MGT 460 : chapter 6 Strengthening a company’s competitive position and Practice questions
MGT 460 : chapter 6 Strengthening a company’s competitive position and Practice questions MGT 460
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MGT 460 Chapter 6 Strengthening a company39s competitive position and Practice questions Book Crafting and executing strategy Thompson Peteraf Gamble Strickland The Quest for Competitive Advantage 19e 1 Choosing the Basis for competitive attack a Offering an equally good or better product at a lower price Pricecutting offensives are best initiated by companies that have rst achieved a cost advantage Ex Irish airline Ryanair used this strategy successfully against rivals such as British Air and Aer Lingus by rst cutting costs to the bone and then targeting leisure passengers who care about low price than in ight amenities and service b Leapfrogging competitors by being rst to market with next generation products Ex Microsoft got its nextgeneration Xbox 360 to market a full 12 months ahead of Sony s PlayStation c Pursuing continuous product innovation to draw sales and market share away from less innovative rivals d Adopting and improving on the good ideas of other companies rivals or otherwise Ex the idea of warehousetype home improvement centers e Using hitandrun or guerilla warfare tactics to grab market share from complacent or distracted rivals f Launching a preemptive strike to secure an advantageous position that rivals are prevented or discouraged from duplicating Preemptive moves 1 securing the best distributors in a particular geographic region or country 2 moving to obtain the most favorable site at a new interchange or intersection in a new shopping mall 3 typing up the most reliable highquality suppliers via exclusive partnerships longterm contracts or acquisition 4 moving swiftly to acquire the assets of distressed rivals at bargain prices 2 Defensive Strategies protecting market position and competitive advantage a Blocking the avenues open to challengers b Signaling Challengers that retaliation is likely Publicly announcing managements commitment to maintain the rm s present market share Publicly committing the company to a policy of matching competitors terms or prices Maintaining a war chest of cash and marketable securities 3 Timing a company s offensive and defensive strategic moves a The potential for rstmover advantages 0 When pioneering helps build a rm s reputation and creates strong brand loyalty 0 When a rstmover s customers will thereafter face signi cant switching costs 0 When property rights protections thwart rapid imitation of the initial move 0 When an early lead enables the rst mover to move down the learning curve ahead of rivals 0 When a rst mover can set the technical standard for the industry 4 Strengthening a company39s market position via its scope of operations 5 Horizontal merger and acquisition strategies 6 a Creating a more costef cient operation out of the combined companies b Expanding a company s geographic coverage c Extending the company s business into new product categories ol Gaining quick access to new technologies or complementary resources and capabilities e Leading the convergence of industries whose boundaries are being blurred by changing technologies and new market opportunities Vertical integration strategies is one that performs value chain activities along more than one stage of an industry s value chain system The Advantages of a Vertical Integration strategy Integrating Backward to Achieve greater competitiveness Backward integration to be a costsaving and pro table strategy a company must be able to 1Achieve the same scale economies as outside suppliers 2Match or beat suppliers production ef ciency with no dropoff in quality Integrating Forward to enhance competitiveness Forward integration lower costs by increasing ef ciency and bargaining power Disadvantages of a Vertical Integration strategy Increase business risk Slow to embrace technological advances or more ef cient production methods when they are saddled with older technology or facilities Result in less exibility in accommodating shifting buyer preferences May not enable a company to realize economies of scale all kinds of matching problems 7 Outsourcing strategies Narrowing the scope of operations Outsourcing involves a conscious decision to abandon attempts to perform certain value chain activities internally and instead to farm them out to outside specialists 8 Bene ts of strategic alliances Strategic alliance is a formal agreement between two or more separate companies in which they agree to work cooperatively toward some common objective a Picking a good partner b Being sensitive to cultural differences c Recognizing that the alliance must bene t both sides d Ensuring that both parties live up to their commitments e Structuring the decision making process so that actions can be taken swiftly when needed f Managing the learning process and then adjusting the alliance agreement over time to t new circumstances Practice question for chapter 6 1 company39s competitive strategy deals with A Management39s game plan for competing successfully the speci c efforts to please customers offensive and defensive moves to counter the maneuvers of rivals the reactions and responses to whatever market conditions prevail at the moment and the initiatives undertaken to improve the company39s market position B What its strategy will be in such functional areas as RampD production sales and marketing distribution nance and accounting and so on C Its efforts to change its position on the industry39s strategic group map Answer A 2 The objective of competitive strategy is to A Contend successfully with the industry39s 5 competitive forces B Knock the socks off rival companies by doing a better job of satisfying buyer needs and preferences C Get the company into the best strategic group and then dominate it Answer B 3 company achieves competitive advantage whenever A It is the acknowledged market share leader B It is the industry39s acknowledged technology leader C It has greater nancial resources than its rivals D It has a wellknown and wellregarded brand name prefers offensive strategies to defensive strategies and has a strong balance sheet E It has some type of edge over rivals in attracting customers and coping with competitive forces Answer E 4 company can be said to have competitive advantage if A It is the acknowledged leader in product quality B It has a different value chain than rivals C It has some type of edge over rivals in attracting customers and coping with competitive forces Answer C 5 While there are many routes to competitive advantage they all involve A Building a brand name image that buyers trust B Delivering superior value to buyers and building competencies and resource strengths in performing value chain activities that rivals cannot readily match C Achieving lower costs than rivals and becoming the industry39s sales and market share leader B DUI The biggest and most important differences among the competitive strategies of different companies boil down to A How they go about building a brand name image that buyers trust and whether they are a risktaker or riskavoider B The different ways that companies try to cope with the ve competitive forces C Whether a company39s market target is broad or narrow and whether the company is pursuing a competitive advantage linked to low cost or differentiation c lIllIllIl Which of the following is not one of the ve generic types of competitive strategy A A lowcost provider strategy B A broad differentiation strategy C A bestcost provider strategy D A focused lowcost provider strategy E A market share dominator strategy e Hill The generic types of competitive strategies include A Build market share maintain market share and slowly surrender market share B Offensive strategies and defensive strategies C Lowcost provider broad differentiation bestcost provider focused lowcost and focused differentiation c lIllIllIl Which one of the following generic types of competitive strategy is typically the best strategy for a company to employ A A lowcost leadership strategy B A broad differentiation strategy C A bestcost provider strategy D A focused lowcost provider strategy E There is no such thing as a quotbestquot competitive strategy a company39s quotbestquot strategy is always one that is customized to t both industry and competitive conditions and the company39s own resources and competitive capabilities e lIllIllIl lowcost leader39s basis for competitive advantage is A Lower prices than rival rms B Using a low costlow price approach to gain the biggest market share C High buyer switching costs D Meaningfully lower overall costs than competitors d lIllIllIl How valuable a lowcost leader39s cost advantage is depends on A Whether it is easy