[MHR 410] Exam 1

Exam 1:
Results from this test have not been verified, only 43 out of 52 are correct...(86%).  Use at own risk.

Update: These are my answers, 47 out of 52.

1. The most appealing approaches to differentiation are __________________

• those that are the most costly to incorporate. 
• those that match the differentiating features offered by rivals in the industry. 
• those that are hard or expensive for rivals to duplicate and that also have considerable buyer appeal. [ANSWER CHOSEN]
• those that appeal to the most affluent consumers. 

2. Which of the following is not one of the strategy options for expanding into markets of foreign countries?

• A profit sanctuary strategy  [ANSWER CHOSEN]
• An export strategy 
• Establish a subsidiary in a foreign market strategy 
• A licensing strategy 

3. As a user, switching cost is highest when _____

• Moving from Ford car to Hyundai car 
• Moving from Dell Computer to HP computer 
• Moving from Windows operating system to Unix operating system  [ANSWER CHOSEN]
• Moving from Samsung cell phone to Motorola cell phone 

4. BMW seeks to attain competitive advantage by using the _________ business strategy.

• Low Cost Leadership 
• Differentiation  [ANSWER CHOSEN]
• Generic
• Forward

5. Video-on-demand services is a substitute for renting movies from a movie rental store.

• True  [ANSWER CHOSEN]
• False

6. Mercedes Benz acquiring Chrysler is an example of backward integration.

• True 
• False [ANSWER CHOSEN]

7. A low-cost leader can translate its low-cost advantage over rivals into superior profit performance by _______________

• spending heavily on advertising to promote the fact that it charges the lowest prices in the industry. 
• cutting its price to levels significantly below the prices of rivals. 
• using its low-cost edge to underprice competitors and attract price-sensitive buyers in large enough numbers to increase total profits.  [ANSWER CHOSEN]
• outproducing rivals and thus having more units available to sell. 

8. In order to reduce the raw materials that it carries, General Motors (GM) must focus on ________ activity of its value chain

• Operations
• Supply Chain Management [ANSWER CHOSEN]
• Distribuition
• Sales & Marketing 

9. Which of the following is not an example of an external threat to a company's future profitability?

• Adverse changes in foreign exchange rates 
• Unfavorable demographic shifts 
• The introduction of restrictive trade policies in countries where the company does business 
• The lack of a distinctive competence  [ANSWER CHOSEN]

10. The advantages of manufacturing goods in a particular country and exporting them to foreign markets __________________

• are largely unaffected by fluctuating exchange rates. 
• are greatest when local distributors and dealers in that country can be convinced not to carry products that are made outside the country's borders. 
• can be wiped out when that country's currency grows weaker relative to the currencies of the countries where the output is being sold. 
• are weakened when that country's currency grows stronger relative to the currencies of the countries where the output is being sold.  [ANSWER CHOSEN]

11. You are a manager at Coca-Cola and you conduct an industry analysis and conclude that substitutes for your company product is

• Fanta 
• Pepsi Cola (?)
• Sprite 
• Water  [ANSWER CHOSEN]

12. Based on your understanding of the consumer preferences in different countries, you would advise  the management of McDonald's to adopt ___________ strategy

• Transglobal
• Global [ANSWER CHOSEN]
• Multidomestic 
• Generic

13. Barrier to Entry are highest in __________ industry

• Hair Salon 
• Pizza 
• Furniture
• Airline [ANSWER CHOSEN]

14. _____________ is an example of forward integration

• Delta acquiring Northwest airlines
• Kroger manufacturing K-Cola
• Ford Motors acquiring a tire company
• Apple opening Apple stores [ANSWER CHOSEN]

15. According to internal analysis assessment (i.e., VRIN analysis) we can conclude that _______ are one of the sources of competitive advantage for Dell.

• Customers 
• Microprocessors 
• JIT inventory management system  [ANSWER CHOSEN]
• Products 

16. Chrysler shipping cars from their factories in Midwest U.S. to Germany and other European countries is an example of ___________

• Exporting strategy [ANSWER CHOSEN]
• Licensing strategy
• Strategic alliance
• Transcontinental strategy

17. The major avenues for achieving a cost advantage over rivals include ____________    Answer

• eliminating or curbing nonessential cost-producing activities and performing essential value chain activities more cost-effectively that rivals.  [ANSWER CHOSEN]
• having a management team that accepts below-market salaries. 
• paying lower wages to hourly workers than what rivals are paying workers. 
• performing high-cost activities in-house.

18. According to internal analysis assessment (i.e., VRIN analysis) we can conclude that _______ are one of the sources of competitive advantage for Intel.

• Patents  [ANSWER CHOSEN]
• Customers 
• Operating System
• Products 

19. Which of the following is not a good example of a marketing-related key success factor?

• High utilization of fixed assets  [ANSWER CHOSEN]
• A well-known and well-respected brand name 
• Courteous, personalized customer service 
• Clever advertising 

20. The options for remedying a cost disadvantage associated with activities performed by forward channel allies include ____________

• pressuring forward channel allies to reduce their costs and markups.  [ANSWER CHOSEN]
• switching to lower priced substitutes. 
• shifting into the production of substitute products. 
• shifting from a differentiation strategy to a best-cost strategy or focus strategy. 

21. The advantages of using a franchising strategy to pursue opportunities in foreign markets include _______________

• helping build multiple profit sanctuaries 
• having franchisees bear most of the costs and risks of establishing foreign locations and requiring the franchisor to expend only the resources to recruit, train, and support foreign franchisees [ANSWER CHOSEN]
• being particularly well suited to the global expansion efforts of companies with multicountry strategies. 
• being well suited to the global expansion efforts of manufacturers 

22. You are an international business expert and Ford's management has approached you to assist them in developing their international business strategy. You would recommend that Ford adopts the _________ strategy

• Transglobal 
• Global  [ANSWER CHOSEN]
• Multidomestic 
• Generic 

23. According to internal analysis assessment (i.e., VRIN analysis) we can conclude that _______ are one of the sources of competitive advantage for Coca-Cola.

• Brand recognition  [ANSWER CHOSEN]
• Customers
• Bottlers
• Cola drinks

24. In order to successfully implement cost leadership business strategy, Kmart should

• Maximize marketing expenses 
• Maximize economies of scale  [ANSWER CHOSEN]
• Maximize R&D expenses 
• Maximize workforce layoffs 

25. Barriers to entry are the highest when you are trying to enter the  ________ industry

• Telecommunication [ANSWER CHOSEN]
• Specialty coffee
• PC 
• Pizza 

26. When conducting an industry analysis of the retail industry it is appropriate to identify _______ as the buyers of this industry.

• Wal-Mart 
• Internet Retailers 
• Individuals  [ANSWER CHOSEN]
• Procter & Gamble 

27. As a consumer product company that sells most of its products through the traditional retail channels, Johnson & Johnson most likely experiences _________

• Low brand recognition
• Low management controls 
• High supplier power  [ANSWER CHOSEN]
• High buyer power 

28. The advantages of using a franchising strategy to pursue opportunities in foreign markets include _______________

• helping build multiple profit sanctuaries 
• having franchisees bear most of the costs and risks of establishing foreign locations and requiring the franchisor to expend only the resources to recruit, train, and support foreign franchisees [ANSWER CHOSEN]
• being particularly well suited to the global expansion efforts of companies with multicountry strategies. 
• being well suited to the global expansion efforts of manufacturers 

29. Based on your understanding of the five forces model, you can conclude that rivalry is strongest in _________ industry

• Operating system
• 3D TV
• Solar car
• Fast food [ANSWER CHOSEN]

30. Identifying the strategic issues a company faces and compiling a "worry list" of problems and roadblocks is an important component of company situation analysis because _____

• without a precise fix on what problems/issues a company confronts, managers cannot know what the industry's key success factors are. 
• the "worry list" sets the management agenda for taking actions to improve the company's performance and business outlook.  [ANSWER CHOSEN]
• the "worry list" helps company managers clarify their thinking about how best to modify the company's value chain. 
• these issues and obstacles must be cleared before management can focus clearly on what is the best strategy for the company to pursue. 

31. Ford company acquiring Goodyear tire company is an example of __________

• forward integration 
• generic integration
• linear integration
• backward integration  [ANSWER CHOSEN]

32. Which of the following is a good example of a manufacturing-related key success factor?

• Global distribution capabilities 
• Low distribution costs 
• Accurate filling of buyer orders 
• High labor productivity (especially if the production process has high labor content)  [ANSWER CHOSEN]

33. To use location to build competitive advantage when competing in both domestic and foreign markets, a company must _________________

• scatter its production plants across many different country markets so as to minimize the costs of shipping to its own distribution centers and/or to wholesalers/retail dealers. 
• avoid selling in countries where there are high trade barriers or where buyers purchase in small quantities. 
• consider (1) whether to concentrate each activity it performs in a few select countries or to disperse performance of the activity to many nations and (2) in which countries to locate particular activities.  [ANSWER CHOSEN]
• concentrate buyer-related activities in a few well-chosen locations so as to maximize the capture of distribution-related scale economies. 

34. The higher the variable cost the greater the need for attaining high economies of scale.

• True  [ANSWER CHOSEN]
• False

35. Which of the following is not an appropriate guideline for developing a strategic group map for a given industry?

• The variables chosen as axes for the map should indicate big differences in how rivals have positioned themselves to compete in the marketplace. 
• The variables chosen as axes for the map should be highly correlated. 
• The variables chosen as axes for the map can be quantitative, qualitative, or discrete and defined in terms of distinct classes and combinations.  [ANSWER CHOSEN]
• The sizes of the circles on the map should be drawn proportional to the combined sales of the firms in each strategic group. 

