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Study Guide for Mid-Term exam for chapter 5, 6 ,8 , 10 ,11.1)Practice questions2)Summary for each chapter3)Multiple-choices practice questions for chapter 5,6,8.Practice Questions for Exam : Explaining Important To RememberMost Important1) Explain how the strategic target of a low-cost provider differs from the strategic target of a best-cost provider.Low-cost providerBest-cost providerPurposeAchieve low-cost advantage over rivals, a company must do a better job than rivals of cost-effectively managing value chain activities and/or it must find innovative ways to eliminate cost-producingactivities.Stake out a middle ground between pursuing a low-cost advantage and a differentiation-based advantage and between appealing to the broad market as a whole and a narrow market niche. => create competitive advantage by gigivng buyers more value for the moneyTime to work well_Price competition is strong_Products of rival sellers are virtually identical._ Buyer switching costs are low and when industry new-comers used a low introductory price__In markets with large numbers of value-consciousbuyers desirous of purchasing good products and services for less money.
2) Identify and briefly explain what is meant by each of following terms:a) Horizontal scope : is the range of product and service segments that the firm serves within its product or service market. Mergers and acquisitions involving other market participants provide a means for a company to expand its horizontal scope. b) Vertical scope : is the extentto which the firm engages in the various activities that make up the industry’s entire value chain system, from initial activities such as raw-material production all the way to retailing and after-salesservice activities.c) Scope of the firm : refers to the range of activities which the firm performs internally, the breadth of its product and service offerings, the extent of its geographic market presence and its mix of busineeses.3) Identify and briefly discuss/explain three components of structuring a company’s work effort to promote successful strategy execution.a) Incentives and motivational practices that facilitate good strategy execution : - Providing attractive perks and fringe benefits. - Giving awards and other forms of public recognition to high performers, and celebrating the achievement of organizational goals- Replying on promotion from within whenever possible- Inviting and acting on ideas and suggestions from employees- Creating a work atmosphere in which there is genuine caring and mutual respect among workers and between management and employees- Stating the strategic vision in inspirational terms that make employees feel they are a part of something very worthwhile in a larger social sense.- Sharing info with employees about financial performance, strategy , operational measures, market conditions and competitors’ actions.- Providing a comfortable and attractive working environment. b) Striking the right balance between rewards and punishment :_ Evidence shows that managerial initiatives to improve strategy execution should incorporate more positive than negative motivational elements because when cooperation is positively enlisted and rewarded , rather than coerced by orders and threats , people tend to respond with more enthusiasm, dedication , creativity and initiative.c) Linking rewards to achieving the right outcomes :
- Make the performance payoff a major, not minor, piece of the total compensation package.- Have incentives that extend to all managers and all workers, not just top management.- Administer the reward system with scrupulous objectivity and fairness- Ensure that the performance targets set for each individual or team involve outcomes that the individual or team can personally affect.- Keep the time between achieving the performance target and receiving the reward as short as possible- Avoid rewarding effort rather than resultsChapter 5 : The Five Generic Competitive Strategies.1 Why do the strategies differ? _ Categorizing Decisions :a Making routine choices and judgements. b Influencing outcomes. c Placing competitive bets._ Discernment and Versatility 2 The Five Generic competitive strategies :a Low-cost provider strategy : (Walmart , Sam’s , 99 cent stores , the attic , Dollar tree, Family Dollar ) _ Cost driver is factor that has a strong influence on a firm’s cost. _ Keeping costs low, yet offering basic features that low cost buyers consider essential. _Targeting : • Price sensitive markets…price conscious buyers • Segments with limited incomes • Price sensitive customers in greater numbers thereby, increasingprofits (although thin profit margins)• Extreme price competitive markets • Products are essentially the same • Where brand differences are inconsequential to the consumer • When substitutes are readily available • Good strategy for new entrantsb Broad differentiation strategy : Differentiating the firm’s product offering from rivals’ with attributes that appeal to a broad spectrum of buyers Targeting :• Diverse needs and preferences among target markets • A broad range of buyers
• Value conscious consumers • Products and services stand apart in consumers’ minds • Customers looking for a unique value proposition • Premium price products • Buyers loyal to the brand (value the unique differentiation)Example : Rolex , Microsoft , FedEx, BMW , Michelin , Gucci , Land’s end, nike , snack wells, briggs and Stratton, Harley-Davidson , Avis ,Versaci ,Starbucks ,Victoria Secret , HEB Plumbing.c Market focused strategy : ( focused low-cost and focused differentiation) : cost and niche ( good way to discourage entry of industry leaders , another differentiation and positioning strategy ) Targeting :• Price conscious customers (similar to low cost provider strategy) • Well defined segments • Appealing to cultures and geographical preferences • Brand loyal customers • Appeal to broad market segments (low cost) • Wants and needs of narrow and unique market segment (niche)Example : Community office , Grand ole Opry , krispy Kreme doughnuts, red box , best buy , trader joe’s , tabasco , oberweis dairies , Haltom ‘s jewelries , dairy queen.d Best cost provider strategy : balances low-cost against emphasis on differentiation and positioning. Targeting : • Low cost, differentiation markets (a hybrid) • Broad markets and market niches (middle ground) • Value conscious buyers • Those who shy away from cheap, low-end products and, expensive high-end products• Willing to pay a fair price for functionality and performance • More for the moneyExample : Lexus , Target , Savane , Marriott Courtyard , UPS ,Little Debbie , Black Eyed Pea, Ruby Tuesday , Budweiser , Goodyear , Bimbo Bakeries.Distinguishing Features of the Five Generic Competitive Strategies
Part 2 : Practice Questions ( these questions I read and make answers from many sources : I hope it will help you guys in the exam ) 1 A factor that has a strong influence on a company's costs is termeda cost driver.2 A focused strategy aimed at securing a competitive edge and which is based either on low cost or differentiation becomes more attractive whenthe target market niche is small enough to limit profitability and the outlook is ripe for differentiating.3 Approaches to enhancing differentiation through changes in the value chain include-coordinating with channel allies to enhance customer perception of value.