or inexpensive for rivals to copy the lowcost leader39s methods or otherwise match its low costs B How easy it is for the lowcost leader to gain the biggest market share C The aggressiveness with which the lowcost leader pursues converting the cost advantage into the absolute lowest possible costs a Hill A lowcost leader can translate its lowcost advantage over rivals into superior pro t performance by A Cutting its price to levels signi cantly below the prices of rivals B Either using its lowcost edge to underprice competitors and attract price sensitive buyers in large enough numbers to increase total pro ts or refraining from pricecutting and using the lowcost advantage to earn a bigger pro t margin on each unit sold C Going all out to use its cost advantage to capture a dominant share of the market b Hill The major avenues for achieving a cost advantage over rivals include A Revamping the rm39s value chain to eliminate or bypass some costproducing activities andor outmanaging rivals in the ef ciency with which value chain activities are performed B Having a management team that is highly skilled in cutting costs C Being a rstmover in adopting the latest stateof theart technologies especially those relating to lowcost manufacture a Hill A competitive strategy of striving to be the lowcost provider is particularly attractive when A Buyers are not very brandconscious B Most rivals are trying to be bestcost providers C There are many ways to achieve product differentiation that have value to buyers D Buyers are large and have signi cant power to bargain down prices buyers use the product in much the same ways and buyers have low switching costs d lIllIllIl Which of the following is not an action that a company can take to do a better job than rivals of performing value chain activities more costeffectively A Striving to capture all available economies of scale and learningexperience curve effects B Trying to operate facilities at full capacity C Adopting laborsaving operating methods D Improving supply chain ef ciency E Outsourcing all productionrelated activities e lIllIllII Which of the following is not one of the ways that a company can achieve a cost advantage by revamping its value chain A Cutting out distributors and dealers by selling direct to customers B Replacing certain value chain activities with faster and cheaper onine technology C Increasing production capacity and then striving hard to operate at full capacity c lIllIllII To succeed with a lowcost provider strategy company managers have to A Pursue backward or forward integration to detour suppliers or buyers with considerable bargaining power and leverage B Move the performance of most all value chain activities to low wage countries C Sell direct to users of their product or service and eliminate use of wholesale and retail intermediaries D Do two things 1 do a betterjob than rivals of pursuing cost savings throughout the value chain and 2 be proactive in revamping the rm39s overall value chain to eliminate low value added activities and bypass quotnonessentialquot costproducing activities d lIllIllII Achieving a cost advantage over rivals entails A Concentrating on the primary activities portion of the value chain and outsourcing all support activities B Being a rstmover in pursuing backward and forward integration and controlling as much of the industry value chain as possible C Outmanaging rivals in performing value chain activities cost effectively and nding creative ways to cut costproducing activities out of the value chain c Hill The best evidence that a company is the industry39s lowcost provider is that A It sells more of its productservice than its key competitors and is the market share leader B It has lower overall per unit costs for its productservice than other competitors in the industry C It has lower total operating costs on its income statement than do its competitors b lIllIllIl company pursuing a lowcost leadership strategy must generally A Have products with goodtoexcellent attributes so that its low prices will provide customers with more value for the money B Have acceptable quality products that incorporate a good basic design with few frills and offer a limited number of modelsstyles to select from C Have a wide selection of products that are of average or better quality b lIllIllIl Being the overall lowcost provider in an industry has the attractive advantage of A Building strong customer loyalty and locking customers into its product because customers have such high switching costs B Giving the rm a very appealing brand image C Putting a rm in position to compete offensively on the basis of low price win the business of price sensitive customers set the oor on market price and defend against price war conditions should they arise c lIllIllIl competitive strategy to be the lowcost provider in an industry works well when A Price competition among rival sellers is especially vigorous B There are few ways to achieve product differentiation that have value to buyers C Buyers incur low costs in switching their purchases from one sellerbrand to another D Industry newcomers use low introductory prices to attract buyers and build a customer base E All of these e lIllIllIl competitive strategy predicated on lowcost leadership tends to work best when A There are widely varying needs and preferences among the various buyers of the product or service B There are many market segments and market niches such that it is feasible for a lowcost leader to dominate the niche where buyers want a budgetpriced product C Price competition is especially vigorous and the offerings of rival rms are essentially identical standardized commoditylike products c Hill In which of the following circumstances is a strategy to be the industry39s overall lowcost provider not particularly well matched to the market situation A When the offerings of rival rms are essentially identical standardized commoditylike products B When there are few ways to achieve differentiation that have value to buyers C When price competition is especially vigorous D When buyers have widely varying needs and special requirements and the prices of substitute products are relatively high d Hill A strategy to be the industry39s overall lowcost provider tends to be more appealing than a differentiation or best cost or focusmarket niche strategy when A There are many ways to achieve product differentiation that buyers nd appealing B Buyers use the product in a variety of different ways and have high switching costs in changing from one seller39s product to another C The offerings of rival rms are essentially identical standardized commoditylike products c Hill In which of the following circumstances is a lowcost leadership strategy not likely to be particularly successful A When the industry39s product is a standardized commodity B When buyers are looking for a goodtoexcellent product at a bargain price C When the industry is composed of more than three strategic groups and the companies in at least one of the groups are pursuing full vertical integration strategies c lIllIllIl Which of the following is not one of the pitfalls of a low cost provider strategy A Overly aggressive pricecutting B Trying to set the industry39s price ceiling C Not emphasizing avenues of cost advantage that can be kept proprietary or that relegate rivals to playing catch up b Hill The essence of a broad differentiation strategy is to A Appeal to the high end part of the market and concentrate on providing a topof theline product to consumers B Incorporate a greater number of differentiating features into its productservice than rivals C Lower buyer switching costs D Outspend rivals on advertising and promotion in order to inform and convince buyers of the value of its differentiating attributes E Be unique in ways that are valuable and appealing to a wide range of buyers e Hill A company attempting to be successful with a broad differentiation strategy has to A Study buyer needs and behavior carefully to learn what buyers consider important what they think has value and what they are willing to pay for B Incorporate more differentiating features into its productservice than rivals C Concentrate its differentiating efforts on marketing and advertising where almost all differentiating features are created a Hill Successful differentiation allows a rm to A Be the industry39s bestcost provider B Set the industry ceiling on price C Avoid being dragged into a price war with industry rivals and not be overly concerned about whether entry barriers into the industry are high or low D Command a premium price for its product andor increase unit sales because additional buyers are won over by the differentiating features andor gain buyer loyalty to its brand because some buyers prefer the differentiating features and are thus brand