Deck 10: Competitive Advantage in Mature Industries

Question 1

A critical determinant of the profitability of a declining industry is the balance between capacity and output during decline.

Answer 1

True

Question 2

Central to the strategies of Starbucks and Harley Davidson is the notion that they are not simply supplying a product but involving their customers in an experience of which the product forms only one component.

Answer 2

True

Question 3

Low-cost inputs,low overheads,and R&D effectiveness are the three primary drivers of cost in mature industries.

Answer 3

False

Question 4

The transition of an industry from mature to decline is most commonly the result of technological obsolescence as superior substitutes become available.

Question 5

Overinvestment in production capacity,internationalization,and commoditization are factors that depress the profitability of mature industries.

Question 6

Leadership models which have been shown to be effective for companies in mature industries include: the administrator,the autocrat,and the strategic leader.

Question 7

In mature industries,the profitability advantages of specializing in only attractive industry segments are usually outweighed by the scale advantages of a broad segment scope.

Question 8

Bureaucratic approaches to management are seldom conducive to cost efficiency within a mature industry.

Question 9

Companies in mature industries where cost efficiency is the critical success factor (such as wholesale distribution,airlines,and logistics)tend to favour qualitative performance targets over quantitative performance targets.

Question 10

In tires,domestic appliances,and airlines,achieving differentiation advantage is constrained by customers' unwillingness to pay a price premium for differentiation that exceeds the cost of differentiation.

Question 11

An industry leadership strategy involving continued investment,acquiring competitors,and encouraging rivals to exit is seldom advisable for a firm in a declining industry.

Question 12

"New game strategies" and "blue-ocean strategies" and both types of strategy oriented towards strategic innovation.

Question 13

In mature industries new entrants are almost always at a cost disadvantage to established firms.

Question 14

The correlation between return on investment and market share in mature industries indicates the importance of scale economies as a source of competitive advantage in mature industries.

Question 15

The retail sector offers many opportunities for establishing differentiation advantage and these advantages can usually be sustained over time.

Question 16

Providing "customer solutions" involves offering customers a customized bundle of products and services.

Question 17

Very few companies in mature industries are able to achieve high profitability and rapid growth.

Question 18

Maturity tends to shift the opportunities for competitive advantage from differentiation-based factors to cost-based factors.

Question 19

Strategic innovation in mature industries usually involves the application of new technology.

Question 20

Enterprise Rent-A-Car and wealth management advisers,Edward Jones are examples of companies that have established a competitive advantage through defying the conventional wisdom concerning key success factors in their industries.

Question 21

In terms of building competitive advantage,Harley-Davidson's motorcycles and Nintendo's Wii video games console share the following:

A)Both are leisure products
B)Both are not the biggest companies in their industry,but are the most profitable
C)Both have demonstrated that cutting-edge technology is not critical to success
D)Both embraced customers groups outside the their industries' core customer group

Question 22

One of the greatest challenges of strategy implementation in mature industries is:

A)Reconciling differentiation and innovation with a relentless drive for cost efficiency
B)Encouraging strategic innovation by widening the strategic planning process to include younger organizational members
C)Continually adjusting the strategy to adapt to environmental changes
D)Both b and c

Question 23

In mature industries where companies compete primarily on prices and cost efficiency,the most appropriate type of performance controls are:

A)Flexible,allowing considerable managerial discretion.
B)Quantitative and short term.
C)Those closely linked to pay.
D)Qualitative milestones.

Question 24

The evidence from watches,pens,and cigars is that the best segments of a declining industry in which to be located are usually the low-price segments that cater to the mass market.

Question 25

In a declining industry that lacks strong pockets of continuing demand,a suitable strategy would be:

A)Leadership
B)Niche
C)Harvest or divest
D)All of these

Question 26

Competition in mature,low-technology industries such as tires,brassieres,and fishing rods reveals:

A)In these "stalemate" industries the potential for competitive advantage is severely limited
B)There is constant quest for new sources of competitive advantage-including a steady stream of technological innovations
C)The quest for cost advantage has resulted in these industries relocating to countries with low labor costs
D)A price premium can only be earned through providing high quality

Question 27

Warren Buffet's distinction between a "franchise" and a "business" refers to:

A)The advantage of starting a franchised business rather than an independent start-up.
B)The difference between a business whose uniqueness gives it pricing power and one that lacks such a competitive advantage.
C)The importance of taking a contrarian approach in business.
D)The importance of selecting a business that is easy to manage.

