Deck 6: Strategy Formulation: Situation Analysis and Business Strategy

Question 1

The goal is to find a propitious niche so well suited to the firm's internal and external environment that other corporations are not likely to challenge or dislodge it.

Answer 1

True

Question 2

SO strategies attempt to take advantage of opportunities by overcoming weaknesses.

Answer 2

False

Question 3

An example of a company that was "stuck in the middle" is K-Mart as they tried to imitate both Walmart's low-cost strategy and Target's differentiation strategy.

Answer 3

True

Question 4

SWOT analysis by itself is not a panacea for strategy.

Question 5

One company that has successfully found a propitious niche is Frank J. Zamboni & Company, the manufacturer of the machines that smooth the ice at ice skating rinks.

Question 6

An example of a company following a cost focus strategy is Potlach Corporation, who makes house brands of toilet paper for Safeway and other grocery store chains.

Question 7

If a mission does not provide a common thread for a corporation's businesses, managers might be unclear about where the company is heading.

Question 8

One danger of D'Aveni's concept of hypercompetition is that it may lead to an overemphasis on short-term tactics over long-term strategy.

Question 9

The first firm through a strategic window can occupy a propitious niche and discourage competition (if the firm has the required internal strengths).

Question 10

Niches can grow and change over time.

Question 11

Based on the eight dimensions of quality discussed in the text, serviceability is defined as the product's ease of repair.

Question 12

Rollups are not synonymous with traditional mergers and acquisitions.

Question 13

The TOWS Matrix illustrates how the external opportunities and threats facing a particular corporation can be matched with that company's internal strengths and weaknesses to result in four sets of possible strategic alternatives.

Question 14

SWOT is an acronym that stands for Strategy, Weaknesses, Opportunities, and Threats.

Question 15

Cost leadership is the ability of a company or business unit to design, produce, and market a comparable product more efficiently than its competitors.

Question 16

Business strategy focuses on improving the competitive position of a company's or business unit's products or services within the specific industry or market segment that the company or business unit serves.

Question 17

A cost leader's lower costs allow it to continue to earn profits during times of heavy competition.

Question 18

The strategic rollup was developed in the mid-1990s as an efficient way to quickly consolidate a fragmented industry with the resulting large firm creating economies of scale.

Question 19

One risk of a cost leadership strategy is that the technology for production or of products may change.

Question 20

Most entrepreneurial ventures follow focus strategies.

Question 21

The text authors note that the essence of strategy is

A) opportunity divided by strengths minus weaknesses.
B) strength divided by opportunity.
C) threat divided by capacity.
D) threat divided by opportunity.
E) opportunity divided by threat.

Question 22

The particular capabilities and resources a firm possesses and the superior way in which they are used is called

A) differentiating capabilities.
B) distinctive competencies.
C) situational proficiency.
D) core competencies.
E) distinctive characteristics.

Question 23

The concept that advocates management's attempt to find a strategic fit between external opportunities and internal strengths while working around external threats and internal weaknesses is called

A) environmental analysis.
B) position analysis.
C) strategic evaluation.
D) objective analysis.
E) situation analysis.

Question 24

Those companies using cooperative strategies are generally not able to gain a competitive advantage.

Question 25

A value chain partnership is a loose alliance with several distributors for the short term.

Question 26

Alliances take more financial resources and involve more risk than do acquisitions and going it alone.

Question 27

Too much partnering experience with the same strategic partners generates diminishing returns over time and leads to reduced performance.

Question 28

The T in SWOT represents

A) threat.
B) tactic.
C) tautology.
D) task.
E) time.

Question 29

All of the following reflect criticisms of the SWOT analysis EXCEPT

A) it uses no weights to reflect priorities.
B) it only requires a single level of analysis.
C) it provides a rational link to strategy implementation.
D) it uses ambiguity in words and phrases.
E) it generates lengthy lists.

Question 30

One skill required of the cost leadership strategy is a strong marketing ability.

