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test bank strategic management

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Test Bank, Chapter 5 1 Chapter 5: The Five Generic Competitive Strategies—Which One to Employ? Multiple Choice uestions The Concepts o! Competitive Strategy an" Competitive #"vantage 1. A company's competitive strategy deals with A) management’ management’ss game plan plan or competing competing s!ccess!lly"the s!ccess!lly"the speciic speciic eorts eorts to please please c!stomers, oensive and deensive moves to co!nter the mane!vers o rivals, the reactions and responses to whatever market conditions prevail at the moment, and the initiatives !ndertaken to improve the company’s market position. B) what its strategy will will #e in in s!ch !nctional !nctional areas as $%&, prod!ction, prod!ction, sales sales and marketing, marketing, distri#!tion,, inance and acco!nting, and so on. distri#!tion C) its eorts eorts to change change its position on on the ind!stry’ ind!stry’ss strategic gro!p map. &) its plans or or entering into into strategic alliances, alliances, !tiliing !tiliing mergers or ac(!isitions to strengthen its market position, o!tso!rcing some inho!se activities to o!tside specialists, and integrating orward or #ackward. *) its plans plans or or overcomi overcoming ng the ive ive competi competitive tive orces orces.. Answer+ A age+ 1-- &iic!lty+ &iic!lty+ edi!m Ta/onomy+ 0nowledge AACB+ - 2. The o#3ective o competitive strategy is to A) contend s!ccess!lly with the the ind!stry’ ind!stry’ss 5 competitive orces. B) knock the socks o o rival companies companies #y doing a #etter #etter 3o# o satisying satisying #!yer needs and preerences. C) get the company company into into the #est #est strategi strategicc gro!p and and then dominat dominatee it. &) esta# esta#lish lish a competi competitivel tively y power!l power!l val!e val!e chain. chain. *) grow reven!e reven!ess at a aster ann!al ann!al rate rate than rivals rivals are a#le a#le to grow their their reven!es. reven!es. Answer+ B age+ 1-- &iic!lty+ edi!m Ta/onomy+ Comprehension AACB+ - -. A company achieves competitive advantage w henever A) it is the the acknowled acknowledged ged market market share share leader leader.. B) it is the ind!st ind!stry's ry's acknowl acknowledged edged techn technolog ology y leader. leader. C) it has greate greaterr inancial inancial reso!r reso!rces ces than than its rivals. rivals. &) it has a wellknown and wellregarded wellregarded #rand name, preers oensive oensive strategies strategies to deensive strategies, and has a strong #alance sheet. *) it has some type o edge over over rivals in attracting attracting c!stomers and coping with competitive competitive orces. Answer+ * age+ 1-- &iic!l &iic!lty+ ty+ edi!m Ta/onomy+ Comprehension AACB+ - Test Bank, Chapter 5 2 4. A company can #e said to have competitive advantage i A) it is the acknowl acknowledged edged leader leader in prod!c prod!ctt (!ality (!ality.. B) it has has a di dierent erent val! val!ee chain chain than than rivals. rivals. C) it has some type o edge over over rivals in attracting attracting c!stomers and coping with competitive competitive orces. &) it earns earns the largest largest proits proits o any irm irm in the ind!s ind!stry try.. *) it has has more more reso!rc reso!rcee strength strengthss than than weakness weaknesses. es. Answer+ C age+ 1-- &iic!lty+ edi!m Ta/onomy+ Comprehension AACB+ - 5. hile there are many ro!tes to competitive advantage, they all involve A) #!il #!ilding ding a #rand #rand name name image image that #!yers #!yers tr!st. tr!st. B) delivering s!perior s!perior val!e val!e to #!yers #!yers and #!ilding #!ilding competencies competencies and reso!rce strengths strengths in perorming val!e chain activities that rivals cannot readily match. C) achieving lower lower costs than rivals and #ecoming #ecoming the ind!stry’ ind!stry’ss sales and market market share leader. leader. &) inding eective eective and eicient eicient ways to strengthen the the company’s company’s competitive assets assets and to red!ce its competitive lia#ilities. *) gett getting ing in the the #est