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Strategic Management Practice Test: Other Important Strategy Choices

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Strategic Management Practice Test: Other Important Strategy Choices

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1. The typical strategic mistakes companies can make during the transition from fairly rapid growth to industry maturity include

sacrificing long-term competitive position for short-term profits; outsourcing too many value chain activities to allies and partners, and not pursuing aggressive acquisition of weaker rival firms.steering a middle course between low-cost, differentiation, and focusing; being slow to respond to stiffening competition; and overexpanding in the face of slowing growth.merging with weaker rather than stronger rivals; failing to pursue product differentiation; and abandoning strategic alliances with outsiders.pursuing a low-cost leadership strategy; spending too little on marketing and advertising efforts; and putting too much emphasis on new product R&D and product innovation.pursuing a differentiation strategy instead of a low-cost strategy; not capitalizing on economies of scale; and failing to adequately broaden the product line.

2. Potentially promising strategy alternatives for a company that decides to stick with a declining industry, because top management is encouraged by the remaining opportunities and/or sees merit in striving for market share leadership, include

steering a middle course between low-cost, differentiation and focusing and adopting a best-cost producer strategy aimed squarely at being a middle-of-the-market seller.initiating deep price cuts to rekindle demand for the product.deemphasizing superior quality and customer service and shifting to a more standardized product offering.concentrating on vertical integration to gain operating control over more stages of the industry's value chain.pursuing a focused strategy aimed at the fastest-growing or slowest-decaying market segments and stressing differentiation based on quality improvement and product innovation.

3. Which one of the following statements does not represent one of the typical fundamental changes in an industry as it approaches maturity?

Industry profitability falls temporarily or permanentlyNew scale economies develop and overall costs per unit produced and sold drop significantlyFirms encounter growing difficulty in coming up with new product innovations and developing new uses and applications for the product Increased competitive emphasis is placed on lowering costs and improving serviceInternational competition increases

4. Mergers and acquisitions

are generally less effective than forming alliances or partnerships with these same companies.are usually more successful in achieving cost reductions than in expanding a company’s market opportunities.are nearly always successful in achieving their desired purpose.frequently do not produce the hoped-for outcomes.are highly risky because of the financial drain that comes from using the company's cash resources to pay for the costs of the merger or acquisition.

5. Outsourcing the performance of value chain activities presently performed in-house to outside vendors and suppliers makes strategic sense when

outsourcing won't adversely hollow out the company’s technical know-how, competencies, or capabilities.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 financial success.All of these.an activity can be performed better or more cheaply by outside specialists.it reduces the company's risk exposure to changing technology and/or changing buyer preferences.

6. Promising strategic options for companies competing in a fragmented industry include

striving to become the industry’s low-cost leader.becoming a best-cost provider and pursuing a multicountry strategy to achieve above–average growth.using a broad differentiation strategy to set the company’s product offering well apart from rivals and striving to sell in an ever larger number of country markets. specializing by product type or by customer type, becoming a low-cost operator, and focusing on a limited geographic area.constructing and operating customized facilities at many different locations so as to match local buyer expectations and varying market conditions.

7. The best strategic alliances

are highly selective, focusing on particular value chain activities and on obtaining a particular competitive benefit.are those which help a company move quickly from one strategic group to another.involve joining forces in R&D to develop new technologies cheaper than a company could develop the technology on its own.aim at raising an industry’s barriers to entry.are those whose purpose is to create an industry key success factor.

8. Which one of the following is not likely to be a suitable strategy option for companies competing in rapid-growth industries?

Gaining access to additional distributional channels and sales outletsPursuing rapid product innovation, both to set a company’s product offering apart from rivals and to incorporate attributes that appeal to growing numbers of customersDriving down costs per unit so as to enable price reductions that attract droves of new customersVertically integrating forward and backward to enable greater control of the industry value chainExpanding the product line to add models/styles that appeal to a wider range of buyers

9. Entering into strategic alliances and collaborative partnerships can be competitively valuable because

they are a powerful way for companies to build loyalty and goodwill among customers with diverse needs and expectations.they are quite effective in helping a company transfer the risks of threatening external developments to other companies.they represent highly effective ways to achieve low-cost leadership and capture first-mover advantages.cooperative arrangements with other companies are very helpful in racing against rivals to build a strong global presence and/or racing to seize opportunities on the frontiers of advancing technology.working closely with outsiders is essential in developing new technologies and new products in virtually every industry.

10. Which of the following is not usually a characteristic of competing in an emerging industry?

There’s much speculation about how the industry will function, how fast it will grow, and how big it will get.There is uncertainty regarding which of several competing technologies will win out or which product attributes will win the greatest buyer favor and drive buyer purchases.Many potential buyers expect first-generation products to be rapidly improved and delay their purchase until technology and product design mature.Technological know-how is freely shared and exchanged among the early participants, with no competitive advantage attached to patents and proprietary technology.Entry barriers tend to be relatively low.

11. The strategic impetus for forward vertical integration is to

bypass distributors-dealers and sell direct to consumers at the company’s Web site.control price at the retail level.gain better access to end users and better market visibilityachieve the same scale economies as wholesale distributors and/or retail dealers.build a core competence in mass merchandising.

12. The big risk of employing an outsourcing strategy is

hurting a company's R&D capability.putting the company in the position of being a late mover instead of an early mover.increasing the firm’s risk exposure to both supply chain management failures and shifts in the composition of the industry value chain.causing the company to become partially integrated instead of being fully integrated.hollowing out a firm's own capabilities and losing touch with activities and expertise that contribute fundamentally to the firm's competitiveness and market success.

