Q&A Hero

Q: A transnational strategy makes the most sense when there are strong pressures for cost reductions and demand for local responsiveness is minimal.

Q: Companies pursuing a low-cost strategy on a global scale are following a global standardization strategy.

Q: Responding to pressures to be locally responsive requires that a company differentiate its products and marketing strategy.

Q: Universal needs exist when the tastes and preferences of consumers in different nations are similar if not identical.

Q: Companies that compete in the global marketplace typically face two types of competitive pressures, cost reductions and expanding globally.

Q: Location economics benefits arise from performing a value creation activity in the location optimal for that activity, wherever in the world that might be.

Q: Walmart opened its first stores in Mexico in 1993.

Q: Proctor & Gamble's global success was based only on its portfolio of consumer goods.

Q: The success of many multinational companies is based only upon the goods or services they sell in foreign nations.

Q: A company can increase it growth rate by taking goods or services developed at home and selling them internationally.

Q: The shift from national to global markets has intensified competitive rivalry in industry after industry.

Q: The trend toward the globalization of production and markets is on the rise because industry boundaries do not stop at national borders.

Q: The volume of world merchandise trade has grown slower than the world's economy since 1950.

Q: The average tariff rate on manufactured goods traded between advanced nations has fallen from around 40 percent to under 4 percent.

Q: Expanding globally can enable a company to increase its profitability and grow its profits more rapidly.

Q: Many believe that the world's economic system is moving toward a system in which national markets are merging into one huge global marketplace.

Q: The globalization of production has been increasing as companies take advantage of lower barriers to international trade and investment to disperse important parts of their production process around the globe.

Q: Global strategy affects firms only at the corporate level.

Q: Rivalry for any company is understood by examining what happens only within the boundaries of its home country.

Q: Empirical evidence shows that firms that pursue cost leadership or differentiation achieve returns that are about equivalent, firms that pursue both cost leadership anddifferentiation have the highest returns, and firms that are stuck in the middle have the lowest returns. Using concepts from this chapter, explain why this is so.

Q: For each of the generic strategiescost leadership, differentiation, and focusdescribe one advantage and one disadvantage.

Q: Are the generic business-level strategies of differentiation and cost leadership incompatible? Explain.

Q: If a firm has the resources to serve a stable pocket of demand in a declining industry, then it should pursue a __________ strategy. a) harvest b) product development c) product proliferation d) niche e) divestiture

Q: Which of the following is not a strategy used in declining industries? a) Leadership b) Niche c) Divestment d) Harvest e) Diversification

Q: Competitive intensity in a declining industry is greatest when a) exit barriers are high. b) the product has high differentiation. c) the industry is declining slowly instead of rapidly d) the industry cannot keep up with demand. e) industry fixed costs are low.

Q: A Japanese automaker begins selling its compact cars in Southeast Asia. This firm is pursuing a strategy of a) market penetration. b) market signaling c) product proliferation. d) market development e) product development.

Q: A telecommunications firm is working on the next generation of switching equipment that allows calls to be digitally transmitted from sender to receiver. If the new product will be sold to existing customers, the firm is pursuing a strategy of a) product proliferation b) market penetration. c) product development d) market signaling. e) market development.

Q: Which of the following refers to the process by which one company informally takes the responsibility for setting industry prices? a) Price leadership b) Non-price competition c) Capacity control d) Market development e) Price signaling

Q: Which of the following refers to the process by which companies increase or decrease product prices to convey their competitive intention to other companies and so influence the way they price their products? a) Cost cutting b) Price signaling c) Preemption d) Non-price competition e) Horizontal mergers

Q: Which of the following is an example of a company following a strategy of consolidating a fragmented industry through horizontal merger? a) Mail Boxes Etc. grew through the investments of local owner-managers. b) America Online grew by acquiring rivals such as Netscape, CompuServe, and ICQ. c) Sears funded growth with cash from operations in its existing stores. d) Software House International is licensed to sell over 100,000 products in a dozen countries. e) Heinz started with just one product, pickled horseradish, and today manufactures almost 6,000 foods.