-coordinating with suppliers to better address customer needs.-working closely on those activities performed by upstream suppliersand downstream by distributors and retailers to enhance customer value proposition.-collaborating with suppliers to improve many dimensions affecting product features and quality4 Focused strategies keyed either to low-cost or differentiation are especially appropriate for situations wherethe market is composed of distinctly different buyer groups who have different needs or use the product in different ways.5 In which of the following circumstances is a strategy to be the industry's overall low-cost provider NOT particularly well-matched to the market situation?When buyers have widely varying needs and special requirements, and the prices of substitute products are relatively high.6 The chief difference between a low-cost provider strategy and a focused low-cost strategy isthe size of the buyer group that a company is trying to appeal to.7 The keys to maintaining a broad differentiation strategy areto stress constant innovation to stay ahead of imitative rivals and to concentrate on a few differentiating features.8 A strategy to be the industry's overall low-cost provider tends to be more appealing than a differentiation or best-cost or focus/market niche strategy whenthe offerings of rival firms are essentially identical, standardized, commodity-like products.9 A low-cost leader's basis for competitive advantage ismeaningfully lower overall costs than rivals on comparable products.10A competitive strategy to be the low-cost provider in an industry works well when
industry newcomers use introductory low prices to attract buyers and build a customer base.11Successful differentiation allows a firm tocommand a premium price for its product, and/or increase unit sales,and/or gain buyer loyalty to its brand.12Success in achieving a low-cost edge over rivals comes fromout-managing rivals in finding ways to perform value chain activities faster, more accurately, and more cost efficiently.13The objective of differentiationis to offer customers something rivals can't, at least in terms of the level of satisfaction.14A company's biggest vulnerability in employing a best-cost provider strategy isgetting squeezed between the strategies of firms employing low-costprovider strategies and high-end differentiation strategies.15Easy-to-copy differentiating featurescannot produce sustainable competitive advantage.16Whether a broad differentiation strategy ends up enhancing company profitability depends mainly on whethermost buyers accept the customer value proposition as unique and the product can command a higher price or produce sufficiently bigger unit sales to cover the added costs of achieving the differentiation.17The production emphasis of a company pursuing a broad differentiation strategy usually involvesemphasis on building differentiating features that buyers are willing to pay for and includes wide selection and many product variations.18Achieving a differentiation-based competitive advantage can involve_Incorporating product attributes and user features that lower a buyer's overall cost of using the product
_ Incorporating features that raise the performance a buyer gets from using the product _ Incorporating features that enhance buyer satisfaction in non-economic or intangible ways _ Delivering value to customers via competencies and competitive capabilities that rivals don't have or can't afford to match 19The underlying criteria of a best-cost provider strategy usually is found in the ability of a company tooffer similar goods at more attractive prices.20The marketing emphasis of a company pursuing a broad differentiation strategy usually is totout differentiating features and charge a premium price that more than covers the extra costs of differentiating features.21Brands create customer loyalty, which in turnincreases the perceived cost of switching to another product.22A low-cost provider's product does NOT have to alwayssuggest that a low price, by itself, is not always that appealing to buyers.23A broad differentiation strategy generally produces the best results in situations wherefew rival firms are following a similar differentiation approach.24Each of the five generic strategies positions the company differently, except when it concernscreating differentiation barriers within economies of scope.25Which of the following is NOT one of the ways that a company can achieve a cost advantage by revamping its value chain?Increasing production capacity and then striving hard to operate at full capacity
26Pursuing continuous quality improvement as a uniqueness factor is sound becauseit can often reduce product defects, improve economy of use, and result in more end-user convenience.27An example of how companies can revamp their value chain to reduce costs isto increase service availability while reducing staffing requirements.28A low-cost leader translates its low-cost advantage over rivals into superior profit performance byeither using its lower-cost edge to under-price competitors and attract price-sensitive buyers in great enough numbers to increase total profits or maintain the present price, and using the lower-cost edge to earn a higher profit margin on each unit sold, thereby raisingtotal profits and overall return on investment.29While low-cost providers are champions of frugality, theyseldom hesitate to spend aggressively on resources and capabilities that promise to drive costs out of the business.30Which of the following is NOT one of the ways managers can enhance differentiation based on uniqueness drivers?Seeking out low-quality inputs31In which one of the following market circumstances is a broad differentiation strategy generally NOT well-suited?When the products of rivals are weakly differentiated and most competitors are resorting to clever advertising to try to set their product offerings apart32The culture of a company can be a cost-efficient value chain activity because it canallow for safeguarding internalized operating benefits.33Best-cost provider strategies are appealing in those market situations where
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School: Marshall University
Department: Business Management
Course: Strategic Management
Professor: Uyi Lawani
Term: Spring 2016
Tags: Theory and Management
Name: MGT 460 : Study guide for mid-exam chapter 5,6,8,10,11
Description: Practice questions
Summary for chapter 5,6,8,10,11
Multiple-choice questions for chapter 5,6