Question 1

Discuss the reasons for the decline in profitability levels of firms in commodity markets during downturns in business cycles.

Accepted Answer

There are several reasons for the decline in profitability levels of firms in commodity markets during downturns in business cycles.

Firstly, during economic downturns, there is a decrease in consumer demand for goods and services. This leads to a decrease in the demand for commodities, resulting in lower prices and reduced profitability for firms operating in commodity markets.

Secondly, during downturns, there is often an oversupply of commodities in the market. This oversupply can lead to a decrease in prices as firms compete to sell their products, further reducing profitability levels.

Additionally, during economic downturns, there is often an increase in production costs for firms in commodity markets. This can be due to factors such as higher input costs, increased regulatory requirements, or the need to invest in new technologies to remain competitive. These increased costs can eat into profit margins, further reducing profitability.

Furthermore, during downturns, there is often a decrease in access to credit and financing for firms in commodity markets. This can make it difficult for these firms to invest in new projects or expand their operations, further impacting their profitability levels.

Lastly, economic downturns can also lead to increased volatility in commodity markets, making it difficult for firms to predict and manage their risks effectively. This can lead to unexpected losses and reduced profitability for firms in commodity markets.

In conclusion, the decline in profitability levels of firms in commodity markets during downturns in business cycles can be attributed to a decrease in consumer demand, oversupply, increased production costs, decreased access to financing, and increased market volatility. These factors can all contribute to a challenging business environment for firms in commodity markets during economic downturns.

Question 2

The success of the generic strategy of differentiation depends on customers valuing the product or service characteristics on which managers have based their differentiation strategies.

Accepted Answer

A) True 
 B)False  True

Question 3

___________ are firms that seek stability by maintaining current market positions and defending against encroachment by other firms.

Accepted Answer

A)   Analyzers
B)   Defenders
C)   Prospectors
D)   Reactors
E)   None of these B

Question 4

In a less competitive industry context, a low cost position firm cannot choose to price at competitors' levels.

Accepted Answer

A) True 
 B)False

Question 5

Why is discounting a threat to a firm's strategy of differentiation?

Accepted Answer

The answer of Why is discounting a threat to a...

Question 6

Cost leadership, differentiation, and focus strategies can be both efficient and effective.

Accepted Answer

A) True 
 B)False

Question 7

The value chain concept can be a very useful tool for managers who are pursuing a cost leadership strategy.

Accepted Answer

A) True 
 B)False

Question 8

What two capabilities must a firm have in order to become a successful "dual advantage" competitor?

Accepted Answer

The answer of What two capabilities must a firm have...

Question 9

The success of a cost leadership strategy depends on the perception by customers that the prices of a particular firm's products or services are lower than the prices of other firms in the industry.

Accepted Answer

A) True 
 B)False

Question 10

Commodity products and services, such as colas, hair care, and microprocessors-cannot be effectively differentiated.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is not one of Porter's generic strategies?

Accepted Answer

A)   cost leadership
B)   differentiation
C)   diversification
D)   focus
E)   None of these are generic strategies

Question 12

Effective business strategies should make the lower portion of the demand curve more elastic.

Accepted Answer

A) True 
 B)False

Question 13

The business strategy of differentiation is particularly well suited for firms competing in commodity markets or the markets for basic items in which one firm's products are more or less indistinguishable from other companies' products.

Accepted Answer

A) True 
 B)False

Question 14

Why is the pursuit of a reactor strategy not considered a viable strategic option?

Accepted Answer

The answer of Why is the pursuit of a reactor...

Question 15

There's no "one single right way" to think about the types of business strategies.

Accepted Answer

A) True 
 B)False

Question 16

Why is private-label and store-brand competition a threat to a firm's strategy of differentiation?

Accepted Answer

The answer of Why is private-label and store-brand competition a...

Question 17

Firms pursuing a focus strategy can segment the market based on which of the following?

Accepted Answer

A)   customers
B)   demographics
C)   regions
D)   products
E)   All of these

Question 18

What is negative brand equity?

Accepted Answer

The answer of What is negative brand equity?...

Question 19

Effective business strategies should make the top portion of a product or service's demand curve more inelastic.

Accepted Answer

A) True 
 B)False

Question 20

Morton has been most effective in pursuing a__________ strategy for its commodity products.

Accepted Answer

A)   cost leadership
B)   differentiation
C)   focus cost leadership
D)   focus differentiation
E)   None of these

Exam 7: Business Strategy and Competitive Advantage

Discuss the reasons for the decline in profitability levels of firms in commodity markets during downturns in business cycles.

The success of the generic strategy of differentiation depends on customers valuing the product or service characteristics on which managers have based their differentiation strategies.

___________ are firms that seek stability by maintaining current market positions and defending against encroachment by other firms.

In a less competitive industry context, a low cost position firm cannot choose to price at competitors' levels.

Why is discounting a threat to a firm's strategy of differentiation?

Cost leadership, differentiation, and focus strategies can be both efficient and effective.

The value chain concept can be a very useful tool for managers who are pursuing a cost leadership strategy.

What two capabilities must a firm have in order to become a successful "dual advantage" competitor?

The success of a cost leadership strategy depends on the perception by customers that the prices of a particular firm's products or services are lower than the prices of other firms in the industry.

Commodity products and services, such as colas, hair care, and microprocessors-cannot be effectively differentiated.

Which of the following is not one of Porter's generic strategies?

Effective business strategies should make the lower portion of the demand curve more elastic.

The business strategy of differentiation is particularly well suited for firms competing in commodity markets or the markets for basic items in which one firm's products are more or less indistinguishable from other companies' products.

Why is the pursuit of a reactor strategy not considered a viable strategic option?

There's no "one single right way" to think about the types of business strategies.

Why is private-label and store-brand competition a threat to a firm's strategy of differentiation?

Firms pursuing a focus strategy can segment the market based on which of the following?

What is negative brand equity?

Effective business strategies should make the top portion of a product or service's demand curve more inelastic.

Morton has been most effective in pursuing a__________ strategy for its commodity products.