Ketchen, D. J., & Short, J. Mastering Strategic Management. Chapter 5-7 Quiz

CHAPTER 5

1. A general way of positioning a firm within an industry is termed as a: Generic strategy
2. Dorothy opens a beauty salon exclusively for ladies. She uses only natural extracts for skin treatments. This makes her stand apart from the other salons in the area. This is an example of a(n) _____ strategy. Generic 
3. The most popular set of generic strategies is based on the work of Professor Michael Porter of the Harvard Business School. TRUE
4. James wants to open a library. There are already four other libraries in his town. In order to attract customers James decides to keep the fee for lending books and CDs lower than what is charged by the other four libraries. This is an example of a(n) _____ strategy. Generic
5. : Which of the following strategies allows firms to offer products or services with acceptable quality and features to a broad set of customers at a low price? LOW COST LEADERSHIP
6. Cost leaders manage to charge low prices and still make a profit by emphasizing efficiency. TRUE
7.  Firms which follow the cost leadership strategy: emphasize on efficiency.
8. _____ are created when the cost of offering goods and services decreases as a firm is able to sell more items. Economies of scale (Correct)
9. Cost leadership is advantageous for firms because of the fact that: t makes them well positioned to withstand price competition from rivals. (Correct)
10. Cost leadership is disadvantageous for firms because of the fact that: downplaying research and development can slow cost leaders’ ability to respond to changes once they are detected.
11. A firm is following a _____ if it competes on the basis of uniqueness rather than price and is seeking to attract a broad market.differentiation strategy
12. companies following the differentiation strategy: invest heavily in advertising and brand building. (
13. Successful use of a differentiation strategy depends only on offering unique features. False  also on communicating the value of these features to potential customers.
14. Differentiation strategy is advantageous for a firm because of the fact that: it creates an ability to obtain premium prices from customers.
15. Which of the following terms refers to the extent to which an increase in the cost of the product makes a buyer less likely to purchase an item? Price sensitivity
16. Differentiation strategy is disadvantageous for a firm because of the fact that: competitors may be able to imitate the features well enough that they are no longer unique.
17. Which of the following strategies requires a firm to compete with its rivals based on price to target a narrow market? Focused cost leadership strategy (Correct)
18. Which of the following strategies requires a firm to offer unique features that fulfill the demands of a narrow market? Focused differentiation strategy
19. in the focused differentiation strategy, narrow markets are defined in a single way in a single setting. false (A focused differentiation strategy requires offering unique features that fulfill the demands of a narrow market. As with a focused low cost strategy, narrow markets are defined in different ways in different settings.
20. Ferns and Flowers sells unique products such as exotic plants, flowers, pots, and plant care services to a narrow market. Which of the following would be true about Ferns and Flowers? The shop can charge very high prices for its unique products.
21. Companies following the focused differentiation strategy: can charge very high prices
22. A _____ strategy requires firms to charge relatively low prices and offer substantial differentiation. best-cost
23. Companies following the best-cost strategy encounter low product development and advertising expenses. False (Correct) Firms that charge relatively low prices and offer substantial differentiation are following a best-cost strategy. This strategy is difficult to execute in part because creating unique features and communicating to customers why these features are useful generally raises a firm's costs of doing business. Product development and advertising can both be quite expensive.
24. A firm is said to be _____ if it does not offer features that are unique enough to convince customers to buy its offerings and its prices are too high to effectively compete on based on price. stuck in the middle (
25. A car manufacturer introduces a new car in the market. The car is aimed at the premium segment. It is priced more than any other car in its category, and it offers features that are standard for cars in its category. Thus, the newly launched car can compete neither on the basis of price nor on the basis of any unique feature that can convince customers to buy it. This is the example of a(n) _____ firm. stuck in the middle (Correct)

CHAPTER 6

1. Which of the following is true about the first mover strategy? First movers must be willing to commit sufficient resources to follow through on their pioneering efforts.  One caution is that first movers must be willing to commit sufficient resources to follow through on their pioneering efforts. A first-mover cannot be sure that customers will embrace its offering, making a first move inherently risky. First moves that build on strategic resources such as patented technology are difficult for rivals to imitate and thus are likely to succeed.
