Deck 14: Strategies for Firm Growth

Question 1

Abby Covin owns a firm that manufacturers and sells high-end furniture and home accessories. She is currently trying to grow her firm by developing new products. Abby is pursuing a(n) ________ growth strategy.

A) outside
B) inward
C) internal
D) external
E) domestic

Answer 1

C

Question 2

Which of the following was not identified as one of the keys to effective new product and service development?

A) focus on a broad rather than specific target markets
B) get quality and pricing right
C) conduct ongoing feasibility analysis
D) develop products that add value
E) find a need and fill it

Answer 2

C

Question 3

________ is work that is done for a company by people other than the company's full-time employees.

A) Ability enhancement
B) Productivity subcontracting
C) Capacity enhancement
D) Outsourcing
E) Insourcing

Answer 3

D

Question 4

Which of the following is an example of an external growth strategy?

A) licensing
B) improving an existing product or service
C) increasing the market penetration of an existing product or service
D) extending product lines
E) geographic expansion

Question 5

The Savvy Entrepreneurial Firm feature in Chapter 14 focuses on SwitchFlops, a company that produces sandals with interchangeable straps. The primary takeaway from the feature is that savvy growth-minded startups:

A) utilize both internal and external growth strategies
B) emphasize internal rather than external growth strategies
C) emphasize international growth strategies from their inception
D) configure their products and services in ways that have built-in growth potential
E) compete on the basis of quality rather than price

Question 6

Phone Halo, the company profiled in the opening feature for Chapter 14, developed a device that prevents people from losing their mobile phones. Which growth strategy is Phone Halo now pursuing?

A) joint ventures
B) strategic alliances
C) mergers and acquisitions
D) licensing
E) international expansion

Question 7

Which of the following is an advantage of internal growth strategies?

A) encourages internal entrepreneurship
B) adds to industry capacity
C) need to develop new resources
D) investment in a failed internal effort can be difficult to recoup
E) slow form of growth

Question 8

Frank Patterson owns a chain of barbershops that started near Atlanta and has expanded into northern Florida, South Carolina, North Carolina, and West Virginia. Frank is growing his company via a strategy of:

A) geographic expansion
B) market penetration
C) product line extension
D) outsourcing
E) licensing

Question 9

Pam Ryan owns a store that sells running shoes and related products. Pam is currently trying to increase sales through endorsements by famous runners and former Olympic athletics. Pam is pursuing a(n):

A) strategic alliance strategy
B) licensing strategy
C) market penetration strategy
D) geographic expansion strategy
E) improving an existing product or service strategy

Question 10

Ted Donovan owns a store that sells all-terrain vehicles (ATVs). In the past Ted just sold one version of each of the ATVs he sold in his showroom, but to increase sales, Ted now sells a low-end, a medium-priced, and a high-end version of each of the ATVs he sells. Ted's new strategy is called a(n):

A) improving an existing product or service strategy
B) market penetration strategy
C) product line extension strategy
D) geographic expansion strategy
E) joint venture strategy

Question 11

Which of the following was not identified in Chapter 14 as one of the top 10 reasons new products fail?

A) lack of passion for the product
B) target market is smaller than originally projected
C) target market is not defined correctly
D) sales and marketing efforts are not focused and aligned
E) product doesn't address important customer needs

Question 12

Internally generated growth is often called ________ growth because it does not rely on outside intervention.

A) natural
B) whole
C) expected
D) organic
E) ordinary

Question 13

Which of the following statements is not true regarding new product development?

A) New product development involves designing, producing, and selling new products as a means of increasing firm revenues and profits.
B) When new product development is properly executed, there is tremendous upside potential.
C) The key to successful new product development strategy is to develop products that aren't simply "me-too" products.
D) In general, developing new products is a low-risk strategy.
E) In many fast-paced industries, new product development is a competitive necessity.

Question 14

A(n) ________ strategy involves making additional versions of a product so that it will appeal to different clientele.

A) product line extension
B) geographic expansion
C) improving an existing product or service
D) strategic alliance
E) market penetration

Question 15

Which mechanism for firm growth involves the creation and sale of new products or services?