Question 31

A licensing arrangement is an agreement in which the licensing firm grants rights to another firm in another country or market to produce and/or sell a product.

Question 32

In the development of a SFAS matrix, the first step is to

A) enter the ratings of how the company's management is responding to each of the strategic factors.
B) calculate the weighted scores.
C) list the most important EFAS and IFAS items.
D) indicate short-term goals for the duration.
E) enter the weights for all of the internal factors.

Question 33

The two general types of cooperative strategies are collusion and strategic alliances.

Question 34

The only way to gain competitive advantage within an industry is to use a competitive strategy.

Question 35

A corporation's specific competitive role which is so well-suited to the firm's internal and external environment that other corporations are NOT likely to challenge or dislodge it.

A) strategic fit
B) propitious niche
C) common thread
D) business screen
E) implicit strategy

Question 36

One success factor to a strategic alliance is the ability to identify likely partnering risks and deal with them when the alliance is formed.

Question 37

Collusion is the active cooperation of firms within an industry to reduce output and raise prices in order to get around the normal economic law of supply and demand.

Question 38

In tacit collusion, there is no direct communication among competing firms.

Question 39

Tight cost control is an organizational requirement for a cost leadership strategy.

Question 40

An acronym for the assessment of the external and internal environments of the business corporation in the process of strategy formulation/strategic planning is

A) PET.
B) MBO.
C) SWOT.
D) SBU.
E) ROI.

Question 41

In a TOWS Matrix, SO Strategies

A) are generated by thinking of ways in which a company or business unit could use its strengths to take advantage of opportunities.
B) attempt to take advantage of opportunities by overcoming weaknesses.
C) are basically defensive and primarily act to minimize weaknesses and avoid threats.
D) consider a company's or unit's strengths as a way to avoid threats.
E) are ways to get strategists to think "out of the box."

Question 42

According to Porter, the generic competitive strategy that reflects the ability to provide unique and superior value to the buyer in terms of product quality, special features, or after-sale service is called

A) competitive scope.
B) differentiation.
C) focus.
D) diversification.
E) cost leadership.

Question 43

Walmart, as a discount retailer, is an example of a company following which of Porter's competitive strategies?

A) differentiation
B) cost leadership
C) differentiation focus
D) competitive advantage
E) cost focus

Question 44

When a company following a differentiation strategy ensures that the higher price it charges for its higher quality is not priced too far above the price of the competition, the company is using the process of

A) low-cost differentiation.
B) cost leadership.
C) cost proximity.
D) basic differentiation.
E) price fixing.

Question 45

Business strategy is composed of

A) corporate and competitive strategy.
B) functional and divisional strategy.
C) competitive and cooperative strategy.
D) corporate and cooperative strategy.
E) divisional and competitive strategy.

Question 46

According to Porter, the generic competitive strategy that reflects the ability of the corporation or its business unit to design, produce, and market a comparable product more efficiently than its competitors is called

A) competitive scope.
B) differentiation.
C) cost leadership.
D) diversification.
E) focus.

Question 47

In a TOWS Matrix, ST Strategies

A) are generated by thinking of ways in which a company or business unit could use its strengths to take advantage of opportunities.
B) attempt to take advantage of opportunities by overcoming weaknesses.
C) are basically defensive and primarily act to minimize weaknesses and avoid threats.
D) consider a company's or unit's strengths as a way to avoid threats.
E) are ways to get strategists to think "out of the box."

Question 48

Which of Porter's competitive strategies concentrates on seeking differentiation in a particular buyer group, product line segment, or geographic market?

A) differentiation
B) cost leadership
C) differentiation focus
D) competitive advantage
E) cost focus

Question 49

One company that has successfully found a propitious niche is

A) Coca-Cola.
B) PepsiCo.
C) Frank J. Zamboni & Company.
D) Walmart.
E) Disney.