stra strategic tegic gro!p gro!p and and dominatin dominating g it. Answer+ B age+ 1-- &iic!lty+ edi!m Ta/onomy+ Comprehension AACB+ - The Five Generic Competitive Strategies 6. The #iggest and most important dierences among the competitive strategies o dierent companies #oil down to A) how they go a#o!t #!ilding #!ilding a #rand name image that #!yers #!yers tr!st and whether they are are a risk taker or riskavoider. B) the dierent dierent ways that companies companies try to cope with the the ive competitive orces. C) whether a company’ company’ss market target target is #road or narrow and whether the the company is p!rs!ing a competitive advantage linked to low cost or dierentiation. &) the kinds o actions companies take take to improve improve their competitive assets assets and red!ce their competitive lia#ilities. *) the relative relative emphasis emphasis they they place on oensi oensive ve vers!s vers!s deensive deensive strategies strategies.. Answer+ C age+ 1-4 &iic!lty+ &iic!lty+ edi!m Ta/onomy+ Comprehension AACB+ - 7. hich hich o the ollowing ollowing is not one o the the ive generic generic types o competit competitive ive strategy8 strategy8 A) A lowcost lowcost provider provider strategy strategy B) A #road dierent dierentiati iation on strate strategy gy C) A #est #estcos costt provid provider er strate strategy gy &) A oc!sed oc!sed lowcos lowcostt provide providerr strategy strategy *) A marke markett share share domin dominato atorr strate strategy gy Answer+ * age+ 1-4  1-5 &iic!lty+ *asy Ta/onomy+ 0nowledge AACB+ - Test Bank, Chapter 5 - 9. The generic types o competitive strategies incl!de A) #!ild market market share, maintain market share, share, and slowly slowly s!rrender s!rrender market market share. B) o oensiv ensivee strategies strategies and deensi deensive ve strategi strategies. es. C) lowcost provider provider,, #road dierentiation, dierentiation, #estcost #estcost provider, provider, oc!sed oc!sed lowcost, lowcost, and oc!sed oc!sed dierentiation. &) lowcost:lo lowcost:low w price strategies, high(!ality:h high(!ality:high igh price strategies, and medi!m medi!m (!ality:medi!m (!ality:medi!m price strategies. *) price leader leader strategies, strategies, price price ollower ollower strategies, strategies, technology technology leader strategies, irstmover strategies, oensive strategies, and deensive strategies. Answer+ C age+ 1-4  1-5 &iic!lty+ edi!m Ta/onomy+ 0nowledge AACB+ - ;. hich one o the ollowing ollowing generic generic types o competitive competitive strategy is typically typically the #est #est strategy or a company to employ8 A) A lowcost lowcost leadershi leadership p strate strategy gy B) A #road dierent dierentiati iation on strate strategy gy C) A #est #estcos costt provid provider er strate strategy gy &) A oc!sed oc!sed lowcos lowcostt provide providerr strategy strategy *) There is no s!ch thing as a <#est= competitive competitive strategy> strategy> a company’s company’s <#est= strategy is always one that is c!stomied to it #oth ind!stry and competitive conditions and the company’s own reso!rces and competitive capa#ilities. Answer+ * age+ 1-4 &iic!lty+ &iic!lty+ *asy Ta/onomy+ Comprehension AACB+ - $o%&Cost 'rovi"er Strategies 1?. A lowcost leader's #asis or competitive advantage is A) low lower er price pricess than than rival rival irms irms.. B) !sin !sing g a low cost:low cost:low price price approach approach to gain gain the #iggest #iggest market market share. share. C) hi high gh #!yer #!yer swit switchi ching ng costs costs.. &) meani meaning! ng!lly lly lower lower overall overall costs costs than competi competitors. tors. *) hi highe gherr !nit !nit sale saless than than riv rivals als.. Answer+ & age age++ 1-5 &iic!lty+ edi!m Ta/onomy+ Comprehension Comprehen sion AACB+ - 11. @ow val!a#le a lowcost leader's cost advantage is depends on A) whether it is easy or ine/pensive ine/pensive or rivals rivals to copy copy the lowcost leader’s leader’s methods methods or otherwise match its low costs. B) how easy easy it is or the the lowcost lowcost leader leader to gain the the #iggest #iggest market market share. share. C) the aggressiveness