Question 28

An implication of industry maturity for competitive advantage is that:

A)Industries tend to become perfectly competitive,implying that competitive advantage disappears
B)Diffusion of technology and commoditization mean that strategic innovation is the primary source of competitive advantage
C)Lack of growth,diffusion of technology,and commoditization imply fewer opportunities for competitive advantage
D)Maturity has no significant impact on the extent or sources of competitive advantage

Question 29

The major source of differentiation in mature industries is:

A)Enhanced product features
B)Customization
C)Innovation to create enhanced product functionality
D)Image differentiation and providing complementary services

Question 30

In mature industries,the most important sources of cost advantage are:

A)Economies of scale and economies of learning.
B)Low-cost inputs,low overheads,and economies of scale.
C)Superior process technologies.
D)Business model innovation.

Question 31

The pursuit of efficiency within mature industries is typically achieved through management systems that:

A)Disaggregate company-wide goals into specific performance targets for departments and individuals
B)Give corporate culture precedence over performance targets
C)Utilize balanced scorecards
D)Are implemented by hands-on leaders

Question 32

The management systems of leading firms in mature industries such as UPS,Wal-Mart,Nucor,and ExxonMobil are characterized by:

A)High levels of decentralization.
B)Metrics-based management systems .
C)Bureaucratic controls that also allow significant levels of individual autonomy.
D)Financial controls,HR policies,and operating practices which are tightly integrated with demanding performance targets.

Question 33

The single most important factor that determines the profitability of a declining industry is:

A)The adjustment of capacity to shrinking demand.
B)The capacity of firms in the industry to devise innovative strategies.
C)The speed with which customers switch out of products supplied by the industry.
D)The ability of firms to reduce costs through off-shoring.

Question 34

The success of Edward Jones (a wealth management advisor)and Enterprise Rent-A-Car is based upon:

A)Entrepreneurial drive.
B)Cost leadership.
C)Competing in a different way to the leading companies in their respective industries.
D)Augmenting products and services to enhance customer value.

Question 35

Which of the following tends not a major source of strategic innovation in mature industries?

A)Providing customer solutions
B)Deploying state-of-the-art technology to upgrade products
C)Identifying and serving new customer groups
D)Augmenting,bundling,and theming product offerings

Question 36

A key assumption that underlines the strategies of most banks,hotels,international airlines and Las Vegas casinos is:

A)The customer is always right
B)Cost efficiency is the main determinant of profitability
C)A small minority of affluent or high spending customers contribute a large proportion of total profit
D)Sustainable competitive advantage requires innovative product differentiation

Question 37

A distinctive feature of the strategies of Starbucks,Lego,and Harley-Davidson is:

A)Intangible differentiation
B)Strategic innovation
C)They focus on offering a customer experience rather than a product
D)Premium pricing

Question 38

With maturity,the opportunities for differentiation become scarcer due to:

A)Competition making it difficult to charge a price premium
B)Firms lacking the resources needed to differentiate their offerings
C)The trend toward commoditization narrows the scope for differentiation and reduces customer willingness to pay
D)Technological innovation hinders the potential for differentiation

Question 39

Achieving strategic innovation requires that managers in mature sectors need to:

A)Commit additional resources to R&D
B)Combat isomorphism-the tendency for companies to adopt similar approaches to organization and management
C)Break out of the maturity mindset and recognize the potential for rejuvenation
D)Cultivate entrepreneurship by promoting young,creative individuals to senior management positions

Question 40

Strategic innovation is best described as:

A)The third phase of innovation,after product and process innovations
B)Attempts to reconfigure an industry using new technology
C)Attempting to create a new source of competitive advantage through a novel approach to competing
D)The introduction of a disruptive technology

Question 41

Conditions conducive to a firm adopting a leadership strategy in a declining industry are:

A)A willingness by other firms to exit the industry.
B)Superior financial resources.
C)The presence of pockets of demand that are resilient and relatively price-insensitive.
D)BOTH A willingness by other firms to exit the industry AND The presence of pockets of demand that are resilient and relatively price-insensitive.

Question 42

Which of the following factors is not a source of barriers to the exit of capacity from the European oil refining industry: a declining industry includes not just the presence of durable,specialized assets and the costs of plant closure,but also:

A)Oil refineries have few alternative uses
B)Environmental clean-up costs
C)Employee redundancy payments
D)Investments in new refining capacity in the Middle East by national oil companies