loyal d Hill A company that succeeds in differentiating its product offering from those of its rivals can usually A Avoid having to compete on the basis of simply a low price B Charge a price premium for its product because buyers see its differentiating features as worth something extra C lncrease unit sales because of the attraction of its differentiating product attributes D Gain buyer loyalty to its brand because some maybe many of its customers will have a strong preference for the company39s differentiating features E All of the above e Hill A broad differentiation strategy improves pro tability when A It is focused on product innovation B Differentiating enhances product performance C The differentiating features appeal to sophisticated and prestigious buyers D Unit sales increase and the extra price the product commands exceeds the added costs of achieving the differentiation d lIllIllIl Whether a broad differentiation strategy ends up enhancing company pro tability depends mainly on whether A Many buyers view the product39s differentiating features as having value B Most buyers have similar needs and use the product in the same ways C Unit sales increase and the extra price the product commands exceeds the added costs of achieving the differentiation c lIllIllIl Using a broad differentiation strategy to produce an attractive competitive advantage is least likely to be based on A Developing a superior performing product B Offering buyers a product which is superior in quality and reliability as compared to rivals39 brands C Giving consumers comprehensive support services D Providing buyers with a continuing stream of betterdesigned betterperforming and more stylish products E Undercutting the prices being charged by rivals e lIllIllIl Opportunities to differentiate a company39s product offering A Are most reliably found in the RampD portion of the value chain B Are typically located in the sales and marketing portion of the value chain C Can exist in activities all along an industry39s value chain c lIllIllIl Easytocopy differentiating features A Cannot produce sustainable competitive advantage B Seldom are perceived by buyers as having much value C Tend to give buyers a high degree of power in bargaining for a lower price a Hill The most appealing approaches to differentiation are A Those that are also being pursued by other rivals with differentiation strategies B Those that are the most costly to incorporate because expensive attributes are perceived by buyers as more valuable and worth paying more for C Those that can be made even more attractive to buyers via clever advertising D Generally related to avor and taste or sophisticated use of Internet technology applications E Those that are hard or expensive for rivals to duplicate and that also have considerable buyer appeal e lIllIllIl Perceived value and signaling value are often an important part of a successful differentiation strategy because A Of the diversity of buyer needs and preferences B Buyers seldom will pay for value they don39t perceive no matter how real the value of the differentiating extras may be C Most buyers are heavily in uenced by clever ads that signal value b lIllIllIl differentiationbased competitive advantage A Nearly always is attached to the quality and service aspects of a company39s product offering B Most usually is the result of highly effective marketing and advertising C Requires developing at least one distinctive competence that buyers consider valuable D Hinges on a company39s success in developing topof theline product features that will command the biggest price premium in the industry E Often hinges on incorporating features that 1 raise the performance of the product or 2 lower the buyer39s overall costs of using the company39s product or 3 enhance buyer satisfaction in intangible or noneconomic ways e lIllIllIl Which of the following is not one of the four basic routes to achieving a differentiationbased competitive advantage A Delivering value to customers via competencies and competitive capabilities that rivals don39t have or can39t afford to match B Incorporating features that raise product performance C Incorporating product attributes and user features that lower the buyer39s overall costs of using the company39s product D Appealing to buyers who are sophisticated and shop hard for the best standout differentiating attributes d lIllIllIl Achieving a differentiationbased competitive advantage can involve A Incorporating product attributes and user features that lower a buyer39s overall cost of using the product B Incorporating features that raise the performance a buyer gets from using the product C Incorporating features that enhance buyer satisfaction in non economic or intangible ways D Delivering value to customers via competencies and competitive capabilities that rivals don39t have or can39t afford to match E All of the above are viable ways of building competitive advantage via differentiation e lIllIllIl Broad differentiation strategies are wellsuited for market circumstances where A There are many ways to differentiate the product or service and many buyers perceive these differences as having value B Most buyers have the same needs and use the product in the same ways C Buyers are susceptible to clever advertising a Hill Broad differentiation strategies generally work best in market circumstances where A Buyer needs and preferences are too diverse to be fully satis ed by a standardized product B Most buyers have similar needs and use the product in the same ways C The products of rivals are weakly differentiated and most competitors are resorting to clever advertising to try to set their product offerings apart a Hill broad differentiation strategy works best in situations where A Technological change is slowpaced and new or improved products are infrequent B Buyer needs and uses of the product are very similar C Buyers incur low costs in switching their purchases to rival brands D Buyers have a low degree of bargaining power and purchase the product frequently E Technological change is fastpaced and competition revolves around rapidly evolving product features e Hill A broad differentiation strategy generally produces the best results in situations where A Buyer brand loyalty is low B Buyer needs and uses of the product are diverse C New and improved products are introduced only infrequently b IIIIIIIII In which one of the following market circumstances is a broad differentiation strategy generally not wellsuited A When buyer needs and preferences are too diverse to be fully satis ed by a standardized product B When few rivals are pursuing a similar differentiation approach C When the products of rivals are weakly differentiated and most competitors are resorting to clever advertising to try to set their producto eNngsapaH c IIIIIIIII The pitfalls of a differentiation strategy include A Trying to differentiate on the basis of attributes or features that are easily copied B Choosing to differentiate on the basis of attributes that buyers do not perceive as valuable or worth paying for C Trying to charge too high a price premium for the differentiating features D Being timid and not striving to open up meaningful gaps in quality or performance or service or other attractive differentiating athbutes E A of these e IIIIIIIII Which of the following is not one of the pitfalls of pursuing a differentiation strategy A Trying to strongly differentiate the company39s product from those of rivals rather than be content with weak product differentiation B Overdifferentiating so that the features and attributes incorporated exceed buyer needs and requirements C Trying to charge too high a price premium for the differentiating features a Hill Which one of the following statements about pursuing a broad differentiation strategy is false A Any differentiating feature that works well is a magnet for imitators B The best opportunities for achieving strong product differentiation are in the production technology and marketing portions of the value chain C A lowcost provider strategy can defeat a broad differentiation strategy when buyers are satis ed with a basic product and don39t think quotextraquot attributes are worth paying a higher price b Hill A company achieves bestcost provider status by A Selling a product with the best cost at the best price B Having the best cost as compared to rivals for each activity in the industry39s value chain C Providing buyers with the best attributes at the best cost D Incorporating attractive or upscale attributes into its product offering at a lower cost than rivals d Hill A rm pursuing a bestcost provider strategy A Seeks to be the lowcost provider in the largest and fastest growing or best market segment B Tries to have the best cost as compared to rivals for each activity in the industry39s