13. The standout competitive characteristic or feature of a fragmented industry is

a market situation where demand for the product is scattered over many different country markets.the absence of market leaders with king-sized market shares and widespread buyer recognition.the demand side of the market is populated by millions of buyers, no one of which buys in large volume quantities.an unusually large number of different market segments and buyer groups.an exceptionally large number of models, styles, and product varieties being produced and marketed by industry members.

14. A company competing in a rapid-growth industry

needs a strategy predicated on growing faster than the market average, so that it can boost its market share and improve its competitive standing vis-à-vis rivals.is doomed if it is not an aggressive first-mover.needs to be primarily concerned about building first-rate R&D capabilities.is well advised to employ a best-cost provider strategy.should put top priority on improving product quality.

15. 11. Which of the following is not one of the factors that affects whether a strategic alliance will be successful and realize its intended benefits?"

Minimizing the amount of resources that the partners commit to the allianceStructuring the decision-making process so that actions can be taken swiftly when needed Picking a good partnerRecognizing that the alliance must benefit both sidesEnsuring that both parties live up to their commitments

16. Businesses competing in stagnant or declining industries must

steer a middle course between low-cost, differentiation and focusing and adopt a best-cost producer strategy aimed squarely at being a middle-of-the-market seller.initiate deep price cuts to rejuvenate long-term demand and expand into the markets of foreign countries, especially emerging country markets.outsource as many value chain activities as possible, particularly as concerns production-related activities.pursue vertical integration and gain greater operating control over more stages of the industry's value chain.make a fundamental strategic choice—whether to remain committed to the industry for the long-term despite the industry’s dim prospects or whether to pursue an end-game strategy to withdraw gradually or quickly from the market.

17. A strategic alliance

involves two or more companies joining forces to pursue vertical integration.is usually a cheaper and more effective way for companies to join forces than is merger. 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.is a partnership between two companies that is typically intended to eliminate the need to engage in outsourcing.is a collaborative arrangement where companies join forces to defeat mutual competitive rivals.

18. Which of the following is not a potential advantage of backward vertical integration?

Adding to a company’s differentiation capabilities and perhaps achieving a differentiation-based competitive advantageReduced vulnerability to powerful suppliers (who may be inclined to raise prices at every opportunity)Reduced business risk because of controlling a bigger portion of the overall industry value chainReduced risks of disruptions in obtaining crucial components or support servicesReduced costs

19. Because when to make a strategic move can be just as important as what move to make, a company's best option with respect to timing is

to carefully weigh the first-mover advantages against the first-mover disadvantages and act accordingly.to be a fast follower.to be the first mover.to be the last-mover—playing catch-up is usually fairly easily and nearly always much cheaper than any other option.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?first-mover disadvantages usually overwhelm first-m

20. First-mover disadvantages (or late-mover advantage) arise when

All of these.the pioneer's products are somewhat primitive and do not live up to buyer expectations, allowing clever followers to win disenchanted buyers with better-performing products.rapid market evolution gives fast-followers an opening to leapfrog the pioneer with next-generation products of their own.the costs of pioneering are much higher than being a follower and only negligible learning/experience curve benefits accrue to the pioneer.the marketplace is skeptical about the benefits of a new technology or product being pioneered by a first-mover.

21. Which of the following does not generally account for why the supply side of an industry may be fragmented and contain thousands of companies?

The scope of the geographic market for the industry's product or service is transitioning from national to global, putting companies in more and more countries in the same competitive arena Buyer preferences and requirements are so diverse that very large numbers of firms can easily coexist trying to accommodate differing buyer tastes, expectations, and pocketbooksLow entry barriers that permit small firms to enter cheaply and quicklyA condition where most all competitors have, for one reason or another, chosen to pursue focus and market niche strategiesAn absence of scale economies permits small companies to compete on an equal cost footing with larger firms

22. Which of the following is not usually a promising option for competing in a fragmented industry?

Focusing on a limited geographic areaSpecializing by product type or by customer typeConstructing and operating formula" facilities at many different locations "Becoming a low-cost operatorEmploying a best-cost provider strategy aimed at giving buyers more value for their money and trying to appeal to a broader customer base

23. Once a company has decided to employ a particular generic competitive strategy, then it must make such additional strategic choices as

whether to integrate forward or backward into more stages of the industry value chain.whether to bolster the company’s market position via merger or acquisitions.All of the above.which value chain activities, if any, should be outsourced.whether to enter into strategic alliances or collaborative partnerships.

24. In which of the following instances is being a first-mover not particularly advantageous?

When first-time buyers remain strongly loyal to pioneering firms in making repeat purchasesWhen early commitments to new technologies, types of components, or emerging distribution channels produce an absolute cost advantage over rivalsWhen moving first with a preemptive strike makes imitation difficult or unlikelyWhen markets are slow to accept the innovative product offering of a first-mover and fast followers possess sufficient resources and marketing muscle to overtake a first moverWhen being a pioneer helps build a firm’s image with buyers

25. Outsourcing strategies can offer such advantages as

permitting greater use of strategic alliances and collaborative partnerships.speeding a company's entry into foreign markets.increasing a company’s ability to strongly differentiate its product and be successful with either a broad differentiation strategy or a focused differentiation strategy.obtaining higher quality and/or cheaper components or services, improving a company's ability to innovate, and reducing its risk exposure.giving a firm more direct control over the costs of value chain activities.

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25 Questions

❤ If you liked Fatskills, consider supporting us by checking out The Life Manuals You Never Got.

About | Explore | User Guide | Topics | Subjects | Doubt Solver | Career Aptitude Test | Answers | Free Tools | OSHA Basics Quiz | What Should We Know? Privacy | Terms |

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About | Explore | User Guide | Topics | Subjects | Doubt Solver | Career Aptitude Test | Answers | Free Tools | OSHA Basics Quiz | What Should We Know?
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