TB_ch06.doc

Test Bank, Chapter 6

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Chapter 6: Supplementing the Chosen Competitive Strategy—Other Important Strategy Choices Multiple Choice Questions Strategic Choices Beyond That of Choosing a eneric Competitive Strategy 1. Once a company has decided to employ a particular generic competitive strategy, strategy, then it must make such additional strategic choices as A) whether to enter enter into strategic alliances or collaorative collaorative partnerships. B) whether whether and when when to employ employ o!!ensi o!!ensive ve and de!ensiv de!ensivee moves. moves. C) what type type o! "e "e site strate strategy gy to employ employ.. #) whether to integrate !orward !orward or ackward ackward into more stages o! the industry industry value chain. $) All All o! o! the the aov aove. e. Answer% A &age% 161 #i!!iculty% $asy Ta'onomy% (nowledge AACB% *

+. "hich one o! the !ollowing !ollowing is not a strategic strategic choice choice that a company must must make to complement and supplement its choice o! one o! the !ive generic competitive strategies A) "hether to enter enter into strategic alliances or collaorative collaorative partnerships B) "hether "hether and when when to employ employ o!!ensive o!!ensive and de!ensi de!ensive ve moves moves C) "hether "hether to employ employ a market market share share leadershi leadership p strategy strategy #) "hether to integrate !orward !orward or ackward ackward into more stages o! the industry value value chain $) "hether to olster the the company-s company-s market market position and competitiveness competitiveness via acuisition or or merger Answer% C &age% 161 #i!!iculty% #i!!iculty% $asy Ta'onomy% (nowledge AACB% *

Colla!orative Strategies: "lliances and #artnerships *. tra trate tegi gicc alli allian ance cess A) are the cheapest cheapest means o! developing new technologies technologies and getting new new products to market uickly. B) are collaorative collaorative arrangements arrangements where two or more companies companies /oin !orces to achieve mutually mutually ene!icial strategic outcomes. C) are a proven means means o! reducing reducing the costs costs o! per!orming per!orming value value chain activiti activities. es. #) are est used used to insulate a company !rom the impact o! the !ive !ive competitive competitive !orces. $) help insula insulate te a !irm !rom the the adverse adverse impacts impacts o! industry industry driving driving !orces !orces.. Answer% B &age% 16* #i!!iculty% #i!!iculty% 0edium Ta'onomy% (nowledge AACB% *

Test Bank, Chapter 6

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. A str strat ateg egic ic alli allian ance ce A) is a collaorative collaorative arrangement arrangement where companies /oin /oin !orces to de!eat mutual mutual competitive rivals. B) involves two or more companies companies /oining !orces to pursue vertical integration. integration. C) is a !ormal !ormal agreement etween etween two or more companies companies in which there is strategically strategically relevant collaoration o! some sort, /oint contriution o! resources, shared risk, shared control, and mutual dependence. #) is a partnership partnership etween two companies that is typically intended to eliminate eliminate the need need to engage in outsourcing. $) is usually a cheaper and more e!!ective e!!ective way !or companies to /oin !orces than is merger. merger. Answer% C &age% 16* #i!!iculty% #i!!iculty% 0edium Ta'onomy% (nowledge AACB% *

2. $ntering into into strategic strategic alliances alliances and collaorative partnerships can e competitively valuale ecause A) working closely closely with outsiders is is essential in developing developing new technologies and new products products in virtually every industry. B) cooperative arrangements arrangements with other companies companies are very help!ul in in racing against against rivals to uild a strong gloal presence and3or racing to sei4e opportunities on the !rontiers o! advancing technology. C) they represent represent highly highly e!!ective e!!ective ways ways to achieve achieve low5cost low5cost leadership leadership and capture !irst5mover !irst5mover advantages. #) they are a power!ul way way !or companies companies to uild uild loyalty loyalty and goodwill goodwill among among customers with with diverse needs and e'pectations. $) they are uite e!!ective e!!ective in helping a company trans!er the the risks o! threatening threatening e'ternal e'ternal developments to other companies. Answer% B &age% 16* #i!!iculty% #i!!iculty% 0edium Ta'onomy% Comprehension AACB% *