36. Pfizer has entered into an agreement with a Taiwanese company, under this agreement the Taiwanese company will produce and market Pfizer's products in Asia and pay royalties to Pfizer based on the sales. This is an example of ____________

• global strategy
• export strategy
• generic strategy
• licensing strategy [ANSWER CHOSEN]

37. Which one of the following is not part of conducting a SWOT analysis?

• Identifying a company's resource strengths and competitive capabilities 
• Benchmarking the company's resource strengths and competitive capabilities against industry key success factors  [ANSWER CHOSEN]
• Identifying a company's market opportunities 
• Matching the company's strategy to its resource strengths and market opportunities, correcting problematic weaknesses, and defending against worrisome threats 

38. ____________ is an example of intangible resource

• Toyota’s production facilities 
• Georgia Pacific’s land holdings 
• Hampton Inn’s reservation system 
• Southwest’s organizational culture  [ANSWER CHOSEN]

39. The ability of a multinational or global competitor to shift production from country to country to take advantage of exchange rate fluctuations, energy costs, wage rates, or changes in tariffs is an example of _______________

• cross-border coordination. 
• a profit sanctuary.
• an international strategic alliance.  [ANSWER CHOSEN]
• franchising strategy

40. A "think global, act global" approach to strategy making is preferable to a "think local, act local" approach when _________________

• a big majority of the company's rivals are pursuing localized multidomestic strategies. 
• country-to-country differences are small enough to be accommodated with the framework of a mostly uniform global strategy.  [ANSWER CHOSEN]
• host governments enact regulations requiring that products sold locally meet strict manufacturing specifications or performance standards. 
• plants need to be scattered across many countries to avoid high shipping costs. 

41. Two analytical tools useful in determining whether a company's prices and costs are competitive are ________________

• SWOT analysis and key success factor analysis. 
• competitive position assessment and competitive strength assessment. 
• driving forces analysis and SWOT analysis. 
• value chain analysis and benchmarking.  [ANSWER CHOSEN]

42. In which one of the following instances is supplier bargaining power and leverage not weakened?

• When industry members pose a credible threat of backward integration into the business of suppliers 
• When the cost of switching from one supplier to another is low 
• When the buying firms purchase in large quantities and thus are important customers of the suppliers 
• When the items purchased from suppliers are in short supply [ANSWER CHOSEN] 

43. Doing a competitive strength assessment entails ____________

• determining whether a company has a cost-effective value chain. 
• ranking the company against major rivals on each of the important factors that determine market success and ascertaining whether the company has a net competitive advantage or disadvantage versus major rivals. 
• analyzing whether a company is well positioned to gain market share and be the industry's profit leader. 
• identifying a company's core competencies and distinctive competencies (if any).  [ANSWER CHOSEN]

44. Marketing expenditure is a ________ cost.

• Variable 
• Moderating 
• Punctuated 
• Fixed  [ANSWER CHOSEN]

45. The steps involved in driving forces analysis are _________________

• developing a comprehensive list of all the potential causes of changing industry conditions. 
• predicting which new driving forces will emerge next. 
• determining which of the five competitive forces is the biggest driver of industry  change. 
• identifying the driving forces, assessing whether their impact will make the industry more or less attractive, and determining what strategy changes are needed to prepare for the impact of the driving forces.  [ANSWER CHOSEN]

46. A strategic group consists of those firms in an industry that ____________

• are subject to the same driving forces.  [ANSWER CHOSEN]
• employ similar competitive approaches and occupy similar positions in the market. 
• have similar size market shares. 
• are placing about the same emphasis on each distribution channel. 

47. A focused low-cost strategy seeks to achieve competitive advantage by ____________________

• outmatching competitors by offering value products/services 
• delivering more value for the money than other competitors. 
• performing the primary value chain activities at a lower cost per unit than can the industry's low-cost leaders. 
• serving buyers in the target market niche at a lower cost and lower price than rivals. [ANSWER CHOSEN] 

48. Wal-Mart selling Sam’s Cola is an example of

• forward integration  [ANSWER CHOSEN]
• backward integration 
• horizontal integration 
• linear integration 

49. _________ is the primary reason that new companies face difficulty in entering the automotive industry

• Lack of distribution channels
• High economies of scale  [ANSWER CHOSEN]
• High demand
• High supplier power 

50. It is easy for a franchisor, such as McDonald's, to maintain quality standards when operating in international markets.

• True 
• False [ANSWER CHOSEN]

51. For a best-cost provider strategy to be successful, a company must have ___________________

• excellent marketing and sales skills in convincing buyers to pay a premium price for the attributes/features incorporated in its product. 
• the capability to incorporate upscale attributes at lower costs than rivals whose products have similar upscale attributes. [ANSWER CHOSEN] 
• one of the best-known and most respected brand names in the industry. 
• a short, low-cost value chain. 

52. Which company has the most sustainable competitive advantage?

• Dell 
• Pepsi
• De Beers [ANSWER CHOSEN]
• IBM

53._____________ is an example of focused differentiation strategy
Answer
Toyota
Ferrari
Walmart
Delta airlines




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Quizzes!


Quiz 1: External Analysis

1. Which of the following questions is not primarily needed to craft a strategy that fits the company's external situation?

• What are the key factors of competitive success? 
• What market positions do industry rivals occupy? Who is strongly positioned and who is not? 
• What strategic moves are rivals likely to make next? 
• What forces are driving changes in the industry, and what impact will these changes have on competitive intensity and industry profitability? 
• Which customers have competitors' targeted and how do they approach them? [ANSWER]

2. Which of the following is not included in the five competitive forces?

	Competitive pressures coming from the threat of entry of new rivals.
	Competitive pressures stemming from supplier bargaining power.
*	Competitive pressure stemming from incremental innovations within the industry.
	Competitive pressures coming from the producers of substitute products.
	Competitive pressures coming from other firms in the industry.

3. Which of the following statements is accurate about competitive pressures created by the rivalry among competing sellers?

• Rivalry is usually stronger in slow-growing markets and weaker in fast-growing markets. 
• Rivalry intensifies when competing sellers regularly launch fresh actions to boost their market standing and business performance. 
• Rivalry is usually weaker in industries comprised of vast numbers of small rivals; likewise, it is often weak when there are fewer than five competitors. 
• Rivalry is stronger in industries where competitors are equal in size and capability. 
• All of these are correct. [ANSWER] 

4. Rivalry can be considered fierce to strong __________________

• when the maneuvering among industry members, while lively and healthy, still allows most industry members to earn acceptable profits. 
• when most companies in the industry are relatively well satisfied with their sales growth and market share and rarely undertake offensives to steal customers away from one another. 
• when companies are highly distinctive in their strategic approaches. 
• when the battle for market share is so vigorous that the profit margins of most industry members are squeezed to bare-bones levels. [ANSWER]
• when competitors engage in protracted price wars or habitually employ other aggressive tactics that are mutually destructive to profitability. 

5. The most widely encountered entry barriers candidates must hurdle include all of the following except __________________

• tariffs and international trade restrictions. 
• the difficulties of building a network of distributors or dealers and securing adequate space on retailers' shelves. 
• strong buyer loyalty to existing brands. 
• sizable economies of scale in production. 
• small market size and special customer requirements. [ANSWER]

6. The competitive pressures from potential new entrants tend to be weaker when _______

• newcomers can expect to earn attractive profits. 
• industry members are willing and able to contest new entrants. [ANSWER]
• existing industry members are looking to expand their market reach by entering product segments or geographic areas where they do not have a presence. 
• buyer demand is growing rapidly. 
• there is a large pool of potential entrants, some of which have the capabilities to overcome high entry barriers. 

10. Supplier bargaining power is weaker when ___________________________________

• suppliers are not dependent on the industry for a large portion of their revenues. 
• industry members have the potential to integrate backward and self-manufacture their own requirements. [ANSWER]
• the supplier industry is more concentrated than the industry it sells to. 
• supplier services are critical to industry members' production process. 
• supplier products are differentiated and short in supply. 

11.Whether buyers are able to exert strong competitive pressures on industry members depends on _________

	(1) the extent to which buyers can exercise enough bargaining power to influence the conditions of sale in their favor, and (2) whether strategic partnerships between certain industry members can adversely affect other industry members.
	(1) the extent to which buyers are price-sensitive, and (2) the competitiveness of the market.
	(1) the degree to which buyers have bargaining power, and (2) how much the buyer preferences vary within the industry.
*	(1) the degree to which buyers have bargaining power, and (2) the extent to which buyers are price-sensitive.
	(1) how much the buyer preferences vary within the industry, and (2) whether industry members are spending more or less on advertising.

12. Anheuser-Busch, Coors, and Heinz have increased bargaining power because _____

• they are well informed about sellers' products, prices, and costs. 
• they have the option to delay their purchases of durable goods. 
• they are large and few in number relative to the number of sellers. 
• they have integrated backward into the business of sellers. [ANSWER]
• industry goods are standardized. 

13.Which factor weakens the bargaining power of buyers?

	Buyer costs of switching to competing products are low.
	Buyer demand is weak in relation to industry supply.
*	Buyers are not very price-sensitive.
	Buyers are large and few in number relative to the number of industry sellers.
	Buyers have the ability to postpone purchases.

14.Which of the following statements about an industry's driving forces is wrong?

	Although some drivers of change are unique and specific to a particular industry situation, most driving forces are comparable and fall into specific categories.
	Many driving forces originate in the outer ring of the company's external environment, but others originate in the company's more immediate industry and competitive environment.
	Driving forces are major underlying causes of changing industry and competitive conditions and have the biggest influences in reshaping the industry landscape and altering competitive conditions.
*	Driving forces appear when an industry begins to mature but are seldom present during early stages of the industry life cycle.
	For each industry no more than three or four driving forces are likely to be powerful enough to qualify as the major determinants of why and how an industry's competition is changing.

15.The best technique for revealing the market positions of industry competitors is __________

	the SWOT analysis.
	the key financial analysis.
	the five-forces model of competition.
*	strategic group mapping.
	the macro-environment analysis.