Question 50

In a TOWS Matrix, WT Strategies

A) are generated by thinking of ways in which a company or business unit could use its strengths to take advantage of opportunities.
B) attempt to take advantage of opportunities by overcoming weaknesses.
C) are basically defensive and primarily act to minimize weaknesses and avoid threats.
D) consider a company's or unit's strengths as a way to avoid threats.
E) are ways to get strategists to think "out of the box."

Question 51

Business strategy focuses on

A) ensuring that the company maintains the existing market share that it has historically enjoyed.
B) improving the competitive position of a corporation's products or services within the industry or market segment served.
C) providing adequate shareholders' return on investment.
D) preventing the competition from gaining a competitive edge by undermining their marketing plan.
E) recovering the competitive lead by using all available resources that the company can provide.

Question 52

What are the three generic competitive strategies that Porter promotes as the means for outperforming other corporations in a particular industry?

A) competitive scope, differentiation, and focus
B) diversification, concentration, and competitive scope
C) cost, competitive scope, and focus
D) concentration, cost leadership, and differentiation
E) cost leadership, differentiation, and focus

Question 53

Which of Porter's competitive strategies recommends that a company emphasize a particular buyer group or geographic market and attempts to seek a cost advantage in its targeted segment?

A) differentiation
B) cost leadership
C) differentiation focus
D) competitive advantage
E) cost focus

Question 54

In manufacturing toilet paper for grocery store chains (and avoiding competing directly against Charmin), Potlach has followed which of Porter's generic competitive strategies?

A) differentiation
B) cost leadership
C) differentiation focus
D) competitive advantage
E) cost focus

Question 55

According to Porter, the term that applies to the breadth of a company's or business unit's target market is called

A) competitive scope.
B) differentiation.
C) focus.
D) diversification.
E) cost leadership.

Question 56

Apple is an example of a company following which of Porter's generic competitive strategies?

A) cost leadership
B) differentiation
C) cost focus
D) competitive scope
E) diversification

Question 57

According to the text, unique market opportunities that are available for only a particular time are called

A) situational occasions.
B) critical openings.
C) strategy implementation.
D) strategic windows.
E) trigger points.

Question 58

Which of the following is NOT one of the questions that development of a competitive strategy should raise?

A) Should we compete on the basis of lower cost?
B) Should we compete head-to-head with major competitors?
C) Should we differentiate our products or services on some basis other than cost?
D) Should we compete by garnering political support of influential leaders?
E) Should we compete in a niche market that we can satisfy which is superior to that of the competition?

Question 59

The technique that illustrates how management can match the external opportunities and threats with its strengths and weaknesses to yield four sets of strategic alternatives is called a(n)

A) IFAS Table.
B) EFAS Table.
C) SFAS Table.
D) TOWS Matrix.
E) Issues Priority Matrix.

Question 60

Orphagenix, a small biotech firm, avoids head-to-head competition with large pharmaceutical companies by developing orphan drugs to target diseases that affect fewer than 200,000 people. This is an example of which of Porter's generic strategies?

A) differentiation
B) cost leadership
C) differentiation focus
D) competitive advantage
E) cost focus

Question 61

The book Hypercompetition was written by

A) Porter.
B) D'Aveni.
C) Mintzberg.
D) Maslow.
E) Drucker.

Question 62

According to Barney, under which condition would tacit collusion most likely be successful?

A) There is a large number of identifiable competitors.
B) Costs are not similar among firms.
C) One firm tends to act as the price leader.
D) Sales are characterized by a high frequency of large orders.
E) There are low barriers to entry in the industry.

Question 63

Intense supervision of labor, sustained capital investment and access to capital are commonly required skills and resources for which of Porter's generic competitive strategies?

A) cost leadership
B) differentiation
C) cost leadership focus
D) differentiation focus
E) collusion

Question 64

According to D'Aveni

A) except for a few stable industries, strategy initiatives do not provide sustainable competitive advantage.
B) hypercompetition is rare.
C) it is enough to gain competitive advantage by being the lowest cost competitor.
D) the theory of hypercompetition is not supported by any research.
E) the American home appliance industry was immune to hypercompetition.

