Deck 13: Defensive Strategies

Question 1

Which core defensive strategy is appropriate for a business with a very strong competitive advantage operating in a very attractive market?

A)a harvest strategy
B)a monetize strategy
C)an optimize strategy
D)a protect strategy
E)an invest strategy

Answer 1

D

Question 2

A divest price strategy continues to raise prices slowly with expected decreases in volume until the business has exited the market.

Answer 2

False

Question 3

The reduce-market-focus strategy prescribes a defensive strategic market plan that involves narrowing market focus and trimming market share in an effort to improve profit performance.

Answer 3

True

Question 4

It is during the early stages of market growth that maximum marketing profits are obtained.

Question 5

A defensive strategy to protect market share is the same as a hold-resources-constant strategy.

Question 6

In general,businesses in high-share positions in growing or mature markets will use which type of strategic market plans to maintain cash flow that supports short-run profit performance and shareholder value?

A)offensive strategic market plans
B)defensive strategic market plans
C)decentralized strategic market plans
D)concentrated strategic market plans
E)multi-segment strategic market plans

Question 7

Which of the following core defensive strategies is appropriate when a business is operating in a very unattractive market and has a very weak competitive advantage?

A)a harvest strategy
B)a monetize strategy
C)an optimize strategy
D)a protect strategy
E)an invest strategy

Question 8

All defensive strategies are intended to maximize or protect short-run profits.

Question 9

The primary goal of a defensive strategy is to protect profitability and key strategic share positions that are worth the investment.

Question 10

In general,businesses in high-share positions in growing or mature markets will use defensive strategic market plans to maintain cash flow that supports short-run profit performance and shareholder value.

Question 11

Followers with above-average profits tend to invest more aggressively in marketing as a percentage of sales,as well as on a relative basis when compared with competitors with below-average profits.

Question 12

A divestment strategy,while unattractive,is always feasible.

Question 13

Share leaders,followers,and niche businesses can all pursue defensive strategies to protect their market share positions.

Question 14

A firm plans to use a defensive core strategy of optimize position,with the strategic objective of maximizing profits.Which of the following strategies is the firm most likely to implement as a part of its core strategy?

A)enter new related markets
B)reduce market focus
C)develop new markets
D)divest for cash flow
E)harvest for cash flow

Question 15

The fundamental objective of all share leaders is to invest to protect market share.

Question 16

Maintaining a high-share position in an attractive,growing market requires only minimal investment to sustain a competitive advantage.

Question 17

The strategic objective in the protect position defensive core strategy is to maximize profits.

Question 18

A firm plans to use a defensive core strategy of protect position,with the strategic objective of maintaining profits.Which of the following strategies is the firm most likely to implement as a part of its core strategy?

A)build customer retention
B)enter new related markets
C)harvest for cash flow
D)divest for cash flow
E)develop new markets

Question 19

A business that is able to build a higher level of customer retention can be more profitable than another business,even when both have the same market share.

Question 20

The first step in optimizing net marketing contribution is to focus on optimal management of price-volume rather than margin-volume.

Question 21

Which of the following is the strategic objective of the optimize position defensive core strategy?

A)divest for cash flow
B)maximize profits
C)diversify growth
D)improve competitive position
E)grow in existing markets

Question 22

Gross profit equals ________.

A)unit volume multiplied by margin per unit
B)unit volume divided by unit margin
C)(price minus variable cost)divided by unit volume
D)unit volume multiplied by price
E)market demand multiplied by market share

Question 23

A close examination of profitable high-share and profitable low-share niche businesses reveals only two areas of commonality: relative sales force expense and ________.

A)relative price
B)product breadth
C)relative product quality
D)relative advertising
E)product depth

Question 24

Calculate the average relative price of the product of a business that has a customer value of 36,and a below-average relative product quality of 114.

A)-78
B)-36
C)150
D)78
E)36

Question 25

Which of the following is the strategic objective of the defensive core strategy,protect position?

A)maintain profits
B)improve competitive position
C)maximize cash flow
D)diversify growth
E)grow in existing markets

Question 26

Calculate the average relative product quality of the product,if the business has a customer value of 25,and above-average relative price of 125.

A)-25
B)5
C)-100
D)100
E)150

Question 27

Which of the following statements is true about maximize net marketing contribution strategy?

A)It is an offensive core strategy.
B)It results in inefficient use of marketing resources.
C)It requires careful margin management.
D)Its first step is to focus on optimal management of price-volume rather than margin-volume.
E)It is most effective in very unattractive markets where the firm has a very weak competitive position.

Question 28

To achieve above-average levels of profitability,low-share niche businesses need to focus on their products and ________.