value chain C Tries to outcompete a lowcost provider by attracting buyers on the basis of charging the best price D Seeks to deliver superior value to buyers by satisfying their expectations on key qualityservicefeaturesperformance attributes and beating their expectations on price given what rivals are charging for much the same attributes d lIllIllIl Bestcost provider strategies A Aim at using the best operating practices to achieve lower costs and charge lower prices than companies pursuing lowcost provider strategies B Involve charging a lower price for a product that has more upscale attributes and features than the products offered by companies pursuing either focused differentiation or broad differentiation strategies C Seek to attract buyers on the basis of charging the best price for a midquality averageperforming product D Aim at giving customers more value for the money d Hill The objective of a bestcost provider strategy is to A Deliver superior value to buyers by satisfying their expectations on key qualityperformancefeaturesservice attributes and beating their expectations on price given what rivals are charging for much the same attributes B Offer buyers the industry39s bestperforming product at the best cost and best lowest price in the industry C Attract buyers on the basis of having the industry39s overall best performing product at a price that is slightly below the industry average price a Hill The competitive objective of a bestcost provider strategy is to A Outmatch the resource strengths of both lowcost providers and differentiators B Position the company outside the competitive arena of lowcost producers and differentiators C Meet or exceed buyer expectations on key qualityperformancefeaturesservice attributes and beat their expectations on price given what rivals are charging for much the same attributes thereby achieving a valuebased competitive advantage c lIllIllIl For a bestcost provider strategy to be successful a company must have A Excellent marketing and sales skills in convincing buyers to pay a premium price for the attributesfeatures incorporated in its product B Resource strengths and competitive capabilities that allow it to incorporate upscale attributes at lower costs than rivals whose products have similar upscale attributes C Access to greater learningexperience curve effects and scale economies than rivals b Hill The competitive advantage of a bestcost provider is A Having the best value chain in the industry B lts brand name reputation C lts capability to incorporate upscale attributes at lower costs than rivals whose products have similar upscale attributes c Hill The target market of a bestcost provider is A Valueconscious buyers B Brandconscious buyers C Pricesensitive buyers a Hill Bestcost provider strategies are appealing in those market situations where A Diverse buyer preferences make product differentiation the norm and where many buyers are sensitive to both price and value B A company is positioned between competitors who have ultra low prices and competitors who have topnotch products in terms of both quality and performance C Buyers are more qualityconscious than priceconscious a Hill The big danger or risk of a bestcost provider strategy is A That buyers will be highly skeptical about paying a relatively low price for upscale attributesfeatures B Not establishing strong alliances and partnerships with key suppliers C That lowcost leaders will be able to steal away some customers on the basis of a lower price and highend differentiators will be able to steal away customers with the appeal of better product attributes c Hill A company39s biggest vulnerability in employing a bestcost provider strategy is A Relying too heavily on outsourcing B Getting squeezed between the strategies of rms employing lowcost provider strategies and highend differentiation strategies C Getting trapped in a price war with lowcost leaders b lIllIllIl Focused strategies keyed either to lowcost or differentiation are especially appropriate for situations where A The market is composed of distinctly different buyer groups who have different needs or use the product in different ways B Most other rival rms are using a bestcost producer strategy C Buyers have strong bargaining power and entry barriers are low a DUI What sets focused or market niche strategies apart from lowcost leadership and broad differentiation strategies is A The extra attention paid to topnotch product performance and product quality B Their concentrated attention on serving the needs of buyers in a narrow piece of the overall market C Greater opportunity for competitive advantage b lIllIllIl Companies pursuing a focused lowcost or focused differentiation strategy strive to A Build a valuebased competitive advantage keyed to product uniqueness B Develop the capability to simultaneously serve buyers in a variety of distinct and different market segments C Do a better job of serving the needs and expectations of buyers in the target market niche than other competitors in the industry c Hill A focused lowcost strategy seeks to achieve competitive advantage by A Outmatching competitors in offering niche members an absolute rockbottom price B Delivering more value for the money than other competitors C Performing the primary value chain activities at a lower cost per unit than can the industry39s lowcost leaders D Dominating more market niches in the industry via a lower cost and a lower price than any other rival E Serving buyers in the target market niche at a lower cost and lower price than rivals e DUI The chief difference between a lowcost leader strategy and a focused lowcost strategy is A Whether the product is strongly differentiated or weakly differentiated from rivals B The degree of bargaining power that buyers have C The size of the buyer group that a company is trying to appeal to c Hill A focused differentiation strategy aims at securing competitive advantage A By providing niche members with a topof theline product at a premium price B By catering to buyers looking for an upscale product at an attractively low price C With a product offering carefully designed to appeal to the unique preferences and needs of a narrow wellde ned group of buyers c Hill A focused lowcost strategy can lead to attractive competitive advantage when A Buyers are looking for the best value at the best price B Buyers are looking for a budgetpriced product C Buyers are price sensitive and are attracted to brands with low switching costs D Demand in the target market niche is growing rapidly and a company can achieve a big enough volume to fully capture all the available scale economies E A rm can lower costs signi cantly by limiting its customer base to a wellde ned buyer segment its two options for achieving a lowcost advantage are 1 outmanaging rivals in controlling the factors that drive costs and 2 recon guring its value chain in ways that deliver a cost edge over rivals e Hill The chief difference between a broad differentiation strategy and a focused differentiation is A The size of the buyer group that a company is trying to appeal to B The degree of bargaining power that buyers have C Whether the product is strongly differentiated or weakly differentiated from rivals a Hill Which one of the following does not represent market circumstances that make a focused lowcost or focused differentiation strategy attractive A When it is costly or dif cult for multisegment competitors to put capabilities in place to meet the specialized needs of the target market niche and at the same time satisfy the expectations of their mainstream customers B When the industry has many different segments and market niches thereby allowing a focuser to pick an attractive niche suited to its resource strengths and capabilities C When industry leaders do not see that having a presence in the niche is crucial to their own success D When the target market niche is not overcrowded with a number of other rivals attempting to focus on the same niche E When buyers are not strongly brand loyal and most industry competitors are pursuing some sort of a focused strategy e Hill The risks of a focused strategy based on either lowcost or differentiation include A The chance that competitors outside the niche will nd effective ways to match the focuser39s capabilities in serving the target niche B The potential for the preferences and needs of niche members to shift over time towards many of the same product attributes and capabilities desired by buyers in the mainstream portion of the market C The potential for the segment to become so attractive that it is soon inundated with competitors intensifying rivalry and splintering sales pro ts and growth prospects D The potential for segment growth to slow to such a small rate that a focuser39s prospects for future sales and pro t