16. Which of the following cannot be learned when using a strategic group map?

• Strategic group maps reveal which companies are close competitors and which are distant competitors. 
• Strategic group maps determine which companies seem destined to struggle because of their position. 
• Strategic group map analysis entails drawing conclusions about where on the map is the best place to be and why. 
• Strategic group maps help managers understand why some parts of the map are better than others. 
• Strategic group maps reveal which companies have the highest profit margins. [ANSWER]

17.Which is the following is a benefit of good competitive intelligence?

	It entails concluding which companies seem destined to struggle because of their position.
	It helps determine whether a rival is gaining or losing market share.
	It points to those things that every firm in the industry needs to attend to in order to retain customers and weather the competition.
*	It helps managers to avoid the damage to sales and profits that comes from being caught napping by the surprise moves of rivals.
	It enables more accurate predictions about how long it will take a particular rival to copy most of what the strategy leader is doing.

18. An industry's key success factors ___________________________

• are the strategy elements, product and service attributes, operational approaches, resources, and competitive capabilities with the greatest impact on competitive success in the marketplace. 
• point to those things that every firm in the industry needs to attend to in order to retain customers and weather competition. 
• vary from industry to industry and even from time to time in the same industry. 
• are those competitive factors that affect industry members' ability to survive and prosper in the marketplace. 
• All of these are correct. [ANSWER]

19. Which of the following is a good example of a manufacturing-related key success factor?

• Efficient distribution capabilities 
• High capacity utilization [ANSWER]
• Low marketing expenses 
• High levels of customer service 
• Short delivery time capability 

Quiz 2: Internal Analysis
1. A firm's capabilities ___________

• may either be tangible such as plants, distribution centers, manufacturing equipment, patents, information systems, and capital reserves or creditworthiness or intangible assets such as a well-known brand or a results-oriented organizational culture. 
• are frequently referred to as a core competencies. 
• are developed and enabled through the deployment of a company's resources. [ANSWER]
• enable the superior performance of important cross-functional capabilities. 
• are competitive assets that are owned or controlled by a company. 

2.The two best indicators of how well a company's strategy is working are _____________

• (1) whether the company has more competitive assets than it does competitive liabilities, and (2) whether its strategy is built around at least two of the industry's key success factors. 
• (1) whether customer and employee satisfaction is high, and (2) whether it has more core competencies than close rivals. 
• (1) whether the company is achieving its stated financial and strategic objectives, and (2) whether customer and employee satisfaction is high. 
• (1) whether the company is recording gains in financial strength and profitability, and (2) whether the company's competitive strength and market standing is improving. [ANSWER]
• (1) whether it is subject to weaker competitive forces and pressures than close rivals (a good sign), or (2) whether it is disadvantaged by stronger competitive forces and pressures (a bad sign). 

3. The gross profit margin _______________________

• indicates the percentage of revenues available to cover operating expenses and yield a profit. [ANSWER]
• is a quick and rough estimate of the cash a company's business is generating after payment of operating expenses, interest, and taxes. 
• shows the percentage of after-tax profits paid out as dividends. 
• measures the return on total investment in the enterprise. 
• shows how much profit is earned on each dollar of sales, before paying interest charges and income taxes. 

4. Which of the following statements concerning a company's value chain is incorrect?

• All of the various activities that a company performs internally combine to form a value chain. 
• A company's value chain consists of two broad categories of activities that drive costs and create customer value: primary and support activities. 
• The objectives of a value chain analysis are to identify the best practices in performing an activity and to emulate those best practices when they are possessed by others. [ANSWER]
• The value chain includes a profit margin component because delivering customer value profitably (with a sufficient return on invested capital) is the essence of a sound business model. 
• The value chain consists of the primary activities that are foremost in creating value for customers and the requisite support activities that facilitate and enhance the performance of the primary activities. 

5.The competitive power of a resource or capability is measured by how many of the following four tests it can pass:

*	whether the resource or capability is competitively valuable and/or is something that rivals lack; whether the resource is hard to copy or/and can be trumped by different types of resources and capabilities.
	whether the resource or capability can be trumped and/or is hard to copy; and/or are there good substitutes available for the resource.
	whether the resource or capability is rare and/or is hard to copy; whether the resource or capability is competitively valuable and/or are there good substitutes available for the resource.
	whether the resource or capability is hard to copy and/or can be trumped by different types of resources and capabilities; whether the resource or capability is competitively valuable and/or is something that rivals lack.
	whether the resource or capability is competitively valuable and/or are there good substitutes available for the resource; whether the resource or capability is rare and/or is hard to copy.

6. Which of the following statements accurately describes the SWOT analysis?

• It is a powerful analytic tool that involves determining how the drivers of change are affecting industry and competitive conditions. 
• It is an analytical tool to identify the market segments in which a company is strongly positioned and weakly positioned. 
• It is the most powerful and widely used tool for systematically diagnosing the principal competitive pressure in the market. 
• It is an advanced statistical method to improve quality by reducing defects and variability in the performance of business processes. 
• It is a powerful tool for sizing up a company's resource capabilities and deficiencies, its market opportunities, and the external threats to its future well-being. [ANSWER]

8. Threats to a company's profitability and competitive well-being most likely will not stem from ____________

• rivals' introduction of new or improved products. 
• deficiencies in competitively important areas of the business. [ANSWER]
• vulnerability to a rise in interest rates or tight credit conditions. 
• emergence of cheaper or better technologies. 
• adverse changes in foreign exchange rates. 

9. Which market opportunities are most important for a company?

*	Opportunities that offer the best growth and profitability.
	Opportunities that involve low capital requirements and low regulative burdens.
	Opportunities that are unique, rare, long lasting, and not able to be copied by rivals.
	Opportunities that offer possibilities to increase market share and buyers volume.
	Opportunities that are not yet discovered and utilized by rivals.

10. Which of the following steps is not a part of the SWOT analysis?

• Identify company strengths and competitive assets. 
• Identify external threats to the company's future well-being. 
• Identify the company's alignment of vision, mission, values, and strategy. [ANSWER]
• Identify the company's market opportunities. 
• Identify company weaknesses and competitive deficiencies. 

11. A company's value chain consist of _______________________

• series of steps a company goes through to develop a new product, get it produced and into the marketplace, and then start collecting revenues and earning a profit. 
• the steps it goes through to convert its net income into value for shareholders. 
• activities primarily involving product R&D, HRM, and general administration. 
• two broad categories: primary activities that are foremost in creating value for customers and the requisite support activities. [ANSWER]
• series of steps it takes to get a product from the raw materials stage to the distributors. 

12. The primary purpose of value chain analysis is to ______________________

	measure the lead time it takes to push a product from production to the customer.
	examine how a company delivers on its customer value proposition.
→	facilitate a comparison, activity by activity, of how effectively and efficiently a company delivers value to its customers, relative to its competitors.
*	assess the efficiency of primary activities and support activities.
	track the profit margin along the value-creating activities.

13. Why is a weighted competitive strength analysis superior to an unweighted analysis?

• Weighting each company's overall competitive strength by the size of its market share produces a more accurate measure of its true competitive strength. 
• The different measures of competitive strength are unlikely to be equally important. [ANSWER]
• The weighted analysis is easier to conduct and less cost intensive. 
• It eliminates the bias introduced for those firms having large market shares. 
• The results are more accurate as they involve a greater amount of data. 

14. Identifying the strategy-related issues and problems that company managers need to address and resolve does not primarily entail ____________________

• developing a "worry list" of "how to…," "whether to….," and "what to do about….." 
• drawing on what was learned from having analyzed the company's industry and competitive environment. 
• locking in on what challenges/obstacles/roadblocks the company has to overcome to be financially and competitively successful in the years ahead. [ANSWER]
• assessing what challenges the company has to overcome to be financially and competitively successful in the short run. 
• drawing on the evaluations of the company's own resources, internal circumstances, and competitiveness. 

Quiz 3 - Business Strategy

3. A company achieves low-cost leadership when ________________

• it becomes the industry's low-cost provider rather than just being one of perhaps several competitors with comparatively low costs.
• it uses its pricing advantage to increase buyer switching costs.
• it reduces expenditures through investments in large facilities capable of delivering economies of scale.
• it is able to reduce costs through TQM or other quality initiatives.
• it is using a low-cost approach to gain the largest market share and outperform its competitors.

4. What are the two ways a company can translate its low-cost advantage over rivals into attractive profit performance?

	Either entering other market segments where price is an important competitive weapon or using its cost advantage to add other products to widen market appeal.
	Either using its cost advantage to spend heavily on advertising or increasing price to earn the biggest possible profit margin on each unit sold.
*	Either using its low-cost edge to underprice competitors and attract price-sensitive buyers in large enough numbers to increase total profits or refraining from price cutting and using the low-cost advantage to earn a bigger profit margin on each unit sold.
	Either focusing on price-sensitive buyers or increasing production to achieve greater economies of scale and even lower costs.
	Either using the cost advantage to add a few inexpensive differentiating features or cutting its price to levels significantly below the prices of rivals.

5. Which strategic approach tends to work best when price competition among rival sellers is vigorous, buyers are large, and there are few ways to achieve product differentiation?

• A best-cost provider strategy
• A focused differentiation strategy
• A broad differentiation strategy
• A low-cost provider strategy
• A focused low-cost strategy

6. Which of the following is not a potential pitfall of a low-cost provider strategy?

• Failing to emphasize avenues of cost advantage that can be kept proprietary.
• Overly aggressive price cutting can reduce profitability.
• Becoming too fixated on cost reduction and misreading or ignoring increased buyer interest in added features or service as well as declining buyer sensitivity to price.
• Selling at a lower price can result in revenue gains that are smaller than the increases in total costs.
• A low-cost provider strategy is always doomed when competitors are able to quickly copy most or all of the appealing product attributes a company comes up with.

