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Which of the following statements about a company's strategy is true?
Managers at all companies face three central questions in thinking strategically about their company's present circumstances and prospects: What's the company's present situation? Where does the company need to go from here? How should it get
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The competitive moves and business approaches a company's management are using grow the business, attract and please customers, compete successfully, conduct operations, and achieve the targeted levels of organizational performance is referred to as its
strategy.
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Which one of the following is not related to actions and approaches that comprise a company's strategy?
How to prove to shareholders that the company's business model is viable
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In committing to a particular strategy, a company's managers are in effect saying
Among all the many different business approaches and ways of competing we could have chosen, we have decided to employ this particular combination of competitive and operating approaches in moving the company in the intended direction, strengthening its market position and competitiveness, and boosting performance."
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The heart and soul of any strategy is
the actions and moves in the marketplace that managers are taking to improve the company's financial performance, strengthen its long-term competitive position, and gain a competitive edge over rivals.
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Which of the following is not one of the most frequently used strategic approaches to building competitive advantage?
Striving for a competitive edge based on bigger profit margins
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A company's strategy and its quest for competitive advantage are tightly related because
a company is almost certain to have better profits and financial performance when its strategy produces a competitive advantage over rivals.
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A company achieves sustainable competitive advantage when
an attractive number of buyers have a lasting preference for its products or services as compared to the offerings of competitors
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Which one of the following is not something to look for in identifying a company's strategy?
The company's actions to validate and improve upon its business model
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Company strategies evolve because
of the ongoing need to respond to changing market conditions, advancing technology, the fresh moves of competitors, shifting buyer needs and preferences, emerging market opportunities, new ideas for improving the strategy, and any evidence that indicates the strategy is not working well.
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It is normal for a company's strategy to end up being
a blend of proactive actions to improve the company's competitiveness and financial performance and as-needed reactions to unanticipated developments and fresh market conditions.
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A company's strategy can be considered "ethical"
so long as its actions and behaviors can pass the test of "moral scrutiny" and are aboveboard in the sense of not being shady or unconscionable, injurious to others, or unnecessarily harmful to the environment.
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in crafting an ethical strategy, company managers
have to go beyond what strategic actions and behaviors are legal and address whether all the various elements of the company's strategy can pass the test of moral scrutiny.
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A company's business model
is management's rationale for how the strategy will be a moneymaker—absent the ability to deliver good profitability, the strategy is not viable and the survival of the business is in doubt.
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The difference between a company's strategy and a company's business model is that
strategy relates broadly to a company's action plan for running the business and building competitive advantage, while its business model relates to whether the revenues and costs flowing from the strategy will allow the business to earn satisfactory profits and returns on investment
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A viable business model
must generate revenues sufficient to cover costs and deliver good profitability.
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Which of the following statements concerning Microsoft's business model and Red Hat's business model (as discussed in Illustration Capsule 1.2) is false?
Red Hat's business model is predicated on closely guarding its source code while Microsoft is a strong advocate of open or free source code.
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A winning strategy is one that
fits the company's internal and external situation, builds sustainable competitive advantage, and boosts company performance.
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Crafting and executing strategy are top-priority managerial tasks because
there is a compelling need for managers to proactively shape how the company's business will be conducted and because a strategy-focused organization is more likely to be a strong bottom-line performer.
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The most trustworthy signs of a well-managed company are
good strategy and good strategy execution.
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Which one of the following is not an integral part of the managerial process of crafting and executing strategy?
Choosing a strategic intent
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A strategic vision for a company
delineates management's aspirations for the business, providing a panoramic view of "where we are going" and a convincing rationale for why this makes good business sense for the company—a strategic vision thus points an organization in a particular direction and charts a strategic path for it to follow in preparing for the future.
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Which of the following is not an important consideration in deciding to commit to one directional path versus another?
Where should we head in order to prove that our business model is viable and that our strategy is working
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The difference between a company's mission statement and the concept of a strategic vision is that
a mission statement typically concerns an enterprise's present business scope and purpose—"who we are, what we do, and why we are here"—whereas the focus of a strategic vision is on the direction the company is headed and what its future product-customer-market-technology focus will be.
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Which one of the following is not a characteristic of an effectively-worded strategic vision statement (see Table 2.2, as well as the discussion on page 26)?
Concrete and unambiguous (leaves no doubt as to what the company is trying to accomplish for shareholders)
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According to both the text discussion and the summary in Table 2.3, which of the following is not a common shortcoming of company vision statements?
Lacking in analysis—based more on managerial emotion and excessive ambition than on what is realistically achievable
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Which of the following statements about a company's values is false?
At all but a few companies, the stated values are mostly window-dressing and serve mainly to embellish the company's public image.