gains become unacceptably dim E All of these e Hill The production emphasis of a company pursuing a broad differentiation strategy usually involves A A search for continuous cost reduction without sacri cing acceptable quality and essential features B Strong efforts to be a leader in manufacturing process innova on C Efforts to buildin whatever differentiating features that buyers are willing to pay for and striving for product superiority c Hill The marketing emphasis of a company pursuing a broad differentiation strategy usually is to A Underprice rival brands with comparable features B Tout differentiating features and charge a premium price that more than covers the extra costs of differentiating features C Outadvertise rivals and make frequent use of discount coupons b Hill The keys to sustaining a broad differentiation strategy are A To stress constant innovation to stay ahead of imitative rivals and to concentrate on a few differentiating features B To charge a premium price that more than covers the extra costs of differentiating features and to convince customers to be brand loyal C To outinnovate and outadvertise rivals a Hill The marketing emphasis of a company pursuing a focused lowcost provider strategy usually is to A Tout the company39s lower prices B Tout the lack of frills and extras C Outadvertise rivals and make frequent use of discount coupons D Communicate the attractive features of a budgetpriced product offering that ts niche members39 expectations d lIllIllIl One of the big dangers in crafting a competitive strategy is that managers torn between the pros and cons of the various generic strategies will opt for A A lowcost provider strategy because it is usually the safest least risky competitive strategy B A quotstuckinthemiddlequot strategy C A broad differentiation strategy because it is frequently the most pro table competitive strategy b lIllIllIl Once a company has decided to employ a particular generic competitive strategy then it must make such additional strategic choices as A Whether to enter into strategic alliances or collaborative partnerships B Whether and when to employ offensive and defensive moves C What type of Web site strategy to employ a DUI Which one of the following is not a strategic choice that a company must make to complement and supplement its choice of one of the ve generic competitive strategies A Whether to enter into strategic alliances or collaborative partnerships B Whether and when to employ offensive and defensive moves C Whether to employ a market share leadership strategy c lIllIllIl Strategic alliances A Are the cheapest means of developing new technologies and getting new products to market quickly B Are collaborative arrangements where two or more companies join forces to achieve mutually bene cial strategic outcomes C Are a proven means of reducing the costs of performing value chain activities b Hill A strategic alliance A Is a collaborative arrangement where companies join forces to defeat mutual competitive rivals B Involves two or more companies joining forces to pursue vertical integration C Is a formal agreement between two or more companies in which there is strategically relevant collaboration of some sort joint contribution of resources shared risk shared control and mutual dependence c lIllIllIl Entering into strategic alliances and collaborative partnerships can be competitively valuable because A Working closely with outsiders is essential in developing new technologies and new products in virtually every industry B Cooperative arrangements with other companies are very helpful in racing against rivals to build a strong global presence andor racing to seize opportunities on the frontiers of advancing technology C They represent highly effective ways to achieve lowcost leadership and capture rstmover advantages b Hill The best strategic alliances A Are highly selective focusing on particular value chain activities and on obtaining a particular competitive bene t B Are those whose purpose is to create an industry key success factor C Are those which help a company move quickly from one strategic group to another a Hill Companies racing against rivals for global market leadership need strategic alliances and collaborative partnerships with companies in foreign countries in order to A Combat the bargaining power of foreign suppliers and help defend against the competitive threat of substitute products produced by foreign rivals B Help raise needed nancial capital from foreign banks and use the brand names of their partners to make sales to foreign buyers C Get into critical country markets quickly and accelerate the process of building a potent global presence gain inside knowledge about unfamiliar markets and cultures and access valuable skills and competencies that are concentrated in particular geographic locations c Hill A company racing to seize opportunities on the frontiers of advancing technology often utilizes strategic alliances and collaborative partnerships in order to A Discourage rival companies from merging with or acquiring the very companies that it is partnering with B Reduce overall business risk and raise entry barriers into the newly emerging industry C Help master new technologies and build new expertise and competencies faster than would be possible through internal efforts establish a stronger beachhead for participating in the target industry and open up broader opportunities in the target industry by melding their capabilities with the resources and expertise of partners c lIllIllIl Which of the following is not a typical reason that many alliances prove unstable or break apart A Diverging objectives and priorities B An inability to work well together C The emergence of more attractive technological paths that are better pursued alone or with other partners D Disagreement over how to divide the pro ts gained from joint collaboration d lIllIllIl Experience indicates that strategic alliances A Are generally successful B Work well in cooperatively developing new technologies and new products but seldom work well in promoting greater supply chain ef ciency C Work best when they are aimed at achieving a mutually bene cial competitive advantage for the allies D Have a high quotdivorce ratequot d DUI Which of the following is not a factor that makes an alliance quotstrategicquot as opposed to just a convenient business arrangement A The alliance is critical to the company39s achievement of an important objective B The alliance helps block a competitive threat C The alliance helps open up important new market opportunities D The alliance helps build enhance or sustain a core competence or competitive advantage E The alliance helps the company obtain additional nancing on better credit terms e Hill The Achilles heel or biggest disadvantagedangerpitfalI of relying heavily on alliances and cooperative strategies is A That partners will not fully cooperate or share all they know preferring instead to guard their most valuable information and protect their more valuable knowhow B Becoming dependent on other companies for essential expertise and capabilities C The added time and extra expenses associated with engaging in collaborative efforts b lIllIllIl Which of the following is not one of the factors that affects whether a strategic alliance will be successful and realize its intended bene ts A Picking a good partner B Recognizing that the alliance must bene t both sides C Minimizing the amount of resources that the partners commit to the alliance C DUI Which one of the following is not a strategically bene cial reason why a company may enter into strategic partnerships or cooperative arrangements with key suppliers distributors or makers of complementary products A To improve access to new markets B To expedite the development of promising new technologies or products C To enable greater vertical integration c Hill The competitive attraction of entering into strategic alliances and collaborative partnerships is A In allowing companies to bundle competencies and resources that are more valuable in a joint effort than when kept separate B Speeding new products to market more quickly C Enabling greater vertical integration a Hill The difference between a merger and an acquisition is that A A merger involves one company purchasing the assets of another company with cash whereas an acquisition involves a company acquiring another company by buying all of the shares of its common stock B A merger is a pooling of equals whereas an acquisition involves one company the acquirer purchasing and absorbing the operations of another company the acquired C In a merger the companies retain their original names whereas in an acquisition the name of the company being acquired is changed to be the name of the acquiring company b lIllIllIl Which of the following is