A) acquisitions
B) licensing
C) franchising
D) new product development
E) international expansion

Question 16

Entrepreneurial businesses that grow by expanding from their original location to additional geographic sites are pursuing a:

A) common expansion strategy
B) market penetration strategy
C) universal networking strategy
D) geographic expansion strategy
E) product line extension strategy

Question 17

A(n) ________ seeks to increase the sales of a product or service through greater marketing efforts or through increased production capacity and efficiency.

A) product line extension strategy
B) strategic alliance strategy
C) geographic expansion strategy
D) market penetration strategy
E) improving an existing product or service strategy

Question 18

New product development, other product-related strategies, and international expansion are examples of:

A) external growth strategies
B) domestic growth strategies
C) secondary growth strategies
D) internal growth strategies
E) inward growth strategies

Question 19

If a business enhances the quality of a product, makes it more convenient to use, improves its durability, or makes it more up to date, any one of those initiatives fall under the category of:

A) increasing the market penetration of an existing product or service
B) extending product lines
C) geographic expansion
D) licensing
E) improving an existing product or service

Question 20

Which of the following is an example of an internal growth strategy?

A) licensing
B) merger
C) new product development
D) strategic alliance
E) acquisition

Question 21

Qualcomm, a high-tech company headquartered in San Diego, owns the rights to several of the key components that permit cell phones to work. Instead of selling cell phones itself, Qualcomm grants permission to many companies, such as Samsung and LG, to use specific forms of its intellectual property in exchange for monetary compensation. Qualcomm in engaging in an external growth strategy referred to as:

A) licensing
B) strategic alliances
C) acquisitions
D) new product development
E) joint ventures

Question 22

Two years ago, Jason Jennings and Mary Scott each owned a small chain of bagel restaurants in Orange County, California. Just recently, they decided to pool their interests and combine their individual chains of restaurants into one chain. What Jason and Mary did with their firms is called a(n):

A) licensing agreement
B) strategic alliance
C) acquisition
D) joint venture
E) merger

Question 23

The granting of permission by one company to another company to use a specific form of its intellectual property under clearly defined conditions is referred to as:

A) verifying
B) confirming
C) endorsing
D) licensing
E) certifying

Question 24

Which of the following is the primary disadvantage of licensing as a foreign market entry strategy?

A) high transportation costs
B) quality control
C) It is usually a one-time activity.
D) A firm loses partial control of its business operations.
E) A firm in effect "teaches" a foreign company how to produce its proprietary products.

Question 25

According to the textbook, international new ventures are:

A) businesses that have employees located in three or more countries
B) businesses that sell products in five or more countries
C) businesses that, from inception, seek to derive significant competitive advantage by using their resources to sell products or services in multiple countries
D) businesses that are headquartered in a foreign country and export their products to the United States
E) new ventures that export at least one-third of their products to foreign countries

Question 26

Kent Williamson owns a firm that manufacturers and sells electrical supplies. He is currently trying to grow his firm through licensing and strategic alliances. Kent is pursuing a(n):

A) domestic growth strategy
B) external growth strategy
C) subsidiary growth strategy
D) internal growth strategy
E) secondary growth strategy

Question 27

________ licensing is the licensing of proprietary technology that the licensor typically controls by virtue of a utility patent.

A) Skill
B) Intellectual property
C) Utility
D) Technology
E) Expertise

Question 28

A(n) ________ is the pooling of interests to combine two or more firms into one. A(n) ________ is the outright purchase of one firm by another.

A) acquisition, merger
B) merger, acquisition
C) licensing agreement, acquisition
D) joint venture, strategic alliance
E) strategic alliance, joint venture

Question 29

According to a recent PricewaterhouseCooper's survey (cited in the textbook) of rapid-growth entrepreneurial firms, ________ of the 350 firms surveyed sell in international markets.

A) 15%
B) 25%
C) 46%
D) 77%
E) 90%

Question 30

The ________ is the company that owns the intellectual property. The ________ is the company purchasing the right to use it.

A) endorsee, endorser
B) licensor, licensee
C) licensor, endorsee
D) endorser, endorsee
E) licensee, licensor

Question 31

Which of the following is an advantage of growth by means of external growth strategies?

A) clash of corporate cultures
B) increased business complexity
C) loss of organizational flexibility
D) antitrust implications
E) economies of scale

Question 32

Which of the following is the primary disadvantage of franchising as a foreign market entry strategy?