8. Which strategy tends to work best when buyer needs and uses of the product are diverse?

• An offensive strategy
• A low-cost provider strategy
• A best-cost provider strategy
• A defensive strategy
• A differentiation strategy

9. A differentiation strategy works best in which of the following market circumstances?

• When buyers have a low degree of bargaining power and purchase the product frequently.
• When there are many ways to differentiate the product or service that have value to buyers.
• When the products of rivals are weakly differentiated and most competitors are resorting to clever advertising to try to set their product offerings apart.
• When new and improved products are introduced only infrequently.
• When buyers incur low costs in switching their purchases to rival brands.

10. Overspending on efforts to differentiate the company's product offering and the possibility that competitors quickly copy most of the appealing product attributes a company comes up with are possible drawbacks of _____________________

• a best-cost provider strategy.
• an offensive strategy.
• a differentiation strategy.
• a defensive strategy.
• a low-cost provider strategy.

11. A focused low-cost strategy aims at ___________________

• serving buyers in the target market niche with products carefully designed to appeal to the unique needs of niche buyers.
• becoming the industry's lowest-cost provider rather than just being one of perhaps several competitors with comparatively low costs.
• securing a competitive advantage by serving buyers in the target market niche at lower cost than those of rival competitors.
• securing a competitive advantage with a product offering carefully designed to appeal to the unique preferences and needs of a well-defined group of buyers.
• dominating more market niches in the industry via a lower cost and a lower price than any other rival.

12. Successful use of a focused differentiation strategy depends on _________________

• the possibility to sell directly to retail chains wanting a premium-priced store brand.
• the ability to concentrate on product attributes that appeal to image-conscious consumers.
• the existence of a buyer segment that is looking for special product attributes or seller capabilities.
• the capability to appeal broadly to almost all buyer groups and market segments.
• the firm's ability to stand apart from rivals competing in comparable target market niches.

13. Best-cost provider strategies work best when _______________________

• a company is positioned between competitors having ultra-low prices and those with top-notch products in terms of both quality and performance.
• great masses of buyers become value-conscious and are attracted to economically priced products.
• product differentiation is the norm and there is an attractively large number of value-conscious buyers.
• numerous buyer segments exist and when buyer needs are diverse.
• it is costly or difficult for multisegment competitors to put capabilities in place to meet the specialized needs of buyers.

14. A best-cost provider’s resources and capabilities must allow ______________________

• the company to incorporate whatever differentiating features buyers are willing to pay.
• custom-made products to be developed that match the tastes and requirements of niche members.
• for the development of products that meet the basic needs of niche members at a low cost.
• the incorporation of upscale attributes into its product offering at a lower cost than rivals.
• for a continuous search for cost reduction without sacrificing acceptable quality and essential features.

15. The marketing emphasis of a company pursuing a focused differentiation strategy usually is to _____________________________

	tout differentiating features and charge a premium price that more than covers the extra costs of differentiating features.
	out-advertise rivals and make frequent use of discount coupons.
	charge a premium price to cover the extra costs of differentiating features.
*	highlight carefully designed products or services appealing to the unique preferences and needs of a narrow, well-defined group of buyers.
	emphasize selling direct to end users and promoting personalized customer service.

16. A company's competitive strategy is unlikely to succeed unless ______________________

	it stresses constant innovation to stay ahead of imitative rivals and concentrates on a few differentiating features.
	it keeps prices close to the average of all rivals and it spends heavily on new product R&D.
*	it is predicated on leveraging a competitively valuable collection of resources and capabilities that match the strategy.
	it emphasizes personalized customer service and adding as many differentiating features as possible.
	it out-innovates and out-advertises rivals.

Quiz 4: 

1. Which of the following is the biggest strategic issue when competing in international markets?

• How to avoid the risks of shifting exchange rates.
• Which price strategy to follow.
• To find out about the regulation process and political and capital requirements.
• Whether to follow a global, transnational, or international strategy
• Whether to offer a mostly standardized product worldwide or whether to customize the company's offerings in each different country market.

2. To use location to build competitive advantage when competing on domestic and international levels, a company must __________________

• use acquisition and rapid-growth strategies to better defend against expansion-minded internationals.
• transfer company expertise to cross-border markets and initiate actions to contend on an international level.
• try to change the local market to better match the way the company does business elsewhere.
• be prepared to modify aspects of the company's business model or strategy to accommodate local circumstances.
• consider (1) whether to concentrate each internal process in a few countries or to disperse performance of each process to many nations, and (2) in which countries to locate particular activities.

3. Which statement points out the main difference between the global strategy and the transnational strategy?

• A "think global, act global" approach entails extensive strategy coordination across countries, and a "think global, act local" approach entails little or no strategy coordination across countries.
• A global strategy involves selling standardized product worldwide whereas a transnational strategy entails selling products that are highly differentiated from country to country.
• A global strategy has to cope with high production and distribution costs due to greater variety, whereas a transnational strategy can create large economies.
• A global strategy involves selling under a single brand name worldwide whereas a transnational strategy focuses on utilizing multiple brands.
• A transnational strategy gives local managers more room to make minor strategy changes to better satisfy local buyers and to better match local market conditions.

4. Which of the following is not an advantage of utilizing a licensing strategy to participate in foreign markets?

• Avoiding risks of committing resources to country markets that are unfamiliar or otherwise risky.
• Being able to leverage the company's technical know-how or patents without committing significant additional resources to markets that are unfamiliar, politically volatile, economically uncertain, or otherwise risky.
• Being able to have better local market knowledge than would be possible with a strategic alliance strategy.
• The ability to generate income from royalties.
• The ability to enter international markets although the company lacks international organizational capabilities and the resources.

5.An internal development strategy involves _______________

• avoiding the risk of committing resources to enter foreign markets.
• creating a subsidiary business in the foreign market by setting up all aspects of the operation from the ground up.
• exporting into a foreign market by marketing indirectly through local forward channel allies.
• building a presence in a foreign market.
• using a domestic plant as its production base.

6. The approach of a firm using a "think global, act local" version of a global strategy entails _____________________

• producing and marketing a variety of product versions under the same brand name, with each different version being designed specifically to accommodate the needs and preferences of buyers in a particular country.
• selling numerous product versions (each customized to buyer tastes in one or more countries and sometimes branded for each country) but opting to only sell direct to buyers at the company's website so as to bypass the costs of establishing networks of wholesale/retail dealers in each country market.
• pursuing the same basic competitive strategy theme (low-cost, differentiation, best-cost, focused) in all countries where the firm does business but giving local managers some latitude to adjust product attributes to better satisfy local buyers and to adjust production, distribution, and marketing to be responsive to local market conditions.
• little or no strategy coordination across countries.
• selling the company's products under a wide variety of brand names (often one brand for each country or group of neighboring countries) so that buyers in each country market will think they are buying a locally made brand.

7. The global strategy that emphasizes a "think global, act global" strategic theme focuses on ________

• selling different products under the same brand names everywhere and expanding into most, if not all, nations where there is significant buyer demand.
• utilizing the different competitive capabilities, distribution channels, and marketing approaches available in a company's international markets.
• the same basic competitive approach (low-cost, differentiation, best-cost, focused) in all countries where the firm does business.
• varying the product offering and competitive approach from country to country.
• incorporating elements of both multidomestic and global strategies.

8. Which one of the following is not a factor that makes competing across national borders more difficult than competing domestically?

• Variations in market growth rates from country to country and important country-to-country differences in consumer buying habits and buyer tastes and preferences.
• Vulnerability to adverse shifts in currency exchange rates.
• The difficulty in achieving strategic fit in sales and marketing activities.
• Country-to-country variations in host-government policies and economic conditions.
• The potential for location-based advantage in some countries.

9.A company expands outside its home market in order to _____________________

• increase the bargaining power of alliance members over suppliers or buyers.
• gain access to new customers for the company's products/services.
• strengthen its capability to employ vertical integration strategies, especially those that involve partial integration (building positions in selected stages of the industry's value chain).
• gain economic incentives offered by governments of developing countries wishing to expand industry and job creation.
• All of these are correct.

10. Which of the following is an advantage of an export strategy?

• Export strategies are the most efficient and flexible method to discover and accommodate changes in local demand.
• Export strategies are less costly and most efficient compared to the other options for entering and competing in international markets.
• Export strategies are the best method to overcome high entry barriers.
• Export strategies minimize risks and capital requirements.
• Export strategies are used to avoid tariffs and curb the effects of fluctuating exchange rates.

11. The multidomestic strategy of "think local, act global" _______________

•  is conductive to building a single worldwide competitive advantage.
•  facilitates the transfer of company's capabilities, knowledge, and other resources across country borders.
•  avoids host-country ownership requirements and import quotas.
• becomes more appealing the bigger the country-to-country differences in buyer tastes, cultural traditions, and market conditions.
• is most appropriate, when the need for local responsiveness is low.

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Self Quiz: External Analysis

1. Which of the following is not one of the questions that needs to be answered in thinking strategically about a company's external environment?
A) What kinds of competitive forces are industry members facing, and how strong is each force?
B) What are the company's competitively valuable resources and capabilities that can be used to form the foundation of its competitive approach? [ANSWER]
 C) What market positions do industry rivals occupy—who is strongly/weakly positioned and who is not?
 D) What are the key factors of competitive success?
 E) What forces are driving changes in the industry, and what impact will these changes have on competitive intensity and industry profitability?


2. In identifying an industry's dominant economic features, there is a need to consider such things as
A) market size and growth rate, the number of buyers, the scope of competitive rivalry, the number of rivals, demand-supply conditions, product innovation, the presence of scale economies and/or learning/experience curve effects, and the pace of technological change.[ANSWER]
 B) the threat of additional entry into the industry and what the industry's key success factors are.
 C) the strength of competitive pressures from producers of substitute products and which competitors are in which strategic groups.
 D) the extent and importance of seller-supplier collaborative partnerships, the extent and importance of seller-buyer collaborative partnerships, and the bargaining leverage of sellers and buyers.
 E) All of these.