2. Apple’s iPad is an example of a _____ innovation. Disruptive Some firms have the opportunity to shake up their industry by introducing a disruptive innovation - an innovation that conflicts with, and threatens to replace, traditional approaches to competing within an industry. The iPad has proven to be a disruptive innovation since its introduction by Apple in 2010.
3. In a _____ strategy, a firm intentionally establishes a small position within a market in which it does not yet compete. foothold  Within the context of business, a foothold is a small position that a firm intentionally establishes within a market in which it does not yet compete.
4. A blue ocean strategy provides an innovative way for firms to compete with rivals in an existing market. False (Correct) A blue ocean strategy involves creating a new, untapped market rather than competing with rivals in an existing market.
5. The concept of bricolage differs from the blue ocean strategy in that a firm following the blue ocean strategy: creates a new, untapped market rather than competing with rivals in an existing market.
6. Instead of trying to outmaneuver its competition, a firm using a _____ strategy tries to make the competition irrelevant. blue ocean
7. Which of the following is true about the concept of bricolage? It involves combining ideas from existing businesses in order to create a new business.
8. Executives apply _____ when they combine ideas from existing businesses in order to create a new business. the concept of bricolage
9. The three factors that determine the likelihood of a firm responding to a competitive move are cost, motivation, and capability. False Research indicates that three factors determine the likelihood that a firm will respond to a competitive move: awareness, motivation, and capability. These three factors together determine the level of competition tension that exists between rivals.
10. _____ is a situation where a firm faces the same rival in more than one market. Multipoint competition
11. Coca-cola and Pepsi compete fiercely not only in the United States but in many countries around the world. This is an example of: multipoint competition. Multipoint competition is a situation where a firm faces the same rival in more than one market, as in this scenario.
12. _____ is a situation where rivals do not act aggressively because each recognizes that the other can retaliate in multiple markets. Mutual forbearance
13. When a rival restaurant introduced a new product that conflicted with the industry’s current competitive practices, the owners of Lobsons, an old grocery chain, choose to concentrate on their age-old specialties such as local fruits and vegetables, and home-made chocolates. Which of the following responses of firms to disruptive innovations does this example illustrate? Focus on their traditional modes of business while ignoring the disruption (Correct)
14. Merrill Lynch confronted the emergence of on-line trading in the late 1990s by forming its own Internet-based unit. Which of the following responses of firms to disruptive innovations does this example illustrate? Matching the competitors’ move When a rival introduces a disruptive innovation that conflicts with the industry’s current competitive practices, executives choose from among three main responses. First, executives may believe that the innovation will not replace established offerings entirely and thus may choose to focus on their traditional modes of business while ignoring the disruption. Second, a firm can counter the challenge by attacking along a different dimension. The third possible response is to simply match the competitor’s move. Merrill Lynch, for example, confronted on-line trading by forming its own Internet-based unit.
15. Executives routinely use the blue ocean strategy to respond to a rival who has introduced a disruptive innovation. False
16. In the late 1980s, General Motors (GM) was troubled by the extent to which the sales of small, inexpensive Japanese cars were growing in the United States. In order to recapture its lost sales without devaluing its existing brands, GM started selling small, inexpensive cars under a new brand: Geo. Geo is an example of a _____ brand. Fighting A fighting brand is a lower-end brand that a firm introduces to try protect the firm’s market share without damaging the firm’s existing brands. In the late 1980s, General Motors (GM) was troubled by the extent to which the sales of small, inexpensive Japanese cars were growing in the United States. GM wanted to recapture lost sales, but it did not want to harm its existing brands such as Chevrolet, Buick, and Cadillac by putting their names on low-end cars. GM’s solution was to sell small, inexpensive cars under a new brand: Geo.
17. A fighting brand is a higher-end brand that a firm introduces to try protect the firm’s market share without damaging the firm’s existing brands. False (Cor
18. A joint venture differs from a strategic alliance in that a joint venture: is a cooperative arrangement that involves two or more organizations each contributing to the creation of a new entity.  A joint venture is a cooperative arrangement that involves two or more organizations each contributing to the creation of a new entity. The partners in a joint venture share decision making authority, control of the operation, and any profits that the joint venture earns. A strategic alliance is a cooperative arrangement between two or more organizations that does not involve the creation of a new entity.