Q: Which of the following strategies for fragmented industries grants the right to use the parent's name, reputation, and business model in a particular location or area in return for a fee and often a percentage of the profits? a) Chaining b) Franchising c) Vertical merger d) Horizontal merger e) B2B

Q: To compete in the fragmented restaurant industry, Red Lobster Corporation built and operated hundreds of restaurants across the United States and Canada. Red Lobster is using which type of strategy? a) Acquisitions b) Chaining c) Franchising d) Diversification e) Horizontal mergers

Q: One strategy used to consolidate fragmented industries is a) vertical mergers. b) horizontal merger c) product proliferation. d) chaining e) non-price competition.

Q: All of the following strategies are used to grow and consolidate fragmented industries except a) chaining. b) using the Internet and IT c) franchising. d) horizontal merger. e) vertical merger

Q: If a firm operating in a fragmented industry can find a way to __________, the profit potential is high. a) backwards integrate b) consolidate the industry c) change its generic strategy d) diversify e) change strategic groups

Q: Which of the following is not a characteristic of fragmented industries? a) A large number of small competitors b) High barriers to entry c) Many "custom-made" or specialty firms d) Few economies of scale e) Low consolidation

Q: Which of the following best describes an industry that consists of many small firms? a) Fragmented b) Growth c) Mature d) Declining e) Diverse

Q: A radio station has a distinctive competency in developing new products (shows) and wants to serve the upscale market. Which of the following is the most appropriate generic strategy for this company? a) Cost leadership b) Differentiation c) Both cost leadership and differentiation d) Focused low cost approach e) Focused differentiation approach

Q: Which of the following types of businesses would notbe considered a focused differentiator? a) A store specializing in fly-fishing b) A plus-size clothing store c) A Belgian chocolate shop d) A Mexican fast food restaurant chain e) An aquarium store selling only salt water fish and equipment

Q: Nick is often asked to perform his clown act for birthday parties or school groups, but instead he only offers his very inexpensive services to children's hospitals. Nick is pursuing which generic business strategy? a) Cost leadership b) Differentiation c) Focused cost leadership d) Focused differentiation e) Stuck in the middle

Q: The main difference between companies following a cost leadership strategy and those following a focused cost leadership strategy is a) standardized market price. b) industry life cycle stage. c) degree of market segmentation. d) age of the market. e) market trajectory.

Q: The most expensive competitive strategy to pursue is a) growth. b) cost leadership. c) focused cost leadership. d) differentiation. e) hyper-competition.

Q: When a company produces a wide range of products for different customer groups, it is following a strategy of a) cost leadership. b) market concentration. c) focus. d) differentiation. e) share building.

Q: Which of the following is not a route that can help a company achieve a differentiation advantage? a) Superior innovation b) Low cost structure c) Responsiveness to customer needs d) Excellent quality e) Superior innovation and excellent quality

Q: Delta Airlines used to advertise its high-quality air travel service by saying it flew "anywhere, anytime." What generic strategy is represented by this advertisement? a) Cost leadership b) Focused differentiation c) Stuck in the middle d) Differentiation e) Both cost leadership and differentiation simultaneously

Q: A large company produces a variety of clothing for different customer groups. This firm is pursuing which of the following strategies? a) Cost leadership b) Differentiation c) Both cost and differentiation d) Focus e) Share building

Q: A disadvantage of pursuing a cost leadership strategy is that a) technological change can make experience curve economies obsolete. b) price wars make it hard to compete with differentiators. c) it costs more than a differentiation strategy because of the necessity of high capital investments. d) powerful buyers are a major threat. e) no quality control exists.

Q: As compared to a differentiator, the cost leader has the advantage over its rivals of a) making higher profit margins. b) being better able to withstand the negative influence of powerful suppliers and buyers. c) having inimitable production methods. d) enjoying higher brand loyalty. e) being preferred by investors.