6. The est est stra strateg tegic ic alli allianc ances es A) are highly selective, !ocusing !ocusing on particular particular value chain activities activities and on otaining otaining a particular particular competitive ene!it. B) are those those whose purpose purpose is to to create create an industry industry key success success !actor !actor.. C) are those which help a company move uickly !rom one strategic group group to another another.. #) involve /oining /oining !orces in 7# to develop new technologies cheaper than a company could develop the technology on its own. $) aim at raisin raising g an industry industry--s arriers arriers to entry entry.. Answer% A &age% 162 #i!!iculty% #i!!iculty% 0edium Ta'onomy% a'onomy% Comprehension AACB% *

Test Bank, Chapter 6

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8. Companies racing racing against against rivals !or gloal gloal market leadership need strategic strategic alliances alliances and collaorative partnerships with companies in !oreign countries in order to A) comat the argaining power o! !oreign suppliers suppliers and help de!end against the competitive threat o! sustitute products produced y !oreign rivals. B) help raise needed !inancial !inancial capital !rom !rom !oreign anks and use the rand rand names o! their partners to make sales to !oreign uyers. C) get into critical country country markets uickly and accelerate the process o! uilding a potent gloal presence, gain inside knowledge aout un!amiliar markets and cultures, and access valuale skills and competencies that are concentrated in particular geographic locations. #) help wage wage price price wars against against !oreign !oreign competit competitors. ors. $) e'ercise e'ercise etter etter control control over e!!orts e!!orts to revamp revamp the gloal gloal industry industry value value chain. chain. Answer% C &age% 162 #i!!iculty% #i!!iculty% 0edium Ta'onomy% Comprehension AACB% *

9. A company racing to sei4e opportunities on the !rontiers o! advancing technology o!ten o!ten utili4es strategic alliances and collaorative partnerships in order to A) discourage rival rival companies !rom merging merging with or or acuiring the very companies that that it is partnering with. B) reduce overall usiness risk risk and raise entry arriers into the newly emerging industry industry.. C) help master new technologies technologies and uild new new e'pertise and competencies competencies !aster than would e possile through internal e!!orts, estalish a stronger eachhead !or participating in the target industry, and open up roader opportunities in the target industry y melding their capailities with the resources and e'pertise o! partners. #) help de!eat competitors that are employing road di!!erentiation di!!erentiation strategies. $) enhance enhance its chances chances o! achiev achieving ing gloal gloal low5cost low5cost leader leadership ship.. Answer% C &age% 162 #i!!iculty% #i!!iculty% 0edium Ta'onomy% Comprehension AACB% *

:. "hich o! the !ollowing !ollowing is not a typical reason that many alliances prove unstale unstale or reak reak apart A) #ivergin #iverging g o/ecti o/ectives ves and and priorit priorities ies B) An inaility inaility to work work well together together C) The emergence emergence o! more more attractive technological technological paths that are etter pursued pursued alone or with other partners #) #isagreement over how to divide divide the pro!its gained gained !rom /oint collaoration collaoration $) Changing Changing conditio conditions ns that render render the purpose purpose o! the alliance alliance osolet osoletee Answer% # &age% 168 #i!!iculty% #i!!iculty% 0edium Ta'onomy% Ta'onomy% Comprehension AACB% *