3. Whether the buyers of an industry's product have strong or weak bargaining leverage over the terms and conditions of sale depends on
 A) how often that sellers alter their prices, how sensitive buyers are to price differences among sellers, whether the item being purchased is a good or a service, and whether buyers buy frequently or infrequently.
 B) the frequency with which rival firms change strategies and the amount of advertising that sellers utilize.
 C) whether all buyers have the same degree of negotiating power, whether the item carries a high or low price tag, and whether there are many or few collaborative partnerships between sellers and buyers.
D) whether buyers purchase in relatively large or small quantities, whether the costs of switching to competing brands or to substitute products are high or low, and how well informed buyers are about sellers' prices, products, and costs.[ANSWER]
 E) whether buyer demand is seasonal or year-round, whether entry barriers are high or low, and whether competitive pressures from substitutes are strong or weak.


4. Based on both the chapter discussion and the summary in Figure 3.4, competitive pressures stemming from substitute products are weaker when
A) substitutes are higher-priced, buyers don't believe substitute products have equal or better features, and buyers' costs of switching to substitutes are relatively high.[ANSWER]
 B) the industry consists of a relatively large number of rival sellers that are fairly equal in size and competitive capability.
 C) entry barriers are moderately high but by no means prohibitive and there is a fairly small pool of entry candidates.
 D) a number of customers buy in large volumes and are in a strong bargaining position to win concessions from sellers.
 E) buyer loyalty to the products they are currently purchasing is relatively low.


5. Which of the following is not a factor in determining whether the suppliers to an industry are a source of strong, moderate, or weak competitive pressures?
 A) Whether certain needed inputs are in short supply
 B) Whether it is difficult or costly for industry members to switch their purchases from one supplier to another or to switch to attractive substitute inputs
 C) Whether the item being supplied is a standard commodity that is readily available from many suppliers at the going market price
D) Whether the industry supply chain is global or mostly national, whether suppliers have a wide or narrow product line, and whether industry members place orders frequently or infrequently with suppliers[ANSWER]
 E) Whether certain suppliers provide a differentiated input that enhances the performance or quality of the industry's product


6. Which of the following is not a reason that industry rivals are often motivated to enter into strategic partnerships with key suppliers?
 A) To enhance the quality of parts and components being supplied and/or to reduce defect rates
 B) To speed the availability of next-generation components
C) To reduce the bargaining power they face from buyers of their products[ANSWER]
 D) To squeeze out important cost savings for both themselves and their suppliers
 E) To reduce inventory and logistics costs


7. According to both the text discussion and the summary in Figure 3.6, competitive pressures associated with the threat of new entrants grow stronger when
 A) buyer demand is growing slowly and the pool of entry candidates is small.
 B) the number of customers for the industry's product is large and the product offerings of rival sellers are strongly differentiated.
 C) industry members are looking to expand their market reach by entering product segments or geographic areas where they currently do not have a presence, when current industry members are unable or unwilling to strongly contest the entry of newcomers, and when a newcomer can reasonably expect to earn attractive profits.[ANSWER]
 D) there are not many competitors already in the industry, their products are highly differentiated, and buyers are brand loyal.
 E) a small percentage of companies in the industry are currently earning above-average profits, entry barriers are high, and buyers are not brand loyal.


8. Which of the following conditions generally raise the barriers to entering an industry?
 A) Low levels of brand loyalty on the part of customers and the presence of more than 20 rivals in the industry
 B) Rapid market growth, low buyer switching costs, and weak brand preferences and customer loyalty
 C) Product offerings that are pretty much standardized from rival to rival
 D) High capital requirements, difficulties in building a network of distributors-retailers and securing adequate space on retailers' shelves, and the likelihood that industry incumbents will strongly contest the efforts of new entrants to gain a market foothold[ANSWER]
 E) The industry is not characterized by scale economies and/or sizable learning/experience curve effects and few firms in the industry hold key patents and/or possess significant proprietary technology not readily available to a newcomer


9. According to both the text discussion and the summary in Figure 3.7, which of the following is not among the factors that determine whether competitive rivalry among industry members is strong, moderate, or weak?
 A) Whether buyer demand for the product is growing rapidly or slowly
 B) Whether customers' costs to switch brands is low or high
 C) How active industry rivals are in initiating fresh competitive moves and in using the various weapons of competition to improve their market standing and business performance
 D) Whether there are few or many rival sellers and whether there are big differences in their sizes and competitive capabilities
 E) Whether industry members are vertically integrated and whether the industry is characterized by significant scale economies and rapid technological change[ANSWER]


10. The rivalry among competing sellers in an industry intensifies
 A) when buyer demand for the product is growing rapidly.
 B) when customers are brand loyal and their costs to switch to competing brands or substitute products are relatively high.
 C) when buyer demand is strong and sellers have little or no excess capacity and only minimal inventories.
 D) as the number of rivals increases and as they become more equal in size and competitive capability.[ANSWER]
 E) when the products of rival sellers are highly differentiated products and the industry consists of so many rivals that any one company's actions have little direct impact on rivals' business.


11. Factors that cause the rivalry among competing sellers to be weak include
 A) low buyer switching costs.
 B) slow growth in buyer demand.
 C) rapid growth in buyer demand, buyer costs to switch brands are high, and so many industry rivals that any one company's actions have little impact on the businesses of its rivals.[ANSWER]
 D) standardized or else weakly differentiated products among rival sellers.
 E) the presence of one or more rivals that are dissatisfied with their current position and market share.


12. As a rule, the stronger the collective impact of the five competitive forces,
 A) the more strategic groups there are in an industry.
 B) the lower the number of industry key success factors.
 C) the lower the combined profitability of industry participants and the more "competitively unattractive" is the industry environment.[ANSWER]
 D) the weaker the industry's driving forces.
 E) the higher the barriers to entry and the less likely it is that industry members will make fresh strategic moves very frequently.


13. The task of driving forces analysis is to
 A) identify all the underlying factors that can cause industry profitability to rise or fall in the years ahead.
 B) predict what new forces of competitive and market change will emerge next.
 C) determine which of the five competitive forces is the biggest driver of industry change.
 D) identify which companies are being driven to move from one strategic group to another strategic group.
 E) identify what the driving forces are, assess whether the drivers of change are, on the whole, acting to make the industry more or less attractive, and determine what strategy changes are needed to prepare for the impacts of the driving forces.[ANSWER]



14. Which of the following is not among the most common types of driving forces?
 A) Product innovation, marketing innovation, and increasing globalization of the industry
 B) Changes in the long-term industry growth rate, changes in who buys the product and how they use it, and growing buyer preferences for differentiated products
 C) Ups and downs in interest rates, changes in the number of seller-supplier collaborative alliances, and changes in overall industry profitability[ANSWER]
 D) Emerging new Internet applications and capabilities, technological change, and the diffusion of technical know-how across more companies and more countries
 E) Changes in cost and efficiency, the entry or exit of major firms, and changing societal concerns, attitudes, and lifestyles


15. The procedure for constructing a strategic group map involves
 A) identifying the competitive characteristics that differentiate firms' market positions and competitive approaches.
 B) selecting variables for the map's axes that are highly correlated.
 C) using only variables for the map's axes that are quantitative in nature (qualitative measures of market positions and competitive approaches are too subjective and unreliable).
 D) plotting the firms on a two-variable or two-dimensional map, drawing circles around those firms occupying about the same strategy space, and making the size of the circles for each strategic group proportional to the size of its members' share of total industry sales revenues.
 E) Both A and D[ANSWER]


16. A strategic group map is a helpful analytical tool for
 A) assessing why competitive pressures and driving forces usually impact the biggest strategic groups more so than the smaller groups.
 B) determining which companies have how big a competitive advantage and how good their prospects are for increasing their market shares.
 C) determining which company is the most profitable in the industry and why it is doing so well.
 D) determining who competes most closely with whom; evaluating whether industry driving forces and competitive pressures favor some strategic groups and hurt others; and ascertaining whether the profit potential of different strategic groups varies due to the strengths and weaknesses in each group's respective market positions.[ANSWER]
 E) pinpointing which of the five competitive forces is the strongest and which is the weakest.


17. Trying to determine what strategic moves rivals are likely to make next
 A) is interesting but usually has little bearing on a company's own best strategic moves.
 B) usually requires evaluating the industry's key success factors as well as determining how many driving forces are present.
 C) is best done by monitoring each rival's market share, earnings per share, and stock price—adverse changes in these measures signal the coming of a fresh move but as long as a company's performance on these measures is satisfactory the chance of fresh moves is slim.
 D) cannot be done effectively without first drawing a strategic group map.
 E) entails each rival's situation, understanding the thinking of their managers, and evaluating the relative merits of their strategic options.[ANSWER]


18. An industry's key success factors
 A) can best be determined by studying the strategies of those companies in the industry's best strategic group and those in the worst strategic group.
 B) concern the particular product attributes, competencies, competitive capabilities, and intangible assets with the greatest impact on future success in the industry.[ANSWER]
 C) are mainly a function of an industry's macro-environment and dominant economic features.
 D) can best be determined by identifying the similarities in the strategies of rival companies—those strategy elements that are most commonly found in the strategies of rivals can be considered key success factors.
 E) usually relate to technology and manufacturing-related capabilities and rarely to distribution or marketing capabilities.


19 .Which of the following is not a good example of a marketing-related key success factor?
 A) A well-known and well-respected brand name
 B) Breadth of product line and product selection
 C) Product innovation capabilities[ANSWER]
 D) Clever advertising
 E) Courteous, personalized customer service


20. Which of the following is not an important factor for company managers to consider in drawing conclusions about whether the industry presents an attractive opportunity?
 A) Whether powerful competitive forces are squeezing industry profitability to subpar levels and whether competition appears destined to grow stronger or weaker
 B) The industry's growth potential
 C) Whether industry profitability will be affected favorably or unfavorably by the prevailing driving forces
 D) How many of the industry's key success factors do companies in the industry typically incorporate into their strategies[ANSWER]
 E) The company's competitive position in the industry relative to rivals


Self Quiz: Internal Analysis

1. Evaluating a company's resources and capabilities, relative cost position, and competitive strength relative to rivals does not include developing answers to which one of the following questions?
A)How good is the company's value chain? [ANSWER]
B)Is the company competitively stronger or weaker than key rivals?
C)What are the company's competitively important resources and capabilities?
D)Are the company's prices and costs competitive?
E)What strategic issues and problems merit front-burner managerial attention?