A)keep their market share high
B)divest for cash flow
C)keep expenses low
D)harvest for cash flow
E)expand their product line

Question 29

Calculate the margin per unit if 250,000 units generates a gross profit of $50 million.

A)$2,000
B)$125
C)$1,250
D)$200
E)$500

Question 30

Calculate the volume(units)if a firm has a gross profit of $60 million and a margin price of $300 per unit.

A)180,000 units
B)18,000 units
C)200,000 units
D)30,000 units
E)16,000 units

Question 31

Which of the following is the strategic objective of the defensive core strategies: monetize,harvest,and divest?

A)maintain profits
B)grow in existing markets
C)maximize cash flow
D)diversify growth
E)improve competitive position

Question 32

With respect to competitive advantage,share followers with above-average profits ________.

A)have lower relative product quality
B)have lower levels of capacity utilization
C)have lower levels of price,and unit margin
D)invest less aggressively in marketing as a percentage of sales,in comparison with competitors
E)invest more in research and development (R&D)as a percentage of sales

Question 33

A firm plans to use a defensive core strategy of monetize,harvest,and divest,with the strategic objective of maximizing cash flow.Which of the following strategies is the firm most likely to implement as a part of its core strategy?

A)build customer retention
B)enter new related markets
C)develop new markets
D)manage for cash flow
E)improve customer loyalty

Question 34

Which of the following statements is true?

A)The average profiles for profitable high-share and profitable low-share businesses are almost identical.
B)A low-share business with above-average customer value is more profitable than a high-share business with below-average customer value.
C)A low-share niche business's prices are slightly above the average relative price index of 100.
D)Profitable low-share niche businesses tend to have a wide product breadth.
E)Profitable low-share niche businesses tend to spend more on advertising relative to the competition.

Question 35

Which of the following is true about investing to protect position in growth markets?

A)Protecting a share leadership position in a growth market requires a much lower investment in new products than would be required in a mature market.
B)Growing markets are inherently prone to inducing share loss.
C)The faster a market is growing,the lower the investment a company must make in marketing resources to protect share from new and existing competitors.
D)There is a direct relationship between market share change and size of market share.
E)The effects of market growth on market share change remain the same across industries.

Question 36

Calculate the gross profit generated if 2 million units are sold at a margin price of $200 per unit.

A)$200 million
B)$400 million
C)$100 million
D)$100,000
E)$400,000

Question 37

Calculate the customer value for the product of a business that has an average relative price of 125 and the relative product quality of 200.

A)325
B)75
C)-75
D)-125
E)200

Question 38

In which stage of the product life cycle are maximum marketing profits attained?

A)introduction
B)early growth
C)late growth
D)late decline
E)early decline

Question 39

Customer value equals ________.

A)relative benefits divided by number of customers
B)relative price divided by number of customers
C)relative price plus relative benefits
D)relative benefits minus relative price
E)relative price minus relative benefits

Question 40

Which of the following formulas is used to calculate the net marketing contribution?

A)Acquisition Costs + Retention Costs
B)Volume (units)+ Margin per Unit
C)Price + Variable Cost
D)Gross Profit - Marketing and Sales Expenses
E)Price - Variable Cost

Question 41

Calculate the gross profit if the net marketing contribution is $40 million,the market share is 5%,the acquisition cost is $10 million and the retention cost is $7 million.

A)$57 million
B)$23 million
C)$230,000
D)$60 million
E)$2.85 million

Question 42

Calculate the net marketing contribution if the gross profit generated is $30 million and the total marketing and sales expenses is $15 million.

A)$15 million
B)$45 million
C)$30 million
D)$500,000
E)$2 million

Question 43

Which strategy would be used if a business is losing money in a given market and decides to pursue a quick market exit?

A)a monetize market strategy
B)a disintermediation market strategy
C)a harvest market strategy
D)a divest market strategy
E)an optimize market strategy

Question 44

What condition would make it impossible for a business to achieve maximum marketing profits in later stages of the product life cycle?

A)low customer retention
B)a price increase
C)decreasing volume
D)lower level of sales expenses
E)lower level of marketing expenses

Question 45

Which of the following statements is true about a reduce-market-focus defensive strategy?

A)It involves introducing new lines of products.
B)It requires an increase in the marketing budget.
C)It will likely lead to lower levels of profitability as a percentage of sales.
D)It is most appropriate when a business has the resources to invest in protecting its current share position.
E)It involves trimming market share in an effort to improve profit performance.

Question 46

Which type of strategic market plans are important sources of growth and improving share position?

A)offensive strategic market plans
B)defensive strategic market plans
C)harvest strategic market plans
D)divest strategic market plans
E)monetize strategic market plans

Question 47

In case of monetize,harvest,and divest defensive strategies,each strategy is designed to ________.