Test Bank, Chapter 6

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1;. $'perienc $'periencee indicate indicatess that that strategi strategicc alliance alliancess A) are gene general rally ly succe success! ss!ul. ul. B) work well in cooperatively cooperatively developing developing new technologies and new products ut ut seldom work well in promoting greater supply chain e!!iciency. e!!iciency. C) work est when they are aimed at achieving a mutually ene!icial competitive competitive advantage advantage !or the allies. #) have have a high high perhaps helping helping to to trans!orm otherwise high5cost companies into a competitor with average or elow5average costs) and can also e ene!icial in helping a company try to invent a new industry and lead the convergence o! industries whose oundaries are eing lurred y changing technologies and new market opportunities. C) are a particularly particularly e!!ective e!!ective way o! pursuing a lue ocean strategy and outsourcing outsourcing strategies. strategies. #) seldom are a superior strategic alternative alternative to !orming alliances alliances or partnerships partnerships with with these same companies ecause o! the !inancial drain o! using the company?s cash resources to accomplish the merger or acuisition. $) are one o! o! the est ways !or helping helping a company company strongly strongly di!!erentiate di!!erentiate its product o!!ering o!!ering and use a di!!erentiation di!!erentiation strategy to strengthen its market position. Answer% B &age% 169 5 16: #i!!iculty% #i!!iculty% 0edium Ta'onomy% Comprehension AACB% *

Test Bank, Chapter 6

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+;. 0ergers and acuisitions A) are nearly nearly always always success!ul success!ul in achieving achieving their their desired desired purpose. purpose. B) !reu !reuently ently do not not produce produce the the hoped5!o hoped5!orr outcomes outcomes.. C) are generally less e!!ective e!!ective than !orming !orming alliances or partnerships partnerships with these same companies. #) are highly risky ecause o! the !inancial drain that comes !rom using the company?s company?s cash resources to pay !or the costs o! the merger or acuisition. $) are usually more success!ul in achieving cost reductions reductions than in e'panding e'panding a companycompany-ss market opportunities. Answer% B &age% 181 #i!!iculty #i!!iculty%% 0edium Ta'onomy% Comprehension AACB% *

%ertical Integration Strategies: Operating "cross More Stages of the Industry I ndustry %alue %alue Chain +1. ertical ertical integratio integration n strategies strategies A) e'tend a company?s competitive competitive scope scope within the same industry industry y e'panding its operations operations across more parts o! the industry value chain. B) are one o! o! the est strategic options options !or helping companies companies win the race !or gloal market leadership. C) o!!er o!!er good potential potential to e'pand e'pand a companycompany-ss lineup o! products products and services. services. #) are particularly e!!ective in oosting a company?s company?s aility to e'pand into into additional geographic markets, particularly the markets o! !oreign countries. $) are a good good strategy option !or helping a company to revamp its value chain and ypass ypass low value5added activities. Answer% A &age% 181 #i!!iculty% #i!!iculty% 0edium Ta'onomy% a'onomy% Comprehension AACB% *

++. The two est reasons reasons !or investing company resources resources in vertical integration integration >either >either !orward or ackward) are to A) e'pand into into !oreign markets and3or and3or control more o! the industry industry value value chain. B) roaden roaden the !irm?s !irm?s product product line and3or and3or avoid avoid the need !or outsour outsourcing cing.. C) enale use o! o!!ensive o!!ensive strategies and3or gain a !irst mover mover advantage over rivals in revamping the industry value chain. #) strengthen the the company?s company?s competitive position and3or oost oost its pro!itaility pro!itaility.. $) achieve product product di!!erentiation di!!erentiation and3or and3or lengthen the company-s company-s value value chain to to include more activities per!ormed in5house and therey gain greater aility to reduce internal operating costs. Answer% # &age% 18+ #i!!iculty% #i!!iculty% 0edium Ta'onomy% Ta'onomy% Comprehension AACB% *

Test Bank, Chapter 6

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+*. or ackward vertical integration integration into into the usiness usiness o! suppliers to e a viale viale and pro!itale pro!itale strategy, a company A) must !irst !irst e e a pro!icie pro!icient nt manu!ac manu!acturer turer.. B) must e ale to achieve achieve the same scale economies economies as outside suppliers suppliers and match or eat suppliers- production e!!iciency with no drop5o!! in uality. C) must have e'cess production production capacity, capacity, so that it has ample ample in5house aility to undertake additional production activities. #) needs to have a wide wide product line, so that it can supply parts and components !or !or many products. $) should have have a distinctive distinctive competence competence in production production process process technology technology and at at least a core competence in manu!acturing 7#. Answer% B &age% 18+ #i!!iculty% #i!!iculty% $asy Ta'onomy% Comprehension AACB% *