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When there's an order of magnitude change in a company's environment that dramatically alters its prospects and mandates radical revision of its strategic course, the company is said to have encountered
a strategic inflection point.
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A company's objectives or performance targets
represent a managerial commitment to achieving specified outcomes and results; they function as yardsticks for tracking the company's progress and performance—well-stated objectives are quantifiable, or measurable, and contain a deadline for achievement.
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Which of the following represents the best example of a well-stated strategic objective (as opposed to a well-stated financial objective)?
Increase market share from 17% to 22% and achieve the lowest overall costs of any producer in the industry, both within three years
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Establishing and achieving strategic objectives merits very high priority on management's agenda because
the surest path to boosting company profitability quarter after quarter and year after year is to relentlessly pursue strategic outcomes that strengthen the company's market position and produce a growing competitive advantage over rivals.
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Which of the following statements about objectives is false?
A company's managers are well-advised to give the achievement of financial objectives a much higher priority than the achievement of strategic objectives.
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balanced scorecard for measuring company performance
entails setting both financial and strategic objectives and putting balanced emphasis on their achievement.
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A company exhibits strategic intent when
it relentlessly pursues an ambitious strategic objective and concentrates its full resources and competitive actions on achieving that objective.
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The task of crafting a strategy is
a job for a company's whole management team—senior executives plus the managers of business units, operating divisions, functional departments, manufacturing plants, and sales districts (as per the strategy-making hierarchy shown in Figure 2.2).
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As per Figure 2.2, the strategy-making hierarchy in a single business company consists of
business strategy, functional strategies, and operating strategies, whereas in a diversified company it consists of corporate strategy, business strategies (one for each business the diversified company is in), functional strategies, and operating strategies.
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A company's strategic plan consists of
management's vision of where the company is headed, the established financial and strategic objectives, and management's strategy to achieve the objectives and move the company along the chosen strategic path.
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Leading the drive for good strategy execution and operating excellence does not include which one of the following?
Designing an effective motivational and reward system, instituting policies and procedures that are supportive of good strategy execution, and being a proactive and forceful decision-maker
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Successfully leading the effort to instill a results-oriented work climate and put constructive pressure on the organization to achieve good results
entails such actions as promoting a culture of innovation and high performance, emphasizing individual initiative and creativity, and respecting the contribution of individuals and groups.
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Which one of the following is not among the chief duties/responsibilities of a company's board of directors insofar as the strategy-making, strategy-executing process is concerned?
Directing senior executives as to what the company's long-term direction, objectives, business model, and strategy should be and, further, closely supervising senior executives in their efforts to implement and execute the strategy
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Which of the following is not one of the questions that needs to be answered in thinking strategically about a company's industry and competitive environment?
What emerging opportunities and threats are evident in the industry environment?
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In identifying an industry's dominant economic features, there is a need to consider such things as
market size and growth rate, the number of buyers, the scope of competitive rivalry, the number of rivals, demand-supply conditions, product innovation, the degree of product differentiation, the presence of scale economies and/or learning/experience curve effects, and the pace of technological change.
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According to both the text discussion and the summary in Figure 3.4, which of the following is not among the factors that determine whether competitive rivalry among industry members is strong, moderate, or weak?
Whether industry members are vertically integrated and whether the industry is characterized by significant scale economies and rapid technological change
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The rivalry among competing sellers in an industry intensifies
as the number of rivals increases and as they become more equal in size and competitive capability.
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Factors that cause the rivalry among competing sellers to be weak include
strong buyer loyalty, rapid growth in buyer demand, and so many industry rivals that any one company's actions have little impact on the businesses of its rivals.
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According to both the text discussion and the summary in Figure 3.5, competitive pressures associated with the threat of new entrants grow stronger when
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.
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Which of the following conditions generally raise the barriers to entering an industry?
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
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Based on both the chapter discussion and the summary in Figure 3.6, competitive pressures stemming from substitute products are weaker when
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.
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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?
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
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Which of the following is not a reason that industry rivals are often motivated to enter into strategic partnerships with key suppliers?
To reduce the bargaining power they face from buyers of their products
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Whether the buyers of an industry's product have strong or weak bargaining leverage over the terms and conditions of sale depends on
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.
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As a rule, the stronger the collective impact of the five competitive forces,
the lower the combined profitability of industry participants and the more "competitively unattractive" is the industry environment.
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The task of driving forces analysis is to
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.
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Which of the following is not among the most common types of driving forces?
Ups and downs in interest rates, changes in the number of seller-supplier collaborative alliances, and changes in overall industry profitability
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The procedure for constructing a strategic group map involves
identifying the competitive characteristics that differentiate firms' market positions and competitive approaches.