2. Which one of the following is not a good indicator of how well a company's present strategy is working?
A)Whether it is achieving its stated financial and strategic objectives
B)Whether it is an above-average industry performer
C)Whether the firm's sales and earnings are increasing or decreasing
D)Whether the company's resource strengths and competitive capabilities outnumber its resource weaknesses and competitive vulnerabilities[ANSWER]
E)The rate at which new customers are acquired and whether the company's overall financial strength is improving or on the decline

3. Which one of the following groups of characteristics is least likely to represent valuable company resources or competitive capabilities?
A)Physical assets such as state-of-the-art plants, attractive real estate locations, and worldwide distribution facilities
[ANSWER]B)More employees than rivals, being in business more years than rivals, and smaller capital investment expenditures than rivals
C)Intangible assets such as a well-known brand name
D)Strong collaborative partnerships with key suppliers and an experienced and capable workforce
E)Organizational assets such as proven quality control skills or proprietary technology

4. Which of the following is not a measure of the competitive power of a company's resource strengths?
A)How hard it is for competitors to copy the resource strength
[ANSWER]B)Whether the company has more resources/capabilities than any other key rival
C)Whether a company's resource is really competitively valuable
D)How easily the resource or capability can be trumped by the substitute resources/capabilities of rivals
E)Whether the resource or capability is rare and something rivals lack

5. A company that lacks a single resource strength capable of contributing to competitive advantage may attempt to develop a distinctive competence through
A)devising clever approaches to turning resource weaknesses into resource strengths.
[ANSWER]B)bundled resource strengths that can be leveraged to develop a core competence.
C)changing its industry positioning and approach to building competitive advantage.
D)the development of a new business model.
E)improved employee training programs, new marketing promotions, or technological enhancements to production processes.

6. A company that is a disadvantage in the marketplace because it lacks competitively valuable resources possessed by rivals
A)should adopt a new competitive strategy that might better match the circumstances of the marketplace.
B)should abandon strategy elements that have caused its weakness in the marketplace.
C)undertake efforts to develop a distinctive competence.
D)is virtually blockaded from using offensive strategies and must rely on defensive strategies.
[ANSWER]E)may be able to develop substitute resources that accomplish the same objective as the resource strength possessed by rivals.

7. A core competence
A)is a more durable company resource than a "distinctive competence."
B)usually resides in a company's technology and physical assets (state-of-the-art plants and equipment, attractive real estate locations, modern distribution facilities, and so on) whereas a company competence usually resides in a company's human assets.
[ANSWER]C)is typically knowledge-based, residing in people and in a company's intellectual capital and not in its assets on the balance sheet; moreover, a core competence tends to be grounded in cross-department combinations of knowledge and expertise rather than being the product of a single department or work group.
D)is usually tied closely to the caliber of a company's manufacturing capability and/or its proprietary technology and know-how.
E)is better suited to helping a company defend against external threats than in pursuing external market opportunities.

8. A distinctive competence
A)is a more important competitive asset than a core competence.
B)represents uniquely strong capability relative to rival companies—it qualifies as a competitively superior resource strength with competitive advantage potential.
C)is a competitively important value chain activity that a company performs better than its rivals.
D)can underpin and add real punch to a company's strategy.
[ANSWER]E)All of the above.

9. SWOT analysis
[ANSWER]A)provides an appraisal of a company's resource strengths and competitive deficiencies, its market opportunities, and external threats to its future well-being.
B)is a tool for benchmarking whether a firm's strategy is closely matched to industry key success factors.
C)reveals whether a company is competitively stronger than its closest rivals.
D)examines the company's cost position activity by activity.
E)is a competitive intelligence tool that discloses rivals' key weaknesses.

10. The industry or market opportunities that are most relevant to a company and those which its strategy should aim at capturing include
A)opportunities that are well-matched to the company's competitive capabilities and resource strengths.
B)opportunities which the company has the financial resources to pursue.
C)opportunities that offer important avenues for growth.
D)opportunities where the company has the greatest potential for competitive advantage.
[ANSWER]E)All of the above.

11. Which of the following is not an example of an external threat to a company's future business prospects (see Table 4.1)?
A)Mounting intensity of competition among industry rivals and costly new regulatory requirements
[ANSWER]B)Having a weaker brand image than rivals and a smaller network of retailer dealers than rivals
C)Shifts in buyer needs and preferences away from using the industry's product
D)Vulnerability to unfavorable industry driving forces and adverse demographic changes that are likely to curtail demand for the industry's product
E)Growing bargaining power on the part of customers and/or suppliers

12. Which of the following analytical tools are particularly useful for determining whether a company's prices and costs are competitive?
A)SWOT analysis, strategy assessment, activity-based costing analysis, and key success factor analysis.
B)SWOT analysis, competitive strength assessment, best practices analysis, and value chain analysis.
[ANSWER]C)Value chain analysis and benchmarking.
D)Competitive position assessment, competitive strength assessment, strategic group mapping, SWOT analysis, and value chain analysis.
E)SWOT analysis, best practices analysis, activity-based costing analysis, and competitive strength assessment.

13. A company's value chain consists of
A)the activities a company performs in converting its resource weaknesses into resource strengths.
[ANSWER]B)the collection of activities it performs in the course of designing, producing, marketing, delivering, and supporting its product or service.
C)those activities a company performs that represent "best practices."
D)the activities that a company performs in developing a distinctive competence.
E)the activities that represent a company's competencies, core competencies, distinctive competencies, and competitive capabilities.

14. Benchmarking
A)is inherently unethical if it involves companies that are direct competitors because it involves gathering competitively sensitive information about the operations and costs of rivals.
B)is not a valid tool for measuring the cost-effectiveness of an activity unless it is restricted to companies in the same industry.
[ANSWER]C)entails comparing how different companies perform various value chain activities and then making cross-company comparisons of the costs of these activities.
D)loses much of its managerial usefulness if it is done with the aid of third-party organizations.
E)entails calculating the costs of performing each of the primary and related support activities in a company's value chain.

15. A company's cost competitiveness is largely a function of
A)whether it does a good enough job of benchmarking its value chain activities against the value chains of competitors so that it knows exactly how low to drive its costs to be cost-competitive.
[ANSWER]B)how efficiently it manages its internally performed value chain activities and the costs in the value chains of its suppliers and forward channel allies.
C)whether it does a better job of building its resource strengths more cost effectively than rivals.
D)whether it possesses more core competencies and competitive capabilities than rivals.
E)how closely its internally-performed activities are linked to the activities performed by suppliers and to the activities performed by forward channel allies.

16. Strategic actions to eliminate a cost disadvantage
[ANSWER]A)can aim at lowering costs (1) in the suppliers' part of the industry value chain, (2) in a company's own internally-performed activities, and/or (3) in the forward channel portion of the value chain.
B)work best when they aim at lowering the costs of performing those tasks and activities where the company has core competencies and distinctive competencies.
C)work best when aimed at increasing the amount of the company's low-cost competitive assets and decreasing the amount of its high-cost competitive assets.
D)are likely to be most effective when they are aimed at lowering the costs of the value chain activities that a company performs internally.
E)are most likely to be successful when they involve efforts to concentrate more company resources and talents on those value chain activities where the company already has the lowest costs.

17. Strategic actions to eliminate an internal cost disadvantage include
A)implementing the use of best practices.
B)trying to eliminate some cost-producing activities altogether by revamping the value chain.
C)outsourcing high-cost activities to vendors capable of performing the activity at more cheaply.
D)investing in productivity enhancing, cost-saving technology.
[ANSWER]E)All of these.

18. The options for attacking the high costs of items purchased from suppliers does not include which one of the following?
A)Pressuring suppliers for more favorable prices
B)Integrating backward into the business of high-cost suppliers and making the item in-house so as to better control the cost
C)Switching to lower priced substitute inputs
[ANSWER]D)Raising prices to customers (so as to cover the high costs)
E)Collaborating closely with suppliers to identify mutual cost-saving opportunities

19. Which one of the following is not something that can be learned from doing a competitive strength assessment?

A)Identifying the competitive factors where a company is strongest and weakest vis-à-vis key rivals and the kinds of offensive/defensive actions the company can use to exploit its competitive strengths and reduce its competitive vulnerabilities

[ANSWER]B)Whether a company utilizes more best practices than rivals in performing its value chain activities

C)Which of the rated companies is competitively strongest and what size competitive advantage it enjoys

D)Whether a company has a net competitive advantage or is a net competitive disadvantage relative to key rivals (with the size of the advantage/disadvantage being indicated by the differences among the companies' competitive strength scores)

E)Which rival company is competitively weakest and the areas where it is most vulnerable to competitive attack—when a company has important competitive strengths in areas where one or more rivals are weak, it makes sense to consider offensive moves to exploit rivals' competitive weaknesses

20. Identifying the strategic issues that company managers need to address
A)involves using the results of both industry and competitive analysis and evaluations of the company's internal situation.
B)pinpoints the precise things management needs to worry about.
C)sets the agenda for deciding what actions to take next to improve the company's performance and business outlook.
D)entails locking in on what challenges the company has to overcome in order to be financially and competitively successful in the years ahead.
[ANSWER]E)All of the above.