aggressiveness with which the lowcost leader p!rs!es converting converting the the cost advantage advantage into the a#sol!te lowest possi#le costs. &) the leader's a#ility a#ility to com#ine com#ine the cost advantage with a rep!tation or good (!ality (!ality.. *) the lowcost lowcost leader's a#ility to #e the ind!stry leader leader in man!act!ring man!act!ring innovation innovation so as to keep lowering its man!act!ring costs. Answer+ A age+ 1-5 &iic!lty+ edi!m Ta/onomy+ Comprehension AACB+ - Test Bank, Chapter 5 4 12. A lowcost leader can translate its lowcost advantage over rivals into s!perior proit perormance #y A) c!tting its price price to levels signiicantly signiicantly #elow the prices o rivals. rivals. B) either !sing its lowcost lowcost edge to to !nderprice competitors and attract price sensitive sensitive #!yers in large eno!gh n!m#ers to increase total proits or reraining rom pricec!tting and !sing the lowcost advantage to earn a #igger proit margin on each !nit sold. C) goin going g all o!t to !se its cost cost advantage advantage to capt!re capt!re a dominant dominant share o the market. market. &) spending heavily heavily on advertising advertising to promote promote its cost advantage and the the act that it charges the lowest prices in the ind!stry  it it can then !se this rep!tation or low prices to #!ild very strong c!stomer loyalty, loyalty, gain repeat sales year ater year, and earn s!stained proits over the longterm. *) o!tp o!tprod! rod!cing cing rivals rivals and th!s th!s having having more more !nits !nits availa#le availa#le to sell. sell. Answer+ B age+ 1-5 &iic!lty+ edi!m Ta/onomy+ Comprehension AACB+ - 1-. The ma3or ma3or aven!es aven!es or achievi achieving ng a cost advantag advantagee over rivals rivals incl!de incl!de A) revamping the the irm's val!e val!e chain to to eliminate or #ypass some costprod!cing costprod!cing activities activities and:or and:or o!tmanaging rivals in the eiciency with which val!e chain activities are perormed. B) havi having ng a management management team team that is highly highly skille skilled d in c!tting c!tting costs. costs. C) #eing a irstmover in adopting adopting the the latest stateotheart technologies technologies,, especially especially those relating to lowcost man!act!re. &) o!ts o!tso!rci o!rcing ng highcost highcost activitie activitiess to cost coste eicie icient nt vendors. vendors. *) payi paying ng lower lower wages wages and salari salaries es than than rivals rivals.. Answer+ A age+ 1-7 &iic!lty+ edi!m Ta/onomy+ Comprehen Comprehension sion AACB+ - 14. A competitive strategy o striving to to #e the lowcost provider provider is partic!larly attractive when when A) #!yers #!yers are are not not very very #randc #randconsc onscio!s io!s.. B) most rival rivalss are trying trying to to #e #estco #estcost st provid providers. ers. C) there are many ways to achieve achieve prod!ct dierentiation dierentiation that have val!e val!e to #!yers. &) #!yers are large large and have signiicant signiicant power to to #argain down prices> #!yers !se the the prod!ct in m!ch the same ways> and #!yers have low switching costs. *) most rivals rivals are p!rs!ing oc!sed lowcost or oc!sed oc!sed dierentiatio dierentiation n strategies. strategies. Answer+ & age+ 14- &iic!lty+ edi!m Ta/onomy+ Comprehension AACB+ - 15. hich o the ollowing is not an action that a company can take to do a #etter 3o# than rivals o perorming val!e chain activities more costeectiv costeectively8 ely8 A) triving to capt!re all availa#le economies economies o scale and learning:e/peri learning:e/perience ence c!rve eects eects B) Tr Trying ying to to operate operate acili acilities ties at at !ll !ll capacity capacity C) Adop Adopting ting la#or la#orsavi saving ng operati operating ng method methodss &) mpro mproving ving s!pp s!pply ly chain chain ei eicienc ciency y *) !ts !tso!rci o!rcing ng all prod prod!cti !ctionre onrelated lated acti activiti vities es Answer+ * age+ 1-- &iic!lty+ &iic!lty+ edi!m Ta/onomy+ Comprehension AACB+ - Test Bank, Chapter 5 5 16. hich o the ollowing ollowing is not one o the the ways that that a company company can achieve a