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.
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A strategic group map is a helpful analytical tool for
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.
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Trying to determine what strategic moves rivals are likely to make next
entails understanding rivals' strategies, watching their actions on a regular basis, sizing up their strengths and weaknesses, gauging how well they are faring in the marketplace, assessing how much pressure they are under to improve their performance, and evaluating the relative merits of their strategic options and alternatives so as to better predict their likely next moves.
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An industry's key success factors
concern the particular strategy elements, product attributes, resources, competencies, competitive capabilities, and market achievements that spell the difference between being a strong competitor and a weak competitor—and sometimes between profit and loss.
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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?
How many of the industry's key success factors do companies in the industry typically incorporate into their strategies
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Which one of the following statements is false?
A company's macro-environment includes all relevant external factors and influences that bear upon a company's decision to move to a different strategic group, change its strategic intent, or modify its objectives, strategy, or business model.
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Evaluating a company's resources and competitive position does not include developing answers to which one of the following questions?
How good is the company's value chain
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Which one of the following is not helpful in identifying the components of a single-business company's strategy?
The company's resource strengths and weaknesses
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Which one of the following is not a good indicator of how well a company's present strategy is working?
Whether the company's resource strengths and competitive capabilities outnumber its resource weaknesses and competitive vulnerabilities
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SWOT analysis
consists of three steps (as shown in Figure 4.2): identifying a company's resource strengths and weaknesses and its opportunities and threats, drawing conclusions about the company's overall situation, and translating the conclusions into strategic actions to improve the company's strategy and business prospects.
provides a quick overview of where on the scale from "alarmingly weak" to "exceptionally strong" the attractiveness of the company's overall business situation ranks.
helps provide a basis for matching the company's strategy to its internal resource capabilities and its external opportunities and threats.
helps identify a company's core competencies and competitive capabilities and the seriousness of its resource weaknesses and competitive deficiencies.
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A core competence
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.
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Which one of the following groups of characteristics is least likely to represent company strengths or competitive assets?
More plants than rivals, more employees than rivals, being in business more years than rivals, and smaller capital investment expenditures than rivals
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A distinctive competence
is a more important competitive asset than a core competence.
represents uniquely strong capability relative to rival companies—it qualifies as a competitively superior resource strength with competitive advantage potential.
is a competitively important value chain activity that a company performs better than its rivals.
can underpin and add real punch to a company's strategy.
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Which of the following is not a measure of the competitive power of a company's resource strengths?
Whether the company has more resources/capabilities than any other key rival
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The industry or market opportunities that are most relevant to a company and those which its strategy should aim at capturing include
opportunities that are well-suited to the company's competitive capabilities and resource strengths.
opportunities which the company has the financial resources to pursue.
opportunities that offer important avenues for growth.
opportunities where the company has the greatest potential for competitive advantage.
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Which of the following is not an example of an external threat to a company's future business prospects (see Table 4.2)?
Having a weaker brand image than rivals and a smaller network of retailer dealers than rivals
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Which of the following analytical tools are particularly useful for determining whether a company's prices and costs are competitive?
Value chain analysis and benchmarking.
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A company's value chain consists of
the collection of activities it performs in the course of designing, producing, marketing, delivering, and supporting its product or service and delivering value to customers—these activities can be grouped into (a) the primary activities that are foremost in creating value for customers and (b) the related support activities that facilitate and enhance the performance of the primary activities.
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Benchmarking
is a tool for learning which companies are best at performing particular activities and then using their techniques (or "best practices") to improve the cost and effectiveness of a company's own internal activities.
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A company's cost competitiveness is largely a function of
how efficiently it manages its overall value chain activities relative to how efficiently competitors manage theirs.
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Strategic actions to eliminate a cost disadvantage
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.
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The options for attacking the high costs of items purchased from suppliers does not include which one of the following?
Raising prices to customers (so as to cover the high costs)
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For a company to translate performance of value chain activities into competitive advantage, it
must (1) develop core competencies and maybe a distinctive competence that rivals don't have or can't quite match and that are instrumental in helping it deliver attractive value to customers or (2) be more cost efficient in how it performs value chain activities such that it has a low-cost advantage.
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Doing a weighted competitive strength assessment of how a company compares against key rivals involves
developing a list of 6 to 10 telling measures of competitive strength and then assigning weights to each of these strength measures that reflects their relative importance.
rating each company on each strength measure (using a scale of 1 to 10) and then multiplying the strength rating by the assigned weight to get a weighted strength score.
summing each company's weighted strength scores on the various strength measures to get an overall measure of competitive strength for each competitor.
drawing conclusions about the size of a company's net competitive advantage or disadvantage vis-à-vis its rivals (with the size of the advantage/disadvantage being indicated by the sizes of the differences among the companies' competitive strength scores).
