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| 1 | |
The most important drivers shaping a company's most appealing strategic options tend to revolve around: |
| | A) | whether to try to strongly or weakly differentiate the company's product offering from the offerings of rivals and how to bolster its brand image and reputation with buyers. |
| | B) | which strategic group the company is in and whether is a market leader, a close runner-up, a potential market contender, or an also-ran. |
| | C) | the nature of industry and competitive conditions and the firm's own resource strengths and weaknesses, competitive capabilities, opportunities and threats, and market position. |
| | D) | a company's internal strengths and weaknesses and its external opportunities and threats. |
| | E) | whether it is more adept at lowering costs or at differentiating its product, the company's competitive strength vis-à-vis rivals, and a company's financial strength. |
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| 2 | |
Which of the following is not an aspect of the strategy-making challenge associated with competing in emerging industries? |
| | A) | Strong learning and experience curve effects may be present, allowing significant price reductions as volume builds and costs fall |
| | B) | Many potential buyers expect first-generation products to be rapidly improved and delay their purchase until technology and product design mature |
| | C) | The marketing challenge is to induce first-time purchase and overcome customer concerns about product features, performance reliability, and conflicting claims of rival firms |
| | D) | Whether to compete locally, regionally, nationally, internationally or globally |
| | E) | There are often uncertainties surrounding an emerging industry's technology and there may also be no consensus regarding which product attributes will prove decisive in winning buyer favor |
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| 3 | |
Which one of the following is not likely to be a suitable strategy option for companies competing in rapid-growth industries? |
| | A) | Driving down costs per unit so as to enable price reductions that attract droves of new customers |
| | B) | Pursuing rapid product innovation, both to set a company's product offering apart from rivals and to incorporate attributes that appeal to growing numbers of customers |
| | C) | Gaining access to additional distributional channels and sales outlets |
| | D) | Expanding the product line to add models/styles that appeal to a wider range of buyers |
| | E) | Putting top priority on heavy advertising and other marketing-related actions calculated to strongly differentiate its product offering from rivals |
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| 4 | |
Which one of the following statements does not represent one of the typical fundamental changes in an industry as it approaches maturity? |
| | A) | Firms encounter growing difficulty in coming up with new product innovations and developing new uses and applications for the product |
| | B) | The established rules of competition disintegrate, market conditions become quite turbulent, and business risk increases because of growing uncertainty about whether the industry will stagnate |
| | C) | Industry profitability falls temporarily or permanently, international competition increases, and mergers and acquisitions that drive industry consolidation to a smaller number of larger players |
| | D) | Greater head-to-head competition for market share and increased competitive emphasis on lowering costs and improving service |
| | E) | New scale economies develop and overall costs per unit produced and sold drop significantly |
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| 5 | |
In a maturing market where growth rates are getting smaller, rival firms can often improve their competitive position in the marketplace by: |
| | A) | closely imitating the strategies of the market leaders and being adept fast followers. |
| | B) | aggressively cutting prices, trimming product quality, and spending heavily on advertising to strengthen their brand image. |
| | C) | pruning marginal products and models, improving value chain efficiency, trimming costs, emphasizing cost reduction, acquiring rival firms at bargain prices, building new or more flexible competitive capabilities, and expanding internationally. |
| | D) | making greater use of outsourcing, significantly widening their product lines, and being cautious about expanding into new geographic markets. |
| | E) | shifting to a differentiation strategy based on superior customer service, vertically integrating backward to gain better control of the supply chain, and buying out money-losing rivals at bargain prices. |
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| 6 | |
For a company to succeed in competing in stagnant or declining industries, it is well advised to: |
| | A) | pursue one of three strategic courses: (1) rely on a focus strategy that involves identifying, creating, and exploiting growth segments within the overall industry, (2) pursue differentiation strategies keyed to quality improvement and product innovation, or (3) work diligently and persistently to drive costs down and become the low-cost leader. |
| | B) | depend heavily on defensive strategies rather than offensive strategies and be patient and willing to wait the hard times out until the market turns around (as it usually does) and business conditions improve. |
| | C) | pursue short-term cash flow maximization rather than long-term profit maximization. |
| | D) | steer a middle course between low-cost and differentiation and pursue a best-cost provider strategy. |
| | E) | draw cash out of the business quickly via a fast-exit strategy. |
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| 7 | |
A company that decides to stick with a stagnant or declining industry: |
| | A) | is well-advised to pursue aggressive expansion into the markets of foreign countries and commit its full energies to being the global market leader. |