Self Quiz: The Five Generic Competitive Strategies
1. A company's competitive strategy deals with

• A) the specific actions management plans to take to develop a better value chain than rivals.
• B) how it plans to unify its functional and operating strategies into a cohesive effort aimed at successfully taking customers away from rivals.
• C) deals exclusively with the specifics of management's game plan for securing a competitive advantage vis-à-vis rivals. [ANSWER]
• D) its plans for under-pricing rivals and achieving product superiority.
• E) the specific actions management intends to take to strongly differentiate its product offering from the offerings of rival companies in the industry.

2. Competitive strategies that provide distinctive industry positioning and competitive advantage involve

• A) a customer value proposition, profit formula, and a collection of valuable resources.
• B) striving for a high degree of customer loyalty to the company's brand.
• C) assembling a wide portfolio of company resources, competitive capabilities, and core competencies.
• D) developing a better credit rating than rivals.
• E) choosing between (1) a market target that is either broad or narrow, and (2) whether the company should pursue a competitive advantage linked to low costs or product differentiation. [ANSWER]

3. The five generic types of competitive strategies include

• A) offensive strategies, defensive strategies, differentiation strategies, and low-cost strategies.
• B) low-cost provider, broad differentiation, focused low-cost, focused differentiation, and best-cost provider. [ANSWER]
• C) offensive strategies, defensive strategies, technological leadership strategies, and product innovation strategies.
• D) low-price strategies, premium price strategies, middle-of-the-road strategies, and market share leadership strategies.
• E) attacking competitor strengths, attacking competitor weaknesses, market leadership strategies, and product superiority strategies.

4. A low-cost provider's basis for competitive advantage is

• A) using an everyday low pricing strategy to gain the biggest market share.
• B) bigger profit margins than rival firms.
• C) high buyer switching costs because of the company's differentiated product offering.
• D) meaningfully lower overall costs than competitors. [ANSWER]
• E) a reputation for charging the lowest prices in the industry.

5. Striving to be the industry's low-cost provider and achieving lower costs than rivals entails

• A) eliminating or curbing nonessential activities.
• B) having a smaller labor force than rivals, paying lower wages than rivals, locating all facilities in countries where labor costs are low, and outsourcing many value chain activities to suppliers with world-class technological capabilities.
• C) doing a better job than rivals in performing essential activities.
• D) aggressive use of activity-based costing, utilizing more best practices than rivals, and having a narrower product line than rivals.
• E) Both A and C. [ANSWER]

6. Which of the following is not a distinguishing feature of a low-cost provider strategy?

• A) The product line consists of a few basic models having minimal frills and acceptable quality
• B) The production emphasis is on continuously searching for ways to reduce costs without sacrificing acceptable quality and essential features
• C) The marketing emphasis is on making virtues out of product features that lead to low cost
• D) The strategic target is value-conscious buyers and sustaining the strategy depends on frequent advances in technology and occasional product innovations. [ANSWER]
• E) Sustaining the strategy revolves around managing costs down year-after-year and delivering good value at economical prices

7. A competitive strategy of striving to be the low-cost provider is particularly attractive when

• A) buyers are large and incur low costs in switching their purchases from one seller to another. [ANSWER]
•  B) most rivals are trying to differentiate their product offering from those of rivals.
•  C) there are many ways to achieve higher product quality that have value to buyers.
•  D) buyers are not swayed by advertising and are not very brand-loyal.
•  E) most rivals are pursuing best-cost or broad differentiation strategies.

8. Successful differentiation allows a firm to

• A) gain buyer loyalty to its brand (because some buyers are strongly attracted to the differentiating features and bond with the company and its products).
• B) earn the highest profit margins of any company in the industry.
• C) attract many more buyers by charging a lower price than rivals and thereby take sales and market share away from rivals.
• D) command a premium price for its product and/or increase unit sales (because additional buyers are won over by the differentiating features).
• E) Both A and D. [ANSWER]

9. Easy-to-copy differentiating features

• A) lead to excessive price competition.
• B) are less expensive to integrate into a product or service offering.
• C) tend to satisfy the needs of most buyers.
• D) should be patented before other companies imitate the features.
• E) do not offer the promise of sustainable competitive advantage. [ANSWER]

10. A broad differentiation strategy

• A) is an attractive competitive approach whenever buyers' needs and preferences are too diverse to be satisfied by a product that is essentially identical from seller to seller.
• B) can produce sustainable competitive advantage if the differentiating features possess strong buyer appeal and can't be copied or easily matched by rivals.
• C) works best when the basis for differentiation is superior performance features and buyer switching costs are low.
• D) offers a better chance for gaining market share than low-cost or best-cost provider strategies, and typically allows a firm to charge the highest price in the industry.
• E) Both A and B. [ANSWER]

11. The most appealing approaches to broad differentiation

• A) are those that hinge upon first-rate R&D and frequent product innovation.
• B) involve features or attributes that have considerable buyer appeal and are hard or expensive for rivals to duplicate. [ANSWER]
• C) are those that either lower buyer switching costs or enhance the differentiator's brand image.
• D) generally relate to product superiority or clever merchandising.
• E) are typically based on either superior product quality or superior customer service.

12. In which one of the following market circumstances is a broad differentiation strategy generally not well-suited?

• A) When buyer needs and preferences are too diverse to be fully satisfied by a standardized product
• B) When few rivals are pursuing a similar differentiation approach.
• C) When most competitors are using eye-catching ads to set their product offerings apart and build a brand image that is differentiated [ANSWER]
• D) When there are many ways to differentiate the product or service and many buyers perceive these differences as having value
• E) When technological change is fast-paced and competition revolves around rapidly evolving product features

13. Which of the following is not one of the hazards of pursuing a differentiation strategy?

• A) Trying to charge too high a price premium for the differentiating features
• B) Over-differentiating so that the features and attributes incorporated exceed buyer needs and requirements
• C) Trying to create strong brand loyalty rather than being content with weak brand loyalty (which usually means lower costs and higher profitability) [ANSWER]
• D) Differentiating on features or attributes that rivals can easily copy
• E) Overspending on efforts to differentiate the company's product offering

14. What sets focused (or market niche) strategies apart from low-cost leadership and broad differentiation strategies is

• A) the extra attention paid to establishing a distinctive competence.
• B) their concentrated attention on serving the needs of buyers in a narrow piece of the overall market. [ANSWER]
• C) greater opportunity for brand loyalty.
• D) their suitability for market situations where technological change is fast-paced and continuous product innovation is a key success factor.
• E) their bold strategic intent of global market leadership via heavy advertising.

15. A focused low-cost strategy

• A) involves a serving buyers in the target market niche at a lower cost and a lower price than rival competitors. [ANSWER]
• B) is the hardest of the four generic types of competitive strategies to employ successfully.
• C) involves the use of deep price discounting to capture customers.
• D) entails trying to wrest market share away from rivals via extra advertising, above-average expenditures for promotional programs, and heavy use of point-of-sale merchandising techniques.
• E) cannot be sustained over time unless the focuser is aggressive in entering other segments where it also can achieve a low-cost advantage.

16. A focused differentiation strategy aims at securing competitive advantage by

• A) providing buyers in the target market niche with the best performance features at the best price.
• B) catering to buyers looking for a medium-quality product at an average price.
• C) offering carefully designed products or services to appeal to the unique preferences and needs of a narrow, well-defined group of buyers. [ANSWER]
• D) developing unique product attributes.
• E) convincing buyers that the company is a true leader in product innovation.

17. A firm pursuing a best-cost provider strategy

• A) seeks to offer more value-adding features than the industry's low-cost providers and lower prices than those pursuing differentiation. [ANSWER]
• B) tries to have the best cost (as compared to rivals) for each activity in the industry's value chain.
• C) achieves competitive advantage because its operating activities are "best-in-industry" or "best-in-world."
• D) is a hybrid strategy based upon superior resources and a narrow market niche.
• E) a "middle of the road" strategic approach that attempts to satisfy the product or service needs of consumers with average household incomes.

18. Which of the following are distinguishing features of a best-cost provider strategy?

• A) The strategic target is price-conscious buyers
• B) A marketing emphasis on charging a slightly higher price than rival brands having comparable features and attributes
• C) A product line that stresses wide selection, many product variations, and emphasis on differentiating features
• D) A competitive advantage based on more value for the money [ANSWER]
• E) Using constant product innovation, excellent R&D skills, and periodic technological breakthroughs to sustain the strategy

19. For a best-cost provider strategy to be successful, a company must have

• A) excellent supply chain capabilities and product design expertise.
• B) economies of scope or greater scale economies than rivals.
• C) a superior value chain configuration and unmatched efficiency in managing value chain activities. [ANSWER]
• D) superior product innovation skills and manufacturing capabilities.
• E) a short, low-cost value chain.

20. A company's biggest vulnerability in employing a best-cost provider strategy is

• A) relying too heavily on price discounting.
• B) adding features not needed by the majority of buyers.
• C) not having the needed efficiencies in managing value chain activities to add differentiating features without significantly increasing costs. [ANSWER]
• D) being timid in cutting its prices far enough below high-end differentiators to win away many of their customers.
• E) relying excessively on outsourcing in an attempt to boost gross profit margins.

Self Quiz: International Strategy


1. Companies opt to expand into foreign markets for such reasons as to
A)boost returns on investment, broaden their product lines, avoid tariffs and trade restrictions, and escape having to deal with strong labor unions.
B)gain access to new customers, achieve lower costs and enhance the company's competitiveness, capitalize on core competencies, and spread business risk across a wider market base.[ANSWER]
C)grow sales faster than the industry average, reduce the competitive threats from rivals, and open up more opportunities to enter into strategic alliances.
D)avoid having to employ an export strategy, avoid the threat of cross-market subsidization from rivals, and enable the use of a global strategy instead of a multicountry strategy.
E)raise the entry barriers for industry newcomers, neutralize the bargaining power of important suppliers, grow sales faster, and increase the number of loyal customers.