19. Brewers SABMiller and Molson Coors Brewing Company created a new entity MillerCoors in 2007 in order to better compete against their giant rival Anheuser-Busch, but the two parent companies remain separate. MillerCoors is an example of a _____. joint venture (Correct)
20. A joint venture is a cooperative arrangement that involves two or more organizations each contributing to the creation of a new entity True
21. Which of the following is true about a strategic alliance? It is a cooperative arrangement between two or more organizations that does not involve the creation of a new entity.
22. Which of the following is true about colocation? It occurs when goods and services offered by two or more organizations under different brands are stationed very close to each other.
23. Yum! Brands usually stations more than one of its brands - A&W, Long John Silver’s, Taco Bell, KFC, and Pizza Hut - within a single store. This is an example of _____. colocation (Correct)
24. The term co-opetition: refers to a blending of competition and cooperation between two firms. Ray Noorda, the founder of software firm Novell, coined the term to refer to a blending of competition and cooperation between two firms.
25. Merck and Roche are rivals in some markets but the firms are working together in developing tests to detect cancer and in promoting a hepatitis treatment. This is an example of _____. co-opetition (Correct)

CHAPTER 7

1. Which of the following statements holds true for overseas expansion in business? It gives a firm a weaker leverage when negotiating prices with its suppliers. (Correct)
2. The growth that overseas expansion creates leads many businesses to purchase supplies in greater numbers. True (Correct) Going international has implications for dealing with suppliers. The growth that overseas expansion creates leads many businesses to purchase supplies in greater numbers. This can provide a firm with stronger leverage when negotiating prices with its suppliers.
3. Offshoring is a popular yet controversial means for trying to reduce costs. True Offshoring is a popular yet controversial means for trying to reduce costs. It involves relocating a business activity to another country.
4. Which of the following refers to offshoring? Relocating a business activity to another country
5. Hauer and Ward is an international law firm based in Washington. The firm moves its back-end legal research business unit to India, to take advantage of the lower labor and land costs in India. After a few years, the firm notices that the quality of the legal research work conducted in India is inadequate, and decides to relocate 200 jobs back to Washington. In this example, Hauer and Ward use which of the following processes? Reshoring Reshoring occurs when jobs that are sent overseas return home.
6. Reshoring involves relocating a business activity to another country. False
7. Axis Technologies, an American firm that manufactures and sells desktop computers, decides to use offshoring to improve its business. To implement this strategy, which of the following is the firm most likely to do? Axis Technologies sets up a call center in India to provide customer service to all its customers. Business risk refers to the potential that an operation might fail. If a firm is completely dependent on one country, negative events in that country could ruin the firm.
8. Knightly Pvt. Ltd., an eyewear firm based in Texas, has business operations across various countries. When a financial meltdown occurred in Texas and in its surrounding areas, a number of people lost their jobs and were unemployed. However, this major crisis did not affect the operations of Knightly Pvt. Ltd., as it functioned across many nations. This implies that the organization had diversified its _____ by not being completely dependent on its operations in the United States. business risk. Business risk refers to the potential that an operation might fail. If a firm is completely dependent on one country, negative events in that country could ruin the firm. As Knightly Pvt. Ltd. had operations across different countries other than the United States, the firm did not suffer in spite of the financial meltdown.
9. _____ risk refers to the potential for government upheaval or interference with business to harm an operation within a country. Political risk Unstable governments make it difficult for firms to plan for the future.
10. In North Korea, the government had taken control of several privately-owned steel manufacturing firms, and seized their assets. This process is called nationalization In extreme cases, a firm’s assets in a country are seized by the national government. This process is called nationalization.
11. Creative Publications Pvt. Ltd., a publishing firm based in Germany had entered into several business deals with a few book stores and book lounges in the United States. However, the substantial difference in the currency exchange rate systems of the two nations resulted in the firm facing severe losses. Which of the following risks was encountered by Creative Publications Pvt. Ltd.? Economic risk Economic risk refers to the potential for a country’s economic conditions and policies, property rights protections, and currency exchange rates to harm a firm’s operations within a country.