A) It is usually a one-time activity.
B) quality control
C) A firm loses partial control of its business finances.
D) high transportation costs
E) The costs of setting up and maintaining a manufacturing facility and permanent presence in a foreign country can be high.

Question 33

Which of the following is the primary advantage of exporting as a foreign market entry strategy?

A) No foreign currency risk is involved.
B) Exporting requires little knowledge of foreign markets.
C) Exporting is a relatively inexpensive way for a firm to become involved in foreign markets.
D) The exporting company's customers put up most of the capital needed to establish the export operation.
E) Exporting involves very little effort on the part of a firm.

Question 34

Which of the following is a disadvantage of growth by means of external growth strategies?

A) diversification of business risk
B) economies of scale
C) getting access to proprietary products or services
D) reducing competition
E) increased business complexity

Question 35

Trevor Watts owns a printing company. Over the past three years, Trevor has significantly increased his sales through the outright purchase of other printing firms. Trevor is pursuing a(n) ________ strategy.

A) acquisition
B) merger
C) strategic alliance
D) joint venture
E) licensing

Question 36

Which of the following is an example of an external growth strategy?

A) market penetration
B) product line extension
C) strategic alliance
D) new product development
E) geographic expansion

Question 37

The What Went Wrong? feature in Chapter 15 focuses on StumbleUpon, an Internet startup which sold itself to eBay for $75 million. Surprisingly, just two years after eBay bought StumbleUpon:

A) it licensed the technology underlying StumbleUpon's unique method of finding Web sites to Yahoo
B) it changed StumbleUpon's name to "eBay Surprise"
C) it sold it to Google for $95 million
D) it closed StumbleUpon and retired its name
E) its founder and a group of investors bought it back

Question 38

In an acquisition, the surviving firm is called the ________, and the firm that is acquired is called the ________.

A) target, acquirer
B) goal, objective
C) objective, aggressor
D) acquirer, target
E) aggressor, objective

Question 39

Which of the following statements is incorrect regarding acquisitions?

A) In an acquisition, the surviving firm is called the acquirer.
B) An acquisition is the outright purchase of one firm by another.
C) In most cases, a firm acquires a competitor or a company that has a product line or distinctive competency that it needs.
D) If a firm decides to grow through acquisitions, it is extremely important for it to exercise extreme care in finding acquisition candidates.
E) Many firms have found that the process of assimilating another company into their current operation was easier than they thought it would be.

Question 40

________ growth strategies rely on establishing relationships with third parties, such as mergers, acquisitions, strategic alliances, joint ventures, licensing, and franchising.

A) External
B) Domestic
C) Outside
D) Distant
E) Peripheral

Question 41

Which of the following was identified in the textbook as a disadvantage of participating in strategic alliances and joint ventures?

A) risk and cost sharing
B) economies of scale
C) partners' cultures may clash
D) gain access to a foreign market
E) learning

Question 42

According to the textbook, the key to effective merchandise and character licensing is:

A) get licensing income monthly rather than yearly
B) resist the temptation to license a trademark too widely
C) licensing a trademark very widely
D) restrict licensing agreements to one year
E) restrict licensing to product categories that have no relevance and appeal to a firm's core customers

Question 43

Geographic expansion is most common in retail settings.

Question 44

The majority of entrepreneurial firms first enter foreign markets via joint ventures.

Question 45

________ is the licensing of a recognized trademark or brand that the licensor typically controls through a registered trademark or copyright.

A) Goods and character licensing
B) Products and trademark licensing
C) Products and brand licensing
D) Merchandise and character licensing
E) Products and services licensing

Question 46

External growth strategies rely on establishing relationships with third parties, such as mergers, acquisitions, strategic alliances, joint ventures, licensing, and franchising.

Question 47

Outsourcing is work that is done for a company by people other than the company's full-time employees.

Question 48

In the context of strategic alliances, ________ feature cooperation in research and development, engineering, and manufacturing.

A) administrative alliances
B) directorial alliances
C) marketing alliances
D) organizational alliances
E) technological alliances

Question 49

A market penetration strategy involves actions taken to increase the sales of a product or service through greater marketing efforts or through increased product capacity and efficiency.