2. One of the biggest strategic challenges to competing in the international arena include
A)whether to offer a mostly standardized product worldwide or whether to customize the company's offerings in each different country market to match the tastes and preferences of local buyers.[ANSWER]
B)whether to charge the same price in all country markets.
C)whether the company should engage in exporting, licensing, or franchising to enter new country markets.
D)how to take advantage of the low wage rates prevailing in some countries.
E)whether to pursue a global strategy or an international strategy.

3. Which one of the following is not a factor that a company must contend with in competing in the markets of foreign countries?
A)Variations in market growth rates from country to country and important country-to-country differences in consumer buying habits and buyer tastes and preferences
B)Country-to-country variations in host government policies and trade requirements
C)The fact that product designs suitable for one country are sometimes inappropriate in another
D)Vulnerability to adverse shifts in currency exchange rates
E)A need to convince shippers to keep cross-country transportation costs low[ANSWER]

4. Which one of the following statements concerning the effects of fluctuating exchange rates on companies competing in foreign markets is true?
A)Domestic companies trying to combat competition from foreign imports are hurt even more when their government's currency grows weaker in relation to the currencies of the countries where the imported goods are being made.
B)Fluctuating foreign exchange rates greatly reduce the risks of competing in foreign markets—the big problem occurs when exchange rates are fixed at unreasonably low levels.
C)Domestic companies under pressure from lower-cost imports are benefited when their government's currency grows weaker in relation to the currencies of the countries where the imported goods are being made.[ANSWER]
D)Manufacturers that are exporting much of what they produce are benefited when their country's currency grows stronger relative to the currencies of the countries that the goods are being exported to.
E)If the exchange rate of U.S. dollars for euros changes from $1.15 per euro to $1.25 per euro, then it is correct to say that the U.S. dollar has grown stronger.

5. Which of the following is/are not "valid" strategy options for entering and/or competing in foreign markets?
A)An import strategy, a strategic alliance strategy, a profit sanctuary strategy, and a cross-market subsidization strategy [ANSWER]
B)A global strategy where a company uses essentially the same competitive strategy approach in all country markets where it has a presence.
C)A localized multicountry strategy
D)An export strategy and using strategic alliances or joint ventures with foreign companies as the primary vehicle for entering foreign markets
E)A franchising strategy and a strategy of licensing foreign firms to use the company's technology or to produce and distribute the company's products

6. The advantages of manufacturing goods in a particular country and exporting them to foreign markets
A)are seriously compromised by the potential for local government officials to raise tariffs on the imports of foreign-made goods into their country.
B)are greatest when local consumers prefer products manufactured inside the country's borders.
C)are weakened when that country's currency grows stronger relative to the currencies of the countries where the output is being sold. [ANSWER]
D)can be wiped out when that country's currency grows weaker relative to the currencies of the countries where the output is being sold.
E)are largely unaffected by tariffs or quotas.

7. Using domestic plants as a production base for exporting goods to selected foreign country markets
A)is usually a superior approach to competing in international markets.
B)can be a competitively successful strategy when a company is focusing on vacant market niches in each foreign country.
C)can be an excellent initial strategy to pursue international sales. [ANSWER]
D)is usually a weak strategy when competitors are pursuing licensing strategies.
E)can be a powerful strategy because the company is not vulnerable to tariffs or quotas.

8. The advantages of using a licensing strategy to participate in foreign markets include
A)being especially well suited to the exploit a profit sanctuary.
B)being able to charge lower prices than rivals.
C)enabling a company to achieve competitive advantage quickly and easily.
D)being able to achieve lower costs than with a localized multicountry strategy.
E)being able to leverage the company's technical know-how or patents without committing significant additional resources to markets that are unfamiliar, politically volatile, economically uncertain, or otherwise risky. [ANSWER]

9. The advantages of using a franchising strategy to pursue opportunities in foreign markets include
A)being particularly well suited to the international expansion efforts of companies with global strategies.
B)having franchisees bear most of the costs and risks of establishing foreign locations and requiring the franchiser to expend only the resources to recruit, train, and support foreign franchisees. [ANSWER]
C)helping build brand awareness in international markets
D)being well suited to companies who employ cross-market subsidization.
E)gaining support from local governments in the form of subsidies and meeting local content requirements.

10. A "think local, act local" multicountry type of strategy
A)becomes more appealing the bigger the country-to-country differences in buyer tastes, cultural traditions, and market conditions. [ANSWER]
B)always makes a company vulnerable to rivals employing "think global, act global" strategies.
C)protects a multinational firm against fluctuating exchange rates.
D)is generally an inferior strategy when one or more foreign competitors is pursuing a global low-cost strategy.
E)employs essentially the same basic competitive strategy theme in all country markets.

11. A localized or multicountry strategy
A)is generally preferable to a global strategy in situations where buyers are price sensitive because a "think local, act local" type of multicountry strategy is better suited to achieving low unit costs than a global strategy.
B)is one where a company varies its product offering and competitive approach from country to country in an effort to be responsive to differing buyer preferences and market conditions.
C)has two big drawbacks: (1) the bigger the country-to-country variations in strategy, the harder it is difficult to transfer a company's competencies and resources across country boundaries and (2) it does not promote building a single, unified competitive advantage.
D)is generally inferior to a global strategy when it comes to pursuing product differentiation.
E)Both B and C. [ANSWER]

12 A "think global, act global" approach to strategy-making is preferable to a "think local, act local" approach when
A)customer preferences vary significantly from country to country.
B)it is necessary to delegate strategy making to local managers with firsthand knowledge of local conditions.
C)plants need to be scattered across many countries to avoid high shipping costs.
D)country-to-country differences are small enough to be accommodated with the framework of a mostly uniform global strategy. [ANSWER]
E)host governments enact regulations requiring that products sold locally meet strict manufacturing specifications or performance standards.

13. As indicated in Figure 7.1, the chief difference between a "think global, act global" and a "think global, act local" approach to crafting a global strategy is that
A)a "think global, act local" approach involves charging much difference prices in the various country markets where the company competes.
B)a "think global, act local" approach involves much less adherence to using the same basic competitive strategy theme (low-cost, differentiation, best-cost, or focused) in all country markets.
C)a "think global, act local" approach involves considerably less adherence to utilizing the same capabilities, distribution channels, and marketing approaches worldwide.
D)local managers are given more latitude in adapting the global strategy approach as may be needed to accommodate local buyer preferences and be responsive to local market and competitive conditions. [ANSWER]
E)a "think global, act global" approach involves selling under a single brand worldwide whereas a "think global, act local" approach involves the use of multiple brands (often a local brand for each local market).

14 .Which of the following is not a potential motivation for entering into strategic alliances or other cooperative arrangements with foreign companies?
A)To gain wider access to attractive country markets
B)To gain better access to scale economies in production and/or marketing
C)To fill competitively important gaps in their technical expertise and/or knowledge of local markets
D)To better enable the use of a "think global, act global" strategy and facilitate cross-market subsidization [ANSWER]
E)To share distribution facilities and dealer networks, thus mutually strengthening the allies' access to buyers

15. Which of the following is not one of the ways in which a company can pursue competitive advantage by expanding outside its domestic market and competing multinationally?
A)Locating value chain activities among various countries in a manner that lowers costs
B)Pursuing blue ocean opportunities in the company's home country market [ANSWER]
C)Locating value chain activities among various countries in a manner that helps achieve greater product differentiation
D)Cross-border coordination of its activities in ways that contribute to building a competitive edge
E)Employing a profit sanctuary strategy to wage a strategic offensive.

16. Multinational competitors tend to concentrate activities in a limited number of locations when
A)prices and competitive conditions are strongly linked across country markets to form a world market.
B)there are significant scale economies and/or steep learning curve effects associated with performing certain activities in a single location, costs of performing the activity are lower in particular geographic locations, and certain locations have superior resources, allow better coordination of related activities, or offer other valuable advantages. [ANSWER]
C)the risk of fluctuating exchange rates is very high.
D)host country governments can be persuaded to erect high tariff barriers to protect the company's operations from foreign competitors and when it is not imperative to be responsive to buyer needs and competitive conditions in each country.
E)competitive conditions make it infeasible to employ a profit sanctuary strategy or an export strategy.

17. Dispersing the performance of value chain activities to many different countries rather than concentrating them in a few country locations tends to be advantageous
A)when high transportation costs make it expensive to operate from central locations.
B)whenever buyer-related activities are best performed in locations close to buyers.
C)if economies of scale are essential to achieving acceptable production costs.
D)Both A and B. [ANSWER]
E)None of the above.

18. A country (or geographic region) becomes a company's profit sanctuary when
A)a majority of the company's customers are in that country.
B)that country (or region) is where a company's prices are the highest of any country where it sells its product/service.
C)a company pursues a "think local, act local" type of multicountry strategy in that country.
D)the company earns substantial profits from sales in that nation due either to its strong or protected competitive position. [ANSWER]
E)the company is the market share leader in that country market.

19. Profit sanctuaries are valuable competitive assets because
A)they enable a company pursuing a "think global, act local" type of strategy to be more successful.
B)a domestic competitor with multiple profit sanctuaries can wage and generally win a competitive offensive against a global competitor whose profits are scattered across many different countries.
C)they provide the financial strength to support strategic offensives in selected country markets and can help fuel a company's race for global market leadership. [ANSWER]
D)without having at least two profit sanctuaries a company is virtually precluded from competing globally.
E)they enable a company pursuing a global strategy to compete on an equal footing with companies employing a multicountry strategy.

20. Which of the following is not a typical option that companies have to consider to tailor their strategy to fit the circumstances of emerging country markets?
A)Develop new sets of core competencies that allow a company to offer value to consumers of emerging markets in ways unmatched by rivals [ANSWER]
B)Prepare to compete on the basis of low price
C)Be prepared to modify aspects of the company's business model to accommodate local circumstances (but not so much that the company loses the advantage of global scale and global branding)
D)Try to change the local market to better match the way the company does business elsewhere
E)Stay away from those emerging markets where it is impractical or uneconomic to modify the company's business model to accommodate local circumstances