cost cost advantage advantage #y revamping its val!e chain8 A) C!tting o!t distri#!tors distri#!tors and dealers dealers #y selling direct to c!stomers B) $eplacing certain certain val!e val!e chain activities with aster aster and cheaper online online technology technology C) ncreasing prod!ction capacity and then striving hard to operate at !ll capacity capacity &) $elocating acilities acilities so as to c!r# c!r# the need need or shipping shipping and handling activities activities *) treamlining operations #y eliminating eliminating low low val!eadded or !nnecessary !nnecessary work steps and and activities Answer+ C age+ 1-;  14? &iic!lty+ &iic!lty+ edi!m Ta/onomy+ Comprehension AACB+ - 17. To s!cceed s!cceed with a lowcost lowcost provider provider strategy strategy,, company manager managerss have to A) p!rs!e #ackward or orward integration to deto!r s!ppliers or #!yers with with considera#le considera#le #argaining power and leverage. B) move the perorma perormance nce o most all val!e val!e chain activit activities ies to lowwage lowwage co!ntri co!ntries. es. C) sell direct direct to !sers o their prod!ct or service and eliminate !se !se o wholesale wholesale and retail intermediaries. &) do two things+ things+ 1) do a #etter 3o# than rivals o p!rs!ing cost cost savings thro!gho!t thro!gho!t the val!e chain and 2) #e proactive in revamping the irm’s irm’s overall val!e chain to eliminate low val!e added activities and #ypass its two options or achieving a lowcost advantage are 1) o!tmanaging rivals in controlling the actors that drive costs and 2) reconig!ring its val!e chain in ways that deliver a cost edge over rivals. Answer+ * age+ 15- &iic!lty+ &iic!lty+ edi!m Ta/onomy+ Comprehension AACB+ - 69. The chie dierence #etween a #road dierentiation strategy and a oc!sed dierentiation is A) the sie sie o the #!yer #!yer gro!p gro!p that a company company is trying trying to appeal appeal to. to. B) the degree degree o o #argaini #argaining ng power power that that #!yers #!yers have. have. C) whether the the prod!ct is strongly strongly dierentiated dierentiated or weakly dierentiated dierentiated rom rivals. rivals. &) the type o val!e chain #eing !sed to achieve achieve a dierentiatio dierentiation#ased n#ased competitive competitive advantage. *) the n!m#er n!m#er o !pscale !pscale attri#!tes attri#!tes incorpo incorporated rated into into the prod!ct prod!ct oering oering.. Answer+ A age age++ 15- &iic!lty+ edi!m Ta/onomy+ Comprehension Comprehen sion AACB+ - Test Bank, Chapter 5 2? 6;. hich one one o the ollowing ollowing does does not represent market market circ!mstances circ!mstances that that make a oc!sed low low cost or oc!sed dierentiation dierentiation strategy attractive8 A) hen it is costly or diic!lt diic!lt or m!ltisegment m!ltisegment competitors competitors to p!t p!t capa#ilities in place to meet the specialied needs o the target market niche and at the same time satisy the e/pectations o their mainstream c!stomers B) hen the ind!stry has many dierent dierent segments segments and market niches, niches, there#y allowing allowing a oc!ser to pick an attractive niche s!ited to its reso!rce strengths and capa#ilities capa#ilities C) hen ind!stry ind!stry leaders do not not see that having having a presence in in the niche is is cr!cial to their their own s!ccess &) hen the target target market niche niche is not overcrowded overcrowded with a n!m#er o other other rivals attempting attempting to oc!s on the same niche *) hen #!yers #!yers are not strongly #rand loyal and most ind!stry competitors competitors are p!rs!ing some some sort o a oc!sed strategy Answer+ * age+ 154  155 &iic!lty+ edi!m Ta/onomy+ Comprehension AACB+ - 7?. The risks risks o a oc!sed strategy strategy #ased #ased on either either lowcost lowcost or dierenti dierentiatio ation n incl!de incl!de A) the chance that competitors o!tside o!tside the niche niche will ind eective ways to match the oc!ser’s capa#ilities in serving the target niche. B) the potential potential or the the preerences and needs o niche mem#ers to shit over time towards towards many o the same prod!ct attri#!tes and capa#ilities desired #y #!yers in the mainstream portion o the market. C) the potential potential or the the segment to #ecome so so attractive that it is soon in!ndated with with competitors, intensiying rivalry and splintering sales, proits, and growth prospects. &) the potential or segment growth growth to slow to s!ch a small small rate that a oc!ser's prospects prospects or !t!re sales and proit gains #ecome !naccepta#ly dim. *) All All o thes these. e. Answer+ * age+ 156 &iic!lty+ &iic!lty+ *asy Ta/onomy+ Comprehension AACB+ - The Contrasting Features o! the Five Generic Strategies 71. The prod!ction prod!ction emphasis o a company company p!rs!ing a #road dierentiation dierentiation strategy !s!ally involves involves A) a search or or contin!o!s contin!o!s cost red!ction witho!t witho!t sacriicing sacriicing accepta#le (!ality and and essential eat!res. B) strong strong eorts eorts to #e a leader in man!act! man!act!ring ring process process innovati innovation. on. C) eorts to to #!ildin whatever dierentiating dierentiating eat!res that #!yers are willing willing to to pay or and striving or prod!ct s!periority. &) aggressiv aggressivee p!rs!it o economies economies o scale and e/perien e/perience ce c!rve eects. eects. *) developin developing g a distincti distinctive ve competence competence in erodeect erodeect man!act!ri man!act!ring ng techni(!es. techni(!es. Answer+ C age+ 157 &iic!lty+ &iic!lty+ edi!m Ta/onomy+ Comprehension AACB+ - Test Bank, Chapter 5 21 72. The marketing emphasis o a company p!rs!ing a #road dierentiation dierentiation strategy strategy !s!ally !s!ally is to A) !nderpric !nderpricee rival #rands #rands with with compara#l compara#lee eat!res. eat!res. B) to!t dierentiating dierentiating eat!res eat!res and charge charge a premi!m premi!m price that more than covers the e/tra costs o dierentiating eat!res. C) o!tadver o!tadvertise tise rivals rivals and make re(!en re(!entt !se o disco!nt disco!nt co!pons. co!pons. &) emphasie selling selling direct direct to end!sers and promoting promoting personalied personalied c!stomer c!stomer service. service. *) comm!nicat comm!nicatee the prod!ct's prod!ct's a#ili a#ility ty to serve serve the c!stomer' c!stomer'ss every need. need. Answer+ B age+ 157 &iic!lty+ &iic!lty+ edi!m Ta/onomy+ Comprehension AACB+ - 7-. The keys keys to s!staini s!staining ng a #road #road dierent dierentiati iation on strategy strategy are are A) to stress constant constant innovation innovation to stay ahead o imitative imitative rivals and to concentrate on a ew dierentiating dierentiating eat!res. B) to charge charge a premi!m price that more than covers the e/tra costs o dierentiating dierentiating eat!res eat!res and to convince c!stomers to #e #rand loyal. C) to o!tinn o!tinnovat ovatee and o!tadver o!tadvertise tise rivals. rivals. &) to emphasie emphasie personalied c!stomer service service and to add as many many dierentiating dierentiating eat!res eat!res as possi#le. *) to keep prices prices close to the the average o all rivals rivals and to spend spend heavily heavily on new prod!ct prod!ct $%&. Answer+ A age+ 157 &iic!lty+ edi!m Ta/onomy+ Comprehension Comprehen sion AACB+ - 74. The marketing emphasis o a company p!rs!ing a oc!sed lowcost lowcost provider provider strategy !s!ally is to A) to!t the compan company’ y’ss lower lower price prices. s. B) to!t to!t the lack lack o ril rills ls and e/tr e/tras. as. C) o!tadver o!tadvertise tise rivals rivals and make re(!en re(!entt !se o disco!nt disco!nt co!pons. co!pons. &) comm!nicate the the attractive eat!res o a #!dgetpriced #!dgetpriced prod!ct oering that that its niche mem#ers’ e/pectations. *) comm!nicat comm!nicatee the prod!ct's prod!ct's a#ili a#ility ty to serve serve the c!stomer' c!stomer'ss every need. need. Answer+ & age+ 157 &iic!lty+ edi!m Ta/onomy+ Comprehension AACB+ - 75. ne o the the #ig dangers dangers in crating crating a competitive competitive strategy strategy is that managers, torn #etween the pros and cons o the vario!s generic strategies, will opt or A) a lowcost provider provider strategy #eca!se #eca!se it is !s!ally the saest, least risky risky competitive strategy. strategy. B) a