Question 50

A ________ is a partnership between two or more firms that is developed to achieve a specific goal, and has no joint ownership involved.

A) joint alliances
B) joint venture
C) licensing agreement
D) merger
E) strategic alliance

Question 51

Paul Kite owns a chain of ice cream stores in New England. To draw attention to his stores, he adopted a very colorful and distinctive logo several years ago, which depicts a funny-looking cow churning ice cream. Recently, a dairy company asked Paul if it could use a characterization of his funny-looking cow on a line of yogurt it is coming out with, and offered to pay Paul's company 3 cents for every carton of yogurt it sells that has the cow's image on the carton. If Paul accepts this proposal, he will need to enter into a(n) ________ agreement with the dairy.

A) licensing
B) joint venture
C) strategic alliance
D) new product development
E) exporting

Question 52

Merchandise and character licensing is the licensing of a recognized trademark or brand that the licensor typically controls through a registered:

A) trade secret or copyright
B) patent or copyright
C) trademark or patent
D) patent or trade secret
E) trademark or copyright

Question 53

An advantage of internal growth is that it is a rapid form of growth.

Question 54

Internally generated growth is often called organic growth because it does not rely on outside intervention.

Question 55

Internal growth strategies involve efforts taken within the firm itself, such as new product development, other product-related strategies, and international expansion.

Question 56

New product development is a low-risk growth strategy.

Question 57

In the context of strategic alliances, ________ typically match a company with a distribution system with a company that has a product to sell to increase sales of a product or service.

A) promotion alliances
B) marketing alliances
C) organizational alliances
D) directional alliances
E) technological alliances

Question 58

Which of the following was identified in the textbook as an advantage of participating in strategic alliances and joint ventures?

A) risk and cost sharing
B) loss of organizational flexibility
C) partners' cultures may clash
D) risk becoming dependent on a partner
E) loss of proprietary information

Question 59

The Partnering for Success feature in Chapter 14 is titled "Three Steps to Alliance Success." The three steps to alliance success identified in the feature are:

A) drafting a licensing agreement, setting up a governance structure, and making it work
B) selecting a partner, cutting the deal, and making it work
C) interviewing potential partners, cutting the deal, and supervising the implementation of the agreement
D) drafting a licensing agreement, cutting the deal, and setting up a governance structure
E) selecting an alliance "manager," setting up a governance structure, and making it work

Question 60

New product development involves designing, producing, and selling new products as a means of increasing firm revenues and profitability.

Question 61

In a link joint venture, the position of the parties is not symmetrical, and the objectives of the partners may diverge.

Question 62

In regard to acquisitions, many firms have found that the process of assimilating another company into their current operations is not easy and can stretch finances to the brink.

Question 63

Licensing is the granting of permission by one company to another company to use a specific form of its intellectual property under clearly defined conditions.

Question 64

A strategic alliance is a partnership between two or more firms that is developed to achieve a specific goal and has no joint ownership involved.

Question 65

Explain the difference between internal and external growth strategies. Provide examples of each.

Question 66

In an acquisition, the surviving firm is called the acquirer, and the firm that is acquired is called the target.

Question 67

Management complexities is a disadvantage of participating in strategic alliances and joint ventures.

Question 68

Describe what licensing is. What type of intellectual property can be licensed? Identify the two types of licensing pursued by entrepreneurial firms.

Question 69

Describe the internal growth strategy of new product development. Why is it a competitive necessity in some industries that entrepreneurial firms focus on this form of growth?

Question 70

Technology licensing is the licensing of a recognized trademark or brand that the licensor typically controls through a registered trademark or copyright.

Question 71

A spin-in occurs when a large company divests itself of one of its smaller divisions and the division becomes an independent company.

Question 72

Describe what a joint venture is. Identify the two types of joint ventures.

Question 73

An acquisition is the pooling of interests to combine two or more firms into one. A merger is the outright purchase of one firm by another.

Question 74

Describe what a product line extension strategy is. What are the advantages of this strategy? Describe a company you are familiar with that utilizes a product line extension growth strategy.

Question 75

In a scale joint venture, the partners collaborate at a single point in the value chain to gain economies of scale in production of distribution.