not a typical strategic objective or bene t that drives mergers and acquisitions A To gain quick access to new technologies or other resources and capabilities B To create a more costef cient operation out of the combined companies C To expand a company39s geographic coverage D To facilitate a company39s shift from a broad differentiation strategy to a focused differentiation strategy d lIllIllIl Mergers and acquisitions are often driven by such strategic objectives as to A Expand a company39s geographic coverage or extend its business into new product categories B Reduce the number of industry key success factors C Reduce the number of strategic groups in the industry a Hill Merger and acquisition strategies A Are nearly always a superior strategic alternative to forming alliances or partnerships with these same companies B May offer considerable costsaving opportunities perhaps helping to transform otherwise highcost companies into a competitor with average or belowaverage costs and can also be bene cial in helping a company try to invent a new industry and lead the convergence of industries whose boundaries are being blurred by changing technologies and new market opportunities C Are a particularly effective way of pursuing a blue ocean strategy and outsourcing strategies b lIllIllIl Mergers and acquisitions A Are nearly always successful in achieving their desired purpose B Frequently do not produce the hopedfor outcomes C Are generally less effective than forming alliances or partnerships with these same companies b lIllIllIl Vertical integration strategies A Extend a company39s competitive scope within the same industry by expanding its operations across more parts of the industry value chain B Are one of the best strategic options for helping companies win the race for global market leadership C Offer good potential to expand a company39s lineup of products and services a Hill The two best reasons for investing company resources in vertical integration either forward or backward are to A Expand into foreign markets andor control more of the industry value chain B Broaden the rm39s product line andor avoid the need for outsourcing C Enable use of offensive strategies andor gain a rst mover advantage over rivals in revamping the industry value chain D Strengthen the company39s competitive position andor boost its pro tability d lIllIllIl For backward vertical integration into the business of suppliers to be a viable and pro table strategy a company A Must rst be a pro cient manufacturer B Must be able to achieve the same scale economies as outside suppliers and match or beat suppliers39 production ef ciency with no dropoff in quality C Must have excess production capacity so that it has ample in house ability to undertake additional production activities b Hill The strategic impetus for forward vertical integration is to A Gain better access to end users and better market visibility B Achieve the same scale economies as wholesale distributors andor retail dealers C Control price at the retail level a Hill Which of the following is typically the strategic impetus for forward vertical integration A Being able to control the wholesaleretail portion of the industry value chain B Fewer disruptions in the delivery of the company39s products to endusers C Gaining better access to end users and better market visibility c Hill A good example of vertical integration is A A global public accounting rm acquiring a small local or regional public accounting rm B A large supermarket chain getting into convenience food stores C A crude oil re ner purchasing a rm engaged in drilling and exploring for oil c lIllIllIl Which of the following is not a potential advantage of backward vertical integration A Reduced vulnerability to powerful suppliers who may be inclined to raise prices at every opportunity B Reduced risks of disruptions in obtaining crucial components or support services C Reduced costs D Reduced business risk because of controlling a bigger portion of the overall industry value chain d lIllIllIl Which of the following is not a strategic disadvantage of vertical integration A Vertical integration boosts a rm39s capital investment in the industry thus increasing business risk if the industry becomes unattractive later B Vertical integration backward into parts and components manufacture can impair a company39s operating exibility when it comes to changing out the use of certain parts and components C Vertical integration reduces the opportunity for achieving greater product differentiation c lIllIllIl Outsourcing strategies A Are nearly always a more attractive strategic option than merger and acquisition strategies B Carry the substantial risk of raising a company39s costs C Carry the substantial risk of making a company overly dependent on its suppliers D Increase a company39s risk exposure to changing technology andor changing buyer preferences E lnvolve farming out value chain activities presently performed inhouse to outside specialists and strategic allies e lIllIllIl Outsourcing the performance of value chain activities presently performed inhouse to outside vendors and suppliers makes strategic sense when A An activity can be performed better or more cheaply by outside specialists B It allows a company to focus its entire energies on those activities that are at the center of its expertise its core competencies and that are most critical to its competitive and nancial success C Outsourcing won39t adversely hollow out the company39s technical knowhow competencies or capabilities D It reduces the company39s risk exposure to changing technology andor changing buyer preferences E All of these e Hill The two big drivers of outsourcing are A Increased ability to cut RampD expenses and increased ability to avoid the problems of strategic alliances B A desire to take advantage of the fact that outsiders can perform certain activities better or cheaper and allowing a company to focus its entire energies on those activities that are at the center of its expertise its core competencies and that are most critical to its competitive and nancial success C A desire to reduce the company39s investment in xed assets and the need to narrow the scope of the company39s inhouse competencies and competitive capabilities b lIllIllIl Which of the following is not one of the bene ts of outsourcing value chain activities presently performed in house A Streamlining company operations in ways that improve organizational exibility and cut the time it takes to get new products into the marketplace B Allowing a company to concentrate on its core business leverage its key resources and do even better what it already does best C Helping the company assemble diverse kinds of expertise speedily and ef ciently D Preventing a company from hollowing out its technical know how competencies or capabilities d lIllIllIl Relying on outsiders to perform certain value chain activities offers such strategic advantages as A Obtaining higher quality andor cheaper components or services B Improving the company39s ability to innovate by allying with quotbestinworldquot suppliers C Reducing the company39s risk exposure to changing technology andor changing buyer preferences D Increasing the rm39s ability to assemble diverse kinds of expertise speedily and ef ciently E A of the above e lIllIllIl Outsourcing strategies can offer such advantages as A Increasing a company39s ability to strongly differentiate its product and be successful with either a broad differentiation strategy or a focused differentiation strategy B Obtaining higher quality andor cheaper components or services improving a company39s ability to innovate and reducing its risk exposure C Speeding a company39s entry into foreign markets b Hill The big risk of employing an outsourcing strategy is A Causing the company to become partially integrated instead of being fully integrated B Hollowing out a rm39s own capabilities and losing touch with activities and expertise that contribute fundamentally to the rm39s competitiveness and market success C Hurting a company39s RampD capability b DUI Which of the following is not one of the principal offensive strategy options A Leapfrogging competitors by being the rst adopter of next generation technologies B Offering an equally good or better product at a lower price C Blocking the avenues open to challengers c lIllIl Which one of the following is an example of an offensive strategy A Blocking the avenues open to challengers B Signaling challengers that retaliation is likely C Pursuing continuous product innovation to draw sales and market share away from less innovative rivals c Hill A blue ocean type of offensive strategy A Is an offensive attack used by a market leader to steal customers away from unsuspecting smaller rivals B Involves a preemptive strike to secure