Q: Which of the five forces does a cost leadership advantage help protect a company from? a) Competitive rivalry b) Power of suppliers c) Power of buyers d) Substitute products e) All of these

Q: A true cost leader has a __________ level of product differentiation and __________ market segmentation. a) high; low b) low; high c) low; low d) high; high e) variable; variable

Q: Which generic business-level strategy is based on the intent to outperform competitors by doing everything it can to lower its cost structure? a) Focused differentiation b) Differentiation c) Broad differentiation d) Cost leadership e) None of these

Q: When a company services the broad market and has a low degree of product differentiation, it is most likely a) pursuing a focus strategy. b) pursuing a differentiation strategy. c) pursuing a cost-leadership strategy. d) stuck in the middle. e) pursuing both cost leadership and differentiation.

Q: A producer of commodity steel should pursue which of the following generic competitive strategies? a) Growth b) Cost leadership c) Focus d) Differentiation e) Profit

Q: Which of the following industries offers the leastopportunity for product differentiation and market segmentation? a) Oil and gas b) Clothing c) Building supplies d) Home electronics e) Computers

Q: Which of the following is not a generic competitive strategy? a) Cost leadership b) Differentiation c) Focused cost leadership d) Focused differentiation e) Innovation

Q: Which of the following markets offers the best opportunity for product differentiation and market segmentation? a) Bulk chemicals b) Wheat c) Cement d) Home theater e) Fax machines

Q: Competitive advantage with product differentiation occurs when a company a) creates competitive advantage by grouping customers on the basis of important differences in their needs. b) helps firms keep costs to a minimum. c) creates, makes, and sells a product in a way that better satisfies customer needs than its rivals. d) is focused on corporate-level strategy. e) allows its managers to ignore costs.

Q: A harvest strategy is the best choice when a company wishes to get out of a declining industry and perhaps optimize cash flow in the process.

Q: A leadership strategy aims at growing in a declining industry by picking up the market share of companies that are leaving the industry.

Q: When the size of the total market is shrinking, competition tends to intensify in a declining industry and profit rates tend to fall.

Q: Product proliferation can be used to manage rivalry within an industry and to encourage other businesses to enter the industry.

Q: Market development is the process that a company uses to increase its market share in its existing, established markets.

Q: Market penetration is a strategy in which a company concentrates on expanding market share in its existing product markets.

Q: A price-cutting strategy will always keep potential entrants from entering the industry.

Q: Product proliferation refers to the strategy of "filling the niches" by catering to the needs of customers in all market segments.

Q: Through chaining, companies increase their buying power, which allows them to negotiate large price reductions with their suppliers, which promotes their competitive advantage.

Q: JCPenney's corporation owns thousands of retail outlets and is pursuing a strategy called franchising.

Q: McDonald's created the first national chain of fast-food restaurants in a previously fragmented industry. This is an example of consolidation.

Q: A focused company is a specialized differentiator or a cost leader.

Q: John wants to open a small sandwich shop, in a city that contains dozens of similar stores. John's industry is consolidated.

Q: Fragmented industries typically have few barriers to entry.

Q: A fragmented industry is composed of a large number of small and medium-sized companies.

Q: The fate of a company whose strategy fails because it has made product/market choices in a way that does not lead to a sustained competitive advantage is stuck in the middle.

Q: All focus strategies entail serving a specific market segment using a differentiation approach.

Q: A factor promoting the trend toward market fragmentation and niche marking is the substantial reeducation of the costs of differentiation as a result of flexible manufacturing.

Q: Differentiation leads to high brand loyalty, which in turn reduces the threat of new firms entering the industry.

Q: Powerful suppliers are usually a problem for companies following a differentiation strategy.

Q: A differentiator should not be concerned about the production cost of a product because it can charge a premium price.

Q: For any company, building new competencies in the functions that sustain its differentiation means neglecting its cost structure.

Q: Differentiation on the basis of innovation and technological competency depends on the R&D function.