A)maximize immediate cash flow
B)maximize brand equity
C)increase customer loyalty
D)facilitate long-run growth in market share
E)diversify growth

Question 48

MINI-CASE
Coller Inc.is an American firm that manufactures flat panel LCD computer monitors.The firm has a 5% share of a 2 million unit market.The firm's marketing department calculates that its acquisition cost is $13 million and retention costs is $5 million.The market for flat panel LCD computer monitors is in the late growth stage of the product life cycle,and Coller currently sells its product for $2,000 and experiences variable costs per unit of $1,600.
Mini-Case Question.Coller Inc. ,because of a weak competitive advantage,is unable to produce desired levels of performance,and considers using a strategic market plan that allows it to exit the market slowly.The firm decides to improve its short-run performance by reducing marketing and sales expenses and systematically raising prices.In this example,Coller Inc.is most likely to be using which of the following defensive core strategies?

A)a decentralization strategy
B)a disintermediation strategy
C)a harvest for cash flow strategy
D)a divest for cash flow strategy
E)a reduce market focus strategy

Question 49

Name and describe the appropriate defensive strategic market plans for a business operating in a very unattractive market.At which level of competitive advantage would each strategy be appropriate? Within those types,what are the strategies and when should each be used?

Question 50

How do follower businesses with above-average profitability and below-average profit performance differ in terms of competitive advantage and investment and asset management?

Question 51

The main purpose of a reduced-market-focus strategy is to ________.

A)enter new market-segments
B)become more efficient
C)increase market share
D)develop new markets
E)increase customer loyalty

Question 52

MINI-CASE
Coller Inc.is an American firm that manufactures flat panel LCD computer monitors.The firm has a 5% share of a 2 million unit market.The firm's marketing department calculates that its acquisition cost is $13 million and retention costs is $5 million.The market for flat panel LCD computer monitors is in the late growth stage of the product life cycle,and Coller currently sells its product for $2,000 and experiences variable costs per unit of $1,600.
Mini-Case Question.As the market for this product matures,Coller may need to rethink its pricing in order to optimize profits as the market growth slows.If the objective is to optimize profits,is it a good idea for Coller Inc.to decrease the price by 10% in an attempt to increase market share to 6%?

A)Yes,because sales revenues will increase by $16 million.
B)Yes,because margin per unit will increase by $200.
C)Yes,because gross profit will increase by $16 million.
D)No,because gross profit will decrease by $16 million.
E)No,because variable costs will increase by 10%.

Question 53

Which of the following defensive strategies allows a business to exit a market slowly?

A)a monetize market strategy
B)a disintermediation market strategy
C)a divest market strategy
D)a harvest market strategy
E)an optimize market strategy

Question 54

MINI-CASE
Coller Inc.is an American firm that manufactures flat panel LCD computer monitors.The firm has a 5% share of a 2 million unit market.The firm's marketing department calculates that its acquisition cost is $13 million and retention costs is $5 million.The market for flat panel LCD computer monitors is in the late growth stage of the product life cycle,and Coller currently sells its product for $2,000 and experiences variable costs per unit of $1,600.
Mini-Case Question.If Coller Inc.has a gross profit of $40 million,what is its net marketing contribution?

A)$2 million
B)$2.5 million
C)$22 million
D)$250,000
E)$160,000

Question 55

Which of the following statements is true about a monetize-cash-flow defensive strategy?

A)It operates with minimal marketing resources.
B)It is used when an optimize position strategy is viable.
C)It allows a business to exit a market quickly.
D)It is used by a business to exit the market slowly.
E)It aims to extract the maximum long-run cash flow from the market.

Question 56

A ________ strategy continues to raise prices slowly with expected decreases in volume until the business has exited the market.

A)diversify growth
B)harvest price
C)divest market
D)reduce-market-focus
E)monetize cash flow

Question 57

When additional profits can be made with a slow exit from a market,a(n)________ strategy can be a good source of short-run profits.

A)monetize
B)invest
C)divest
D)harvest
E)optimize

Question 58

Which of the following defensive strategies allows a business to exit the market rapidly?

A)a monetize market strategy
B)a disintermediation market strategy
C)a divest market strategy
D)a harvest market strategy
E)an optimize market strategy

Question 59

The goal of a monetize strategy is to ________.

A)diversify growth
B)develop new markets
C)extract the maximum short-run cash flow from the market
D)slowly withdraw a product from the market
E)quickly withdraw a product from the market

Question 60

A firm has a gross profit of $60 million and a net marketing contribution of $14 million.The firm has a market share of 6% and a margin per unit of $70.Calculate the marketing and sales expenses of the firm.

A)$46 million
B)$70 million
C)$ 420,000
D)$10,000
E)$14 million