| | B) | may still be successful if it aggressively expands its production capacity, launches a price war that drives weak rivals out of business, and achieves a market share of at least 35 percent. |
| | C) | is doomed to have declining revenues and profits. |
| | D) | may be able to grow and prosper if market demand decays very slowly and it has the competitive capabilities to take market share away from weaker competitors |
| | E) | is well-advised to pursue backward and forward vertical integration in order to gain maximum control over the entire industry value chain. |
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| 8 | |
A slow-exit type of end-game strategy involves: |
| | A) | a gradual phasing down of operations coupled with an objective of generating the greatest possible harvest of cash from the business for as long as possible. |
| | B) | selling off assets gradually and liquidating the business over a period of 5-10 years. |
| | C) | gradually reducing the size of the company's customer base, starting with the least profitable customers and moving steadily toward the most profitable customers—with the intent of selling out to the highest bidder when the business starts to become unprofitable. |
| | D) | withdrawing, one by one, from the various country markets where the firm competes and gradually retreating to the country market where sales and profits are highest. |
| | E) | pruning the operating budget by 5-10 percent annually and outsourcing more and more value chain activities to outside suppliers. |
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| 9 | |
In trying to cope with a turbulent, high-velocity market environment, a company: |
| | A) | should usually put a strong emphasis on short-term profitability rather than worrying excessively about building and strengthening the company's long-term market position—the direction of market change is too volatile and unknowable to put much time into worrying about the long-term. |
| | B) | can assume any of three strategic postures—it can react to change, it can anticipate change, and it can lead change; typically all three postures will have to be employed at one time or another (though not in the same proportion). |
| | C) | should strive to be a fast follower and occasionally a slow-mover (like when the actions of early movers involve adoption of a radically different technological approach)—being an aggressive first mover carries too much risk and can dismay shareholders. |
| | D) | generally needs to put most of its strategic emphasis on defensive-type strategies because offensive strategies are so risky. |
| | E) | is well-advised to compete with a broad differentiation or best-cost strategy. |
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| 10 | |
Which one of the following strategic moves and initiatives is unlikely to be an attractive option for competing in a turbulent, high velocity market environment? |
| | A) | Initiating fresh actions every few months, not just when a competitive response is needed to counter or match what rivals are doing |
| | B) | Relying on strategic partnerships with outside suppliers and with companies making tie-in products |
| | C) | Investing aggressively in R&D to stay on the leading edge of technological know-how and keeping the company's products fresh and exciting enough to stand out in the midst of all the change that is taking place |
| | D) | Avoiding the perils of first-mover disadvantages and, instead, putting heavy emphasis on developing strong defensive strategies to neutralize the changes occurring in the marketplace |
| | E) | Developing quick response capabilities |
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| 11 | |
Competing in fragmented industries: |
| | A) | entails operating under conditions where there are many, many buyers of the product and the quantity sold to any one buyer constitutes a tiny fraction of total industry sales volume. |
| | B) | can entail such characteristics as low entry barriers, an absence of economies of large-scale production, an exploding number of technological paths, a need for the product/service to be delivered/available in neighborhood locations, and/or a market situation where very large numbers of firms can easily coexist trying to accommodate differing buyer tastes, expectations, and pocketbooks. |
| | C) | is very conducive to the use of low-cost leadership and broad-appeal differentiation strategies (because it is in a fragmented industry environment that these strategies most readily lead to industry domination). |
| | D) | tends to be more profitable and more likely to result in sustainable competitive advantage when a company employs a focused differentiation strategy instead of a focused low-cost strategy. |
| | E) | tends to be more profitable when a company employs a broad differentiation strategy and develops a product offering that appeals to buyers in many different market segments. |
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| 12 | |
Which of the following is unlikely to be a promising option for competing in a fragmented industry? |
| | A) | Employing deep price discounting, extensive advertising, and other muscle-flexing maneuvers to gain market dominance in a select few country markets |
| | B) | Specializing by product type or becoming a low-cost operator |
| | C) | Specializing by customer type |
| | D) | Focusing on a limited geographic area |
| | E) | Constructing and operating "formula" facilities at many different locations |
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| 13 | |
Companies that are determined to grow their revenues and earnings at a rapid or above-average pace year-after-year: |
| | A) | typically form an array of strategic alliances with foreign firms to accelerate access to the markets of foreign countries and diversify their product lines so as to offer buyers a wide selection. |
| | B) | have to be aggressive first-movers and strive to build a dominant market share via merger and acquisition. |
| | C) | usually have to pursue global strategies and enter as many new foreign markets each year as their resources will permit. |
