difficulty: Moderate Learning Obj.: 6.4: Identify the types of strategic alliances AACSB: Analytical thinking 25 Copyright © 2018 Pearson Education, Ltd.

103) The kind of strategic alliance in which there is a partnership of similar companies in similar industries who pool their resources to gain a benefit that is too expensive to develop alone is the A) joint venture.

B) licensing agreement.

C) value-chain partnership.

D) mutual service consortia.

E) holding company.

Answer: D Difficulty: Moderate Learning Obj.: 6.4: Identify the types of strategic alliances AACSB: Application of knowledge 104) Which strategy has been used successfully by Yum! Brands to establish KFC and Pizza Hut restaurants across the globe?

A) joint venture B) licensing arrangement C) strategic alliance D) marketing strategy E) value-chain partnership Answer: B Difficulty: Difficult Learning Obj.: 6.4: Identify the types of strategic alliances AACSB: Application of knowledge 105) The kind of strategic alliance in which a company forms a strong and close long-term relationship for mutual advantage with a key supplier or distributor is the A) joint venture.

B) licensing agreement.

C) value-chain partnership.

D) mutual service consortia.

E) holding company.

Answer: C Difficulty: Moderate Learning Obj.: 6.4: Identify the types of strategic alliances AACSB: Application of knowledge

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106) Which of the following is not considered a strategic alliance success factor?

A) Have a clear strategic purpose.

B) Operate with short-term time horizon.

C) Agree on an exit strategy for when the partners' objectives are achieved or the partnership fails.

D) Minimize conflicts among the partners by clarifying the objectives.

E) Identify likely partnering risks and deal with them when the alliance is formed.

Answer: B Difficulty: Moderate Learning Obj.: 6.4: Identify the types of strategic alliances AACSB: Analytical thinking 107) Alliances do not take less financial resources than do acquisitions or going it alone and are not easier to exit if necessary.

Answer: FALSE Difficulty: Moderate Learning Obj.: 6.4: Identify the types of strategic alliances AACSB: Analytical thinking 108) Too much partnering experience with the same strategic partners generates diminishing returns over time and leads to reduced performance.

Answer: TRUE Difficulty: Difficult Learning Obj.: 6.4: Identify the types of strategic alliances AACSB: Analytical thinking 109) A licensing arrangement is an agreement in which the licensing firm grants rights to another firm in another country or market to produce and/or sell a product.

Answer: TRUE Difficulty: Easy Learning Obj.: 6.4: Identify the types of strategic alliances AACSB: Application of knowledge 110) A value chain partnership is a loose alliance with several distributors for the short term.

Answer: FALSE Difficulty: Moderate Learning Obj.: 6.4: Identify the types of strategic alliances AACSB: Application of knowledge 111) One success factor to a strategic alliance is the ability to identify likely partnering risks and deal with them when the alliance is formed.

Answer: TRUE Difficulty: Moderate Learning Obj.: 6.4: Identify the types of strategic alliances AACSB: Analytical thinking

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112) Discuss the reasons a firm may form a strategic alliance.

Answer: A strategic alliance is a long-term cooperative arrangement between two or more independent firms or business units that engage in business activities for mutual economic gain.

A firm may form a strategic alliance to obtain or learn new capabilities, to obtain access to specific markets, to reduce financial risk, or to reduce political risk.

Difficulty: Moderate Learning Obj.: 6.4: Identify the types of strategic alliances AACSB: Application of knowledge 113) Discuss the types of alliances that businesses can engage in?

Answer: The types of alliances that businesses can engage in include a mutual service consortium, a joint venture, a licensing arrangement, and a value-chain partnership. A mutual service consortium is a partnership of similar companies in similar industries that pool their resources to gain a benefit that is too expensive to develop alone. A joint venture is a "cooperative business activity, formed by two or more separate organizations for strategic purposes, that creates an independent business entity and allocates ownership, operational responsibilities, and financial risks and rewards to each member, while preserving their separate identity/autonomy." A licensing arrangement is an agreement in which the licensing firm grants rights to another firm in another country or market to produce and/or sell a product. The licensee pays compensation to the licensing firm in return for technical expertise. A value-chain partnership is a strong and close alliance in which one company or unit forms a long-term arrangement with a key supplier or distributor for mutual advantage.

Difficulty: Difficult Learning Obj.: 6.4: Identify the types of strategic alliances AACSB: Application of knowledge

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