+. The strateg strategic ic impetus impetus !or !or !orward !orward vertical vertical integra integration tion is is to A) gain etter etter access access to end users users and etter etter market market visiil visiility ity B) achieve the the same scale economies economies as wholesale wholesale distriutors and3or retail retail dealers. dealers. C) contro controll price price at the the retail retail level. level. #) ypass distriutors5dealers distriutors5dealers and and sell direct to consumers at the company-s company-s "e "e site. $) uild uild a core core competen competence ce in mass merchan merchandisin dising. g. Answer% A &age% 18* #i!!iculty% $asy Ta'onomy% Comprehension Comprehen sion AACB% *

+2. "hich o! the !ollowing !ollowing is typically the strategic strategic impetus impetus !or !orward vertical vertical integration integration A) Being ale to control the wholesale3retail wholesale3retail portion portion o! the the industry value chain B) ewer disrupt disruptions ions in the delivery delivery o! o! the company?s company?s products products to end5us end5users ers C) aining aining etter etter access access to end users users and etter etter market market visiili visiility ty #) Broadening Broadening the company company--s product product line $) Allowing Allowing the !irm !irm access access to greate greaterr economie economiess o! scale scale Answer% C &age% 18* #i!!iculty% #i!!iculty% 0edium Ta'onomy% Comprehension AACB% *

+6. A good e'ample o! vertical integration is A) a gloal pulic accounting accounting !irm acuiring a small local or regional pulic accounting accounting !irm. !irm. B) a large supermar supermarket ket chain gettin getting g into convenie convenience nce !ood stores. stores. C) a crude oil re!iner re!iner purchasin purchasing g a !irm engaged engaged in drilling drilling and e'plorin e'ploring g !or oil. #) a hospital hospital openin opening g up a nursing nursing home home !or the aged. aged. $) a railroad company company acuiring acuiring a trucking trucking company company speciali4i speciali4ing ng in long5haul long5haul !reight. !reight. Answer% C &age% 18* #i!!iculty% #i!!iculty% 0edium Ta'onomy% Comprehension AACB% *

Test Bank, Chapter 6

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+8. "hich "hich o! the !ollowing !ollowing is not a potential potential advantag advantagee o! ackward ackward vertical vertical integratio integration n A) educed vulneraility vulneraility to power!ul suppliers suppliers >who may e inclined inclined to raise prices at every opportunity) B) educed risks risks o! disruptions in otaining otaining crucial crucial components components or support services services C) edu educe ced d cos costs ts #) educed usiness usiness risk ecause o! controlling a igger portion o! the overall industry value chain $) Adding to a company-s company-s di!!erentiation di!!erentiation capailities and and perhaps achieving a di!!erentiation5 di!!erentiation5 ased competitive advantage Answer% # &age% 18+ 5 18* #i!!iculty% #i!!iculty% @ard Ta'onomy% Comprehension AACB% *

+9. "hich "hich o! the !ollowing !ollowing is not a strategic strategic disadvan disadvantage tage o! vertical vertical integrat integration ion A) ertical integration oosts oosts a !irm?s capital investment investment in the industry industry,, thus increasing usiness risk i! the industry ecomes unattractive later. later. B) ertical integration integration ackward into parts and components components manu!acture can impair a company-s company-s operating !le'iility when it comes to changing out the use o! certain parts and components. C) ertical integration integration reduces the opportunity opportunity !or achieving greater greater product di!!erentiation. di!!erentiation. #) orward or ackward ackward integration integration o!ten calls !or radically radically di!!erent di!!erent skills skills and usiness usiness capailities than the !irm possesses. $) ertical integration integration poses all kinds kinds o! o! capacity5matching capacity5matching prolems. prolems. Answer% C &age% 18* 5 18 #i!!iculty% #i!!iculty% 0edium Ta'onomy% Comprehension AACB% *