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Which one of the following is not something that can be learned from doing a competitive strength assessment?
Whether a company utilizes more best practices than rivals in performing its value chain activities
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Identifying the strategic issues that company managers need to address
involves using the results of both industry and competitive analysis and what has been learned from evaluating the company's present strategy, SWOT analysis, and the evaluations of the company's own competitiveness.
entails developing a "worry list" of "how to…", "whether to….", and "what to do about….."
is important because it sets the agenda for deciding what actions to take next to improve the company's performance and business outlook—a good strategy must include actions to deal with all the strategic issues and problems that stand in the way of the company's future success.
entails locking in on what challenges the company has to overcome in order to be financially and competitively successful in the years ahead.
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Which of the following statements is false?
Because the value chains of rival companies tend to be quite similar, costs outside a company's own value chain do not affect whether it is at a cost advantage or disadvantage vis-à-vis key rivals.
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A company's competitive strategy deals with
deals exclusively with the specifics of management's game plan for competing successfully—its specific efforts to please customers, its offensive and defensive moves to counter the maneuvers of rivals, its responses to whatever market conditions prevail at the moment, its initiatives to strengthen its market position, and its approach to securing a competitive advantage vis-à-vis rivals.
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A company achieves competitive advantage whenever
it has some type of edge over rivals in attracting customers and coping with competitive forces.
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The five generic types of competitive strategies include
low-cost leadership, broad differentiation, best-cost provider, focused low-cost, and focused differentiation.
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A low-cost leader's basis for competitive advantage is
meaningfully lower overall costs than competitors.
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A competitive strategy of striving to be the low-cost provider is particularly attractive when
buyers are large, have significant power to bargain down prices, use the product in much the same ways, and incur low costs in switching their purchases from one seller to another.
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Which of the following is not a way that a company can try to manage the costs of its value chain activities downward and thus be more cost-efficient than rivals?
Having outsiders perform all those value chain activities in which a company odes not have either a core competence or a distinctive competence
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Striving to be the industry's low-cost provider and achieving lower costs than rivals entails
doing a better job than rivals of performing value chain activities more cost-effectively.
revamping the firm's overall value chain to eliminate or bypass cost-producing activities that produce little value added insofar as customers are concerned.
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Which of the following is not an accurate characterization of a strategy to be the industry's overall low-cost provider?
A low-cost provider strategy entails making a product with minimal features so as to keeps cost per unit as low as absolutely possible.
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A broad differentiation strategy
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.
can produce sustainable competitive advantage if the differentiating features possess strong buyer appeal and can't be copied or easily matched by rivals.
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Which of the following is not one of the four basic routes to achieving a differentiation-based competitive advantage?
Appealing to high-income buyers who are willing and able to pay a premium price for a high-performing, multi-featured product
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The most appealing approaches to broad differentiation
involve features or attributes that (1) have considerable buyer appeal and (2) are hard or expensive for rivals to duplicate.
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Successful differentiation allows a firm to
gain buyer loyalty to its brand (because some buyers are strongly attracted to the differentiating features and bond with the company and its products).
command a premium price for its product and/or increase unit sales (because additional buyers are won over by the differentiating features).
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In which one of the following market circumstances is a broad differentiation strategy generally not well-suited?
When most competitors are using eye-catching ads to set their product offerings apart and build a brand image that is differentiated
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Which of the following is not one of the pitfalls of pursuing a differentiation strategy?
Trying to create strong brand loyalty rather than being content with weak brand loyalty (which usually means lower costs and higher profitability)
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A strategy of being a best-cost provider
combines a strategic emphasis on low cost with a strategic emphasis on more than minimally acceptable quality, service, features, and performance
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What sets focused (or market niche) strategies apart from low-cost leadership and broad differentiation strategies is
their concentrated attention on serving the needs of buyers in a narrow piece of the overall market.
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A focused low-cost strategy (see Table 5.1)
involves a marketing emphasis that communicates the attractiveness of a budget-priced product tailored to fit the expectations of buyers comprising the target market niche.
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A focused differentiation strategy aims at securing competitive advantage by
offering buyers in the target market niche a product which they perceive is uniquely well suited to their tastes and preferences.
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Which of the following are distinguishing features of a best-cost provider strategy (see Table 5.1)?
A competitive advantage based on more value for the money
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Based on the information in Table 5.1, which of the following is not a distinguishing feature of a low-cost provider strategy
The strategic target is value-conscious buyers and sustaining the strategy depends on frequent advances in technology and occasional product innovations
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