| | D) | need to have a portfolio of strategic initiatives that range from strengthening their existing businesses to entering businesses with promising growth opportunities to planting the seeds for entirely new ventures. |
| | E) | are usually industry leaders that employ muscle-flexing strategies, that have a strategic intent of being the global market leader, and that are heavily prone to using offensive strategies to build new profit sanctuaries. |
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| 14 | |
To sustain their market positions, industry leaders usually need to consider which of the following strategic options? |
| | A) | A stay-on-the-offensive strategy, a fortify-and-defend strategy, or a muscle-flexing strategy |
| | B) | A multiple profit sanctuary strategy, a preemptive strike strategy, a growth-via-acquisition strategy, or a rapid diversification strategy |
| | C) | A global expansion strategy, a fortify-and-defend strategy, a market consolidation strategy, or an every-day low price strategy |
| | D) | A "formula facilities" strategy, a 900-pound gorilla strategy, a market dominance strategy, a home-run strategy |
| | E) | A first-mover strategy, a harvesting strategy, a price war strategy, or a dominant profit sanctuary strategy |
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| 15 | |
The strategic options most suitable for runner-up competitors include: |
| | A) | a strategy of imitating the strategic actions and approaches of the industry leader. |
| | B) | a "try harder" strategy, a stay-on-the-offensive strategy, a slow-exit strategy, and a retreat-to-a-vacant-niche strategy. |
| | C) | a growth-via-acquisition strategy, a vacant niche strategy, a specialist strategy, a superior product strategy, a distinctive image strategy, or a content follower strategy. |
| | D) | a price war strategy, a "mover-and-shaker" offensive, a sell-out quickly strategy, an fast follower strategy, or a preemptive strike strategy. |
| | E) | a "try harder" strategy, an international expansion strategy based on exporting, a muscle-flexing strategy, and a home-field advantage strategy. |
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| 16 | |
An ambitious runner-up firm that aspires to join the ranks of industry front-runners needs a strategy aimed at: |
| | A) | achieving strong product differentiation based on superior product performance and superior customer service. |
| | B) | hitting a home-run with a radically new product and thereby gaining a reputation as a true product innovator. |
| | C) | building a competitive advantage of its own and making some waves in the marketplace. |
| | D) | attacking the leaders head-on with a series of guerilla initiatives in many different geographic regions, thereby throwing industry leaders off-balance and creating an opening for the challenger to launch a preemptive strike. |
| | E) | gaining buyer attention by significantly outspending rivals on advertising. |
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| 17 | |
Potentially attractive turnaround strategy options for a struggling business include: |
| | A) | a merger and acquisition strategy, a stay-on-the-offensive strategy, attacking rivals' profit sanctuaries, or a price war strategy. |
| | B) | selling off assets to raise cash for saving the rest of the business, revising the existing strategy, launching efforts to boost revenues, and/or launching efforts to reduce costs. |
| | C) | a fortify-and-defend strategy, a product line expansion strategy, a retreat-to-a-vacant-niche strategy, and a price discounting strategy. |
| | D) | acquiring several smaller rivals so as to build a critical mass of customers and get in position to capture economies of scale. |
| | E) | a fast-follower strategy, a product line expansion strategy, a cost-reduction strategy, and a geographic concentration strategy. |
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| 18 | |
The overriding objective of a harvesting strategy is to: |
| | A) | raise price to a level that will yield the highest possible profit margins. |
| | B) | cut the operating budget to the bone. |
| | C) | sell off pieces of the pieces and thereby raise sufficient cash to save the remaining part of the business. |
| | D) | maximize short-term cash flows from operations for as long as possible. |
| | E) | generate the highest possible revenues for the longest possible time. |
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| 19 | |
In which of the following instances is a harvesting strategy not a reasonable strategic option for a weak business? |
| | A) | When a company is in a weak competitive position, its profit prospects are not good, and rejuvenating the business would be costly or at best marginally profitable |
| | B) | When a company is trapped in a fragmented industry and can readily outsource some key value chain activities to trusted strategic allies |
| | C) | When reduced levels of competitive effort will not trigger an immediate or rapid decline in sales and the enterprise can re-deploy the freed resources to other higher-opportunity areas |
| | D) | When industry demand is stagnant or declining and there's little hope that either market conditions will improve |
| | E) | When trying to maintain or grow the company's present sales is becoming increasingly costly |
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| 20 | |
Which of the following does not qualify as a "commandment" for crafting successful business strategies? |
| | A) | Place top priority on crafting and executing strategic moves that will enhance a company's competitive position for the long-term. |
| | B) | Avoid stuck-in-the-middle strategies that represent compromises between lower costs and greater differentiation and between broad and narrow market appeal. |
| | C) | Strive to open up very meaningful gaps in quality or service or performance features when pursuing a differentiation strategy. |
| | D) | Be judicious in cutting prices without an established cost advantage. |
| | E) | Sell or close a crisis-ridden business immediately—turnaround strategies are doomed to fail. |
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