Question 65

Which of the following is NOT one of the risks of a cost leadership strategy?

A) The technology that the organization has been using changes.
B) Achieving excessive success causes jealousy amongst competitors.
C) Competitors can achieve viable imitations.
D) Other bases for cost leadership erode.
E) Proximity in differentiation is lost.

Question 66

As an industry matures while overcoming fragmentation and becomes dominated by a small number of large companies, it tends to become a(n)

A) united industry.
B) fragmented industry.
C) consolidated industry.
D) isolated industry.
E) integrated industry.

Question 67

A car's cruise control, known as a "bell and whistle," is an example of which of the eight dimensions of quality?

A) performance
B) features
C) reliability
D) durability
E) aesthetics

Question 68

If it is to be successful, Porter advises that a division possess strong marketing abilities, product engineering, a creative flair, strong capability in basic research and a corporate reputation for quality or technological leadership, for which one of the following generic competitive strategies?

A) focus
B) differentiation
C) overall cost leadership
D) vertical growth
E) concentration

Question 69

A method developed in the mid-1990s as an efficient means to quickly consolidate a fragmented industry can be referred to as a

A) merger.
B) strategic rollup.
C) cost strategy.
D) differentiation strategy.
E) focus strategy.

Question 70

As an industry becomes hypercompetitive, firms initially respond by

A) raising entry barriers.
B) moving into untapped markets.
C) attacking the strongholds of other firms.
D) competing on cost and quality.
E) working their way to a situation of perfect competition.

Question 71

The focus strategies will likely predominate when many small and medium sized local companies compete for relatively small shares of the total market in a(n)

A) united industry.
B) fragmented industry.
C) consolidated industry.
D) isolated industry.
E) integrated industry.

Question 72

Amenities to attract highly skilled labor, scientists, or creative people is a common organizational requirement for which of Porter's generic competitive strategies?

A) cost leadership
B) differentiation
C) cost leadership focus
D) differentiation focus
E) collusion

Question 73

Product engineering, creative flair, and strong cooperation from channels are commonly required skills and resources for which of Porter's generic strategies?

A) cost leadership
B) differentiation
C) cost leadership focus
D) differentiation focus
E) collusion

Question 74

Incentives based on meeting strict quantitative targets is a common organizational requirement for which of Porter's generic competitive strategies?

A) cost leadership
B) differentiation
C) cost leadership focus
D) differentiation focus
E) collusion

Question 75

Porter recommends that a division with tight cost control, frequent detailed control reports, a well structured organization, and quantitatively based incentives is required for which of the following generic competitive strategies?

A) focus
B) differentiation
C) cost leadership
D) focus differentiation
E) concentration

Question 76

Most entrepreneurial ventures follow

A) differentiation strategies.
B) focus strategies.
C) no strategies.
D) cost leadership strategies.
E) all of the above

Question 77

Which of the following is NOT one of the risks of the focus strategy?

A) The target segment's structure erodes.
B) The segment's differences from other segments narrow.
C) The advantages of a broad line increase.
D) Focusers exit the industry.
E) Demand disappears for the product in the target segment.

Question 78

According to Porter, a business unit in a competitive marketplace with no generic competitive strategy is

A) achieving synergy.
B) practicing innovative leadership.
C) stuck in the middle.
D) not goal directed.
E) last in line.

Question 79

The last stage of a hypercompetitive industry is reached when the remaining large global competitors

A) raise entry barriers.
B) move into untapped markets.
C) attack the strongholds of other firms.
D) compete on cost and quality.
E) work their way to a situation of perfect competition in which no one has any advantage and profits are minimal.

Question 80

Which of the following is NOT one of the eight dimensions of quality?

A) serviceability
B) durability
C) performance
D) value
E) features