an advantageous position in a fastgrowing market segment C Works best when a company is the industry39s lowcost leader D Involves abandoning efforts to beat out competitors in existing markets and instead inventing a new industry or new market segment that renders existing competitors largely irrelevant and allows a company to create and capture altogether new demand d Hill A hitandrun or guerilla warfare type of offensive strategy involves A Random offensive attacks used by a market leader to steal customers away from unsuspecting smaller rivals B Undertaking surprise moves to secure an advantageous position in a fastgrowing and pro table market segment usually the guerilla signals rivals that it will use deep price cuts to defend its newlywon position C Work best if the guerilla is the industry39s lowcost leader D Pitting a small company39s own competitive strengths headon against the strengths of much larger rivals E Random raids by a small competitor to grab sales and market share from complacent or distracted rivals e lIllIllIl Launching a preemptive strike type of offensive strategy entails A Cutting prices below a weak rival39s costs B Moving rst to secure an advantageous position that rivals are prevented or discouraged from duplicating C Using hitandrun tactics to grab sales and market share away from complacent or distracted rivals b lIllIllIl Which one of the following statements about offensive strategies is false A It often takes the use of successful offensive strategies to build to competitive advantage B One situation when a company needs to use offensive strategies is when it has no choice but to try to whittle away at a strong rival39s competitive advantage C Offensive strategies have much to recommend when a company sees an opening to gain pro table market share at the expense of rivals D One of the most potent types of offensive strategy is to introduce new features or models to ll vacant niches in a company39s overall product offering and thereby better match the product offerings of key rivals d DUI Which one of the following is not a trait of a good strategic offensive A Trying to build a more costef cient supply chain than rivals have B Being impatient with the status quo and displaying a strong bias for swift decisive actions to boost a company39s competitive position visavis rivals C Applying resources where rivals are least able to defend themselves a Hill Which one of the following is not a good type of rival for an offensiveminded company to target A Market leaders that are vulnerable B Runnerup rms with weaknesses in areas where the challenger is strong C Small local and regional companies with limited capabilities D Other offensiveminded companies with a sizable war chest of cash and marketable securities d lIllIllIl Which one of the following statements regarding the basis for offensive attack on rivals is false A It is generally wise to use a company39s resource strengths to attack rivals in those competitive areas where they are strong B Ignoring the need to tie a strategic offensive to a company39s strengths is like going to war with a popgun C Strategic offensives should as a general rule be predicated on leveraging a company39s competitive assets its core competencies competitive capabilities and other resource strengths D Offensive initiatives aimed at exploiting the competitive weaknesses of rivals stand a better chance of success than do those that challenge a competitor39s strengths E Attacking a market leader is always unwise e Hill The purposes of defensive strategies are to A Aggressively retaliate against rivals pursuing offensive strategies and prevent against price wars B Lower the risk of being attacked by rivals weaken the impact of any attack that occurs and in uence challengers to aim their offensive efforts at other rivals C Guard against adverse changes in the company39s macro environment and insulate the company from the impact of industry driving forces b lIllIllII Which one of the following is not a defensive option for protecting a company39s market share and competitive position A Adding new features or models and otherwise broadening the product line to close off vacant niches and gaps to opportunity seeking challengers B Thwarting the efforts of rivals to attack with lower prices by maintaining economypriced options of its own C Running comparison ads that call attention to weaknesses in rivals39 products c lIllIllII Which of the following is a potential defensive move to ward off challenger rms A Granting volume discounts or better nancing terms to dealersdistributors and providing discount coupons to buyers to help discourage them from experimenting with other suppliersbrands B Signaling challengers that retaliation is likely in the event they launch an attack C Lengthening warranties offering free or lowcost training and support services and providing coupons and sample giveaways to buyers most prone to experiment with using riva brands D Maintaining a war chest of cash and marketable securities E All of these e IIIIIIIII One of the biggest Internetrelated strategic issues facing many businesses is A Whether to have a company Web site B Whether and how to incorporate use of Internet technology applications in performing various internal value chain activities C How best to try to offset the company39s competitive disadvantage visavis rivals that already se direct to buyers at their Web site D Whether to form a strategic alliance with a pure dotcom enterprise E What role the company39s Web site should play in the company39s competitive strategy e IIIIIIIII Which of the following is not one of the options that companies have for using the Internet as a distribution channel to access buyers A Establishing a company Web site so as to have an Internet presence B Operating a Web site that provides existing and potential customers with extensive product information but that relies on clickthroughs to distribution channel partners to handle orders and sales transactions C Using online sales at the company39s Web site as a relatively minor distribution channel for achieving incremental sales a DUI One very important advantage of a productinformationonly Web site strategy is A Lower advertising costs and lower customer service costs B Avoiding the extra costs associated with operating Web site e stores C Added ability to interest potential buyers in purchasing the company39s products D Avoiding channel con ict d Hill The advantages of a brickandclick strategy include A Being able to attract bargainhunting shoppers by selling the company39s merchandise online at lower prices than in traditional retail stores B Being able to offer a much wider product line than is stocked at brickandmortar stores C Low incremental investments to establish a Web site the ability to access a wider customer base and the ability to use existing distribution centers andor company store locations for picking orders from onhand inventories and making deliveries c lIllIllIl Two big appeals of a brickandclick strategy are A Lower advertising costs and enhanced ability to charge lower prices than rivals B Economically expanding a company39s geographic reach and giving existing and potential customers another choice of how to communicate with the company shop for company products make purchases or resolve customer service problems C Low incremental investments to establish a Web site and the ability of customers to use existing company store locations to view and inspect items prior to purchase b DUI A company that elects to use the Internet as its exclusive channel for accessing buyers must address such strategic issues as A Whether it will have a broad or narrow product offering B How it will deliver unique value to buyers C How it will draw traf c to its Web site and then convert page views into revenues D Whether it will perform order ful llment activities internally or outsource them E A of the above e lIllIllIl Assuming a company elects to use the Internet as its exclusive channel for accessing buyers then which of the following is not one of the strategic issues that it will need to address A Whether to pursue a competitive advantage based on lowcosts differentiation or more value for the money B How to deliver unique value to buyers C How to draw traf c to its Web site and then convert page views into revenues D Whether to employ a forward integration strategy d lIllIllIl Being rst to initiate a particular move can have a high payoff when A Pioneering helps build up a rm39s image and reputation with buyers B Firsttime buyers remain strongly loyal to pioneering rms in making repeat purchases C Moving rst can result in a cost advantage over rivals D Moving rst can constitute a preemptive strike making imitation extra hard or unlikely E A of these e DUI In which of the following instances is being a