12. According to the diamond model of Porter, which of the following refer to demand conditions? The nature of domestic customers (Correct)
13. Sashes Inc. is a firm that provides apparels, footwear, and bags in the U.S, and exports some of its products to England and Canada. The firm conducts extensive research in the U.S. to understand the preferences of customers, such as colors and designs. As a result of American customers’ high standards of quality, Sashes Inc. ensures that its products are durable, as well as stylish. This helps it to compete in the international market. According to the diamond model, Sashes Inc. benefits from: demand conditions. (Correct) Within the diamond model, demand conditions refer to the nature of domestic customers. Firms benefit when their domestic customers have high expectations. In this case, demand conditions explain why Sashes Incorporation focuses on creating goods based on the needs of the consumers in its home country
14. Factor conditions differ from demand conditions in that factor conditions refers to: the nature of raw materials. (Correct). Factor conditions refer to the nature of raw material and other inputs that firms need in order to create goods and services. Examples include land, labor, capital markets, and infrastructure.
15. Meadow Range Pvt. Ltd. is a firm based in France that has one of the finest wine breweries in the country. Due to the availability of many grape varieties, and suitable climatic conditions for growing grapes in France, Meadow Range has an advantage when competing in the international market. According to the diamond model, Meadow Range benefits from: factor conditions. (Correct)
16. Just-in-time inventory management believes in storing large amounts of parts and material. False. JIT management conserves space and lowers costs by requiring inputs to a production process to arrive at the moment they are needed
17. SK Manufacturing Group is a firm based in California that produces rail locomotives. The firm does not need to depend on imported bearings, axle cars, and streamliners as there are many firms in the U.S. that manufacture these equipments. The easy availability of components has fuelled the firm’s growth. According to the diamond model, SK Manufacturing Group benefits from: related and supporting industries. (Correct) The concept of related and supporting industries refers to the extent to which firms’ domestic suppliers and other complementary industries are developed and helpful. SK Manufacturing Group does not have to depend on the equipments required for producing rail locomotives as there are many related and supporting industries in its home country.
18. Which of the following is true about a multidomestic strategy? It places heavy emphasis on being responsive to local requirements within each of its markets. (Correct)
19. Which of the following is true of a firm using a global strategy to build efficiency across different nations? It stresses the need to gain economies of scale by offering the same products in each market. (Correct)
20. Ark Inc. is an international watch manufacturer that sells a variety of watches. The management of Ark Inc. prioritizes efficiency over responsiveness to local requirements. They management aims to gain economies of scale, by offering the same product in all their markets. This indicates that Arc Inc. is using a _____ strategy. Global. A firm using a global strategy sacrifices responsiveness to local requirements within each of its markets in favor of placing heavy emphasis on being efficient.
21. A firm using a transnational strategy: tries to balance the desire for efficiency with the need to adjust to local preferences within various countries. A firm using a transnational strategy seeks a middle ground between a multidomestic strategy and a global strategy. Such a firm tries to balance the desire for efficiency with the need to adjust to local preferences within various countries.
22. A firm can develop a wholly-owned subsidiary by purchasing an existing operation from a local company or another foreign operator. True A wholly-owned subsidiary is a business operation in a foreign country that a firm fully owns. A firm can develop a wholly-owned subsidiary through a greenfield venture, meaning that the firm creates the entire operation itself.
23. Sandré and Moreau Pvt. Ltd. is a firm based in France that manufactures and sells dark chocolate bars and other chocolates under the brand name, ChocoNoir. The firm sold the right to Duvall & Reese Ltd., based in the United States, to use its brand name, products, and processes to manufacture and sell dark chocolate bars in return for a payment and a percentage of the revenues that would be gained by Duvall & Reese Ltd. Which of the following was being implemented by Sandré and Moreau Pvt. Ltd.? Franchising. Franchising involves an organization (called a franchisor) granting the right to use its brand name, products, and processes to other organizations (known as franchisees) in exchange for an upfront payment (a franchise fee) and a percentage of franchisees’ revenues (a royalty fee)
24. Which of the following is true of franchising? Local franchisees must pay the vast majority of the expenses associated with getting their businesses up and running. (Correct). Franchising is an attractive way to enter foreign markets because it requires little financial investment by the franchisor. Local franchisees must pay the vast majority of the expenses associated with getting their businesses up and running.
25. Two major telecommunication corporations in the United States, Stintson Pvt. Ltd. and Gavin Incorporation worked together to create a new entity with the name of Stintson-Gavin Incorporation. Both the firms believed that this would enable them to increase their business performance. Stintson-Gavin Incorporation started to operate by offering telecommunication and broadband services. Stintson-Gavin Incorporation is an example of a _____. joint venture (Correct)