Outsourcing Strategies: &arro'ing the Boundaries of the Business +:. Outsou Outsourci rcing ng strate strategie giess A) are nearly always always a more more attractive strategic option option than merger and acuisition strategies. B) carry the the sustantia sustantiall risk o! raising raising a company company--s costs. C) carry the sustantial risk o! making a company overly overly dependent dependent on its suppliers. suppliers. #) increase a company?s risk e'posure e'posure to changing technology and3or changing changing uyer uyer pre!erences. $) involve !arming out out value chain activities activities presently presently per!ormed per!ormed in5house in5house to outside specialists and strategic allies. Answer% $ &age% 182 #i!!iculty% #i!!iculty% 0edium Ta'onomy% (nowledge AACB% *

Test Bank, Chapter 6

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*;. Outsourcing the per!ormance per!ormance o! value chain chain activities activities presently presently per!ormed per!ormed in5house to outside outside vendors and suppliers makes strategic sense when A) an activity can e per!ormed etter etter or more cheaply cheaply y outside specialists. specialists. B) it allows a company to !ocus !ocus its entire energies on those activities activities that are at the center o! its its e'pertise >its core competencies) and that are most critical to its competitive and !inancial success. C) outsourcing won?t adversely adversely hollow out the company-s company-s technical know5how know5how,, competencies, or or capailities. #) it reduces the company?s company?s risk e'posure e'posure to changing changing technology technology and3or and3or changing uyer pre!erences. $) All All o! thes these. e. Answer% $ &age% 182 5 186 #i!!iculty% #i!!iculty% 0edium Ta'onomy% Comprehension AACB% *

*1. The two ig drivers drivers o! outso outsourcin urcing g are are A) increased aility aility to cut 7# e'penses e'penses and increased aility aility to avoid the prolems o! strategic alliances. B) a desire to to take advantage advantage o! the !act that that outsiders outsiders can per!orm per!orm certain activities activities etter etter or cheaper and allowing a company to !ocus its entire energies on those activities that are at the center o! its e'pertise >its core competencies) and that are most critical to its competitive and !inancial success. C) a desire to reduce reduce the company-s company-s investment investment in !i'ed assets and the the need to narrow narrow the scope o! the company-s company-s in5house competencies and competitive capailities. #) improved aility aility to avoid the risks o! vertical vertical integration integration and a desire to reduce the company?s risk e'posure to changing technology and3or changing uyer pre!erences. $) the attractiveness attractiveness o! o! a smaller smaller in5house in5house work !orce and a lower investment in intellectual intellectual capital. Answer% B &age% 182 #i!!iculty% #i!!iculty% 0edium Ta'onomy% Comprehension AACB% *

*+. "hich o! the !ollowing !ollowing is not one o! the the ene!its o! outsourcing outsourcing value chain activities activities presently presently per!ormed in5house A) treamlining company company operations operations in ways ways that improve improve organi4ational organi4ational !le'iility !le'iility and cut the time it takes to get new products into the marketplace B) Allowing a company to concentrate on its core usiness, usiness, leverage its its key resources, resources, and do even etter what it already does est C) @elping the company company assemle assemle diverse kinds o! e'pertise e'pertise speedily and e!!iciently e!!iciently #) &reventing a company !rom hollowing out its technical know5how know5how,, competencies, or or capailities $) Dmproving Dmproving a company company--s aility aility to to innovate innovate Answer% # &age% 186 #i!!iculty% #i!!iculty% 0edium Ta'onomy% Ta'onomy% Comprehension AACB% *

Test Bank, Chapter 6

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**. elying on outsiders to per!orm certain certain value chain activities activities o!!ers o!!ers such strategic strategic advantages advantages as A) otaining otaining higher higher uality uality and3or and3or cheaper cheaper components components or services. services. B) improving the company?s company?s aility aility to innovate y allying with