rstmover not particularly advantageous A When a pioneer is using a lowcost provider strategy B When buyers are not loyal to pioneering rms in making repeat purchases C When a pioneer is pursuing product innovation b lIllIllII Because when to make a strategic move can be just as important as what move to make a company39s best option with respect to timing is A To be the rst mover B To be a fast follower C To be a late mover because it is cheaper and easier to imitate the successful moves of the leaders and moving late allows a company to avoid the mistakes and costs associated with trying to be a pioneer rstmover disadvantages usually overwhelm rst mover advantages D To be the lastmover playing catchup is usually fairly easily and nearly always much cheaper than any other option E To carefully weigh the rstmover advantages against the rst mover disadvantages and act accordingly e lIllIllII When the race among rivals for industry leadership is a marathon rather than a sprint A It is best to be a fast follower rather than a rst mover or a slow mover B Fast followers nd it easy to leapfrog the pioneer with even better nextgeneration products of their own C A slow mover may not be unduly penalized and rstmover advantages can be eeting C DUI Firstmover disadvantages arise when A The costs of pioneering are much higher than being a follower and only negligible buyer loyalty or cost savings accrue to the pioneer B Technological change is rapid and following rivals nd it easy to leapfrog the pioneer with nextgeneration products of their own C The pioneer39s skills knowhow and products are easily copied or even bested by late movers D All of these d Hill In which of the following cases are rstmover disadvantages not likely to arise A When the costs of pioneering are much higher than being a follower and only negligible buyer loyalty or cost savings accrue to the pioneer B When new infrastructure is needed before market demand can surge C When the pioneer39s skills knowhow and products are easily copied or even bested by late movers b Hill The task of crafting corporate strategy for a diversi ed company encompasses A Picking the new industries to enter and deciding on the means of entry B Initiating actions to boost the combined performance of the businesses the rm has entered C Pursuing opportunities to leverage crossbusiness value chain relationships and strategic ts into competitive advantage D Establishing investment priorities and steering corporate resources into the most attractive business units E All of these e DUI Which one of the following is not one of the elements of crafting corporate strategy for a diversi ed company A Picking new industries to enter and deciding on the means of entry B Choosing the appropriate value chain for each business the company has entered C Pursuing opportunities to leverage crossbusiness value chain relationships and strategic ts into competitive advantage b lIllIllII Diversi cation merits strong consideration whenever a single business company A Has integrated backward and forward as far as it can B Is faced with diminishing market opportunities and stagnating sales in its principal business C Has achieved industry leadership in its main line of business b lIllIllII Diversi cation ought to be considered when A A company39s pro ts are being squeezed and it needs to increase its net pro t margins and return on investment B A company lacks sustainable competitive advantage in its present business C A company begins to encounter diminishing growth prospects in its mainstay business c lIllIllII Diversi cation becomes a relevant strategic option in all but which one of the following situations A When a company spots opportunities to expand into industries whose technologies and products complement its present business B When a company is only earning a low pro t margin in its principal business C When a company has a powerful and wellknown brand name that can be transferred to the products of other businesses and thereby used as a lever for driving up the sales and pro ts of such businesses b lIllIllIl Diversifying into new businesses is justi able only if it A Results in increased pro t margins and bigger total pro ts B Builds shareholder value C Helps acompany escape the rigors of competition in its present business b lIllIllIl To create value for shareholders via diversi cation a company must A Get into new businesses that are pro table B Diversify into industries that are growing rapidly C Spread its business risk across various industries by only acquiring rms that are strong competitors in their respective industries D Diversify into businesses that can perform better under a single corporate umbrella than they could perform operating as independent standalone businesses d Hill The three tests for judging whether a particular diversi cation move can create value for shareholders are A The attractiveness test the pro tability test and the shareholder value test B The strategic t test the competitive advantage test and the return on investment test C The resource t test the pro tability test and the shareholder value test D The attractiveness test the costof entry test and the betteroff test d lIllIllIl To test whether a particular diversi cation move has good prospects for creating added shareholder value corporate strategists should use A The pro t test the competitive strength test the industry attractiveness test and the capital gains test B The betteroff test the competitive advantage test the pro t expectations test and the shareholder value test C The barrier to entry test the competitive advantage test the growth test and the stock price effect test D The strategic t test the industry attractiveness test the growth test the dividend effect test and the capital gains test E The attractiveness test the cost of entry test and the betteroff test e Hill The attractiveness test for evaluating whether diversi cation into a particular industry is likely to build shareholder value involves determining whether A Conditions in the target industry are suf ciently attractive to permit earning consistently good pro ts and returns on investment B The potential diversi cation move will boost the company39s competitive advantage in its existing business C Shareholders will viewed the contemplated diversi cation move as attractive a Hill The costof entry test for evaluating whether diversi cation into a particular industry is likely to build shareholder value involves A Determining whether a newly entered business presents opportunities to costef ciently transfer competitively valuable skills or technology from one business to another B Determining whether the cost to enter the target industry will strain the company39s credit rating C Considering whether a company39s costs to enter the target industry are low enough to preserve attractive pro tability or so high that the potentials for good pro tability and return on investment are eroded c Hill The betteroff test for evaluating whether a particular diversi cation move is likely to generate added value for shareholders involves A Assessing whether the diversi cation move will make the company better off because it will produce a greater number of core competencies B Assessing whether the diversi cation move will make the company better off by improving its balance sheet strength and credit rating C Assessing whether the diversi cation move will make the company better off by spreading shareholder risks across a greater number of businesses and industries D Evaluating whether the diversi cation move will produce a 1 1 3 outcome such that the company39s different businesses perform better together than apart and the whole ends up being greater than the sum of the parts d lIllIllII Acquisition of an existing business is an attractive strategy option for entering a promising new industry because it A Is an effective way to hurdle entry barriers is usually quicker than trying to launch a brandnew startup operation and allows the acquirer to move directly to the task of building a strong position in the target industry B Is less expensive than launching a new startup operation thus passing the costof entry test C Is a less risky way of passing the attractiveness test a Hill lnternal startup of a new business subsidiary can be a more attractive means of entering a desirable new business than is acquiring an existing rm already in the targeted industry when A The costs associated with internal startup are less than the costs of buying an existing company and the company has ample time and adequate resources to launch the new internal startup business from the ground up B There is a small pool of desirable acquisition candidates C The target industry is growing rapidly and no good joint venture partners are available
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