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Strategic Management: Concepts and Cases, 13/e
Arthur A. Thompson Jr., University of Alabama
A.J. Strickland III, University of Alabama

Tailoring Strategy to Fit Specific Industry and Company Situations

Chapter 8 Quiz


Competing in emerging industries of the future
A)poses the strategy-making challenge of dealing with uncertainties about how the market will function, how fast it will grow, and how big it will get and usually requires risk-taking entrepreneurship, a bold strategy, efforts to capture first-mover advantages, forming alliances, and efforts to get first-time buyers to try the product/service.
B)is made somewhat easier because there is usually a strong consensus about which of several competing technologies will win out and which product attributes will ultimately gain the most buyer favor.
C)is less risky than competing in maturing industries where there are established "rules of the game."
D)is usually more profitable than competing in industries where market demand is stagnant or even declining.
E)typically involves high entry barriers, little experimentation with different strategic approaches, and small learning/experience curve effects.

In trying to cope with a turbulent, high-velocity market environment, a company
A)should usually put a strong emphasis on short-term profitability rather than worrying excessively about building and strengthening the company's long-term market position-the direction of market change is too volatile and unknowable to put much time into worrying about the long-term.
B)can assume any of three strategic postures-it can react to change, it can anticipate change, and it can lead change; typically all three postures will have to be employed at one time or another-though not in the same proportion.
C)should strive to be a fast follower and occasionally a slow-mover (like when the actions of early movers involve adoption of a radically different technological approach)-being a consistent first mover entails great risk and can upset shareholders.
D)generally needs to put most of its strategic emphasis on defensive-type strategies because offensive strategies are so risky.
E)generally needs to compete with a focus or best-cost strategy rather than on the basis of low-cost/low-price or strong product differentiation.

Which one of the following strategic moves and initiatives is unlikely to be an attractive option for competing in a turbulent, high velocity market environment?
A)initiating fresh actions every few months, not just when a competitive response is needed to counter or match what rivals are doing
B)Relying on strategic partnerships with outside suppliers and with companies making tie-in products
C)Investing aggressively in R&D to stay on the leading edge of technological know-how and keeping the company's products fresh and exciting enough to stand out in the midst of all the change that is taking place
D)Avoiding the perils of first-mover disadvantages and putting heavy emphasis on developing strong defensive strategies to counter and neutralize the action of rivals-reacting to change is a more prudent approach than trying to lead change when a company wants to be a successful high-performer
E)Developing and maintaining the organizational capability to respond quickly to the moves of rivals and surprising new developments

The big managerial challenge in competing in a fast-changing, high-velocity market environment where there are many new technological frontiers and many new products being introduced is
A)whether to pursue revenue growth by increasing sales to existing customers or by going after altogether new customers.
B)whether to pursue broad differentiation or focused differentiation based on superior product quality or superior customer service.
C)whether to concentrate on the domestic market or to compete more broadly in international markets.
D)finding effective ways to reduce costs, to measure costs more precisely, and to price products more carefully.
E)managing change.

Which of the following are not characteristics of a maturing industry?
A)Profit margins start to get squeezed, industry profitability begins to erode, and the industry begins to consolidate
B)Companies begin to respond by pruning their product lines, focusing on cost reduction, expanding internationally, pursuing value chain innovation, and purchasing/acquiring weak or struggling competitors
C)Entry barriers fall, the industry becomes more profitable because market demand is dependable and stable, and most competitors are driven to pursue a low-cost provider strategy
D)There is more head-to-head competition for market share and product innovations and new-end-use applications are harder to come by,
E)Buyers become more sophisticated, often driving a harder bargain on repeat purchases

Companies that succeed in competing in stagnant or declining industries
A)usually are forced to steer a middle course between low-cost and differentiation and pursue a best-cost provider strategy.
B)depend heavily on defensive strategies rather than offensive strategies and are patient and willing to wait the hard times out until the market turns around (as it usually does) and business conditions improve.
C)typically pursue short-term cash flow maximization rather than long-term profit maximization.
D)sometimes rely on a focus strategy that involves identifying, creating, and exploiting growth segments within the overall industry; sometimes elect to pursue differentiation strategies keyed to quality improvement and product innovation; and sometimes work diligently and persistently to drive costs down.
E)draw their cash out of the business quickly via a rapid harvesting strategy and re-deploy it elsewhere (in other, more profitable investments).

Competing in fragmented industries
A)entails operating under conditions where there are many, many buyers of the product and the quantity sold to any one buyer constitutes a tiny fraction of total industry sales volume.
B)usually means that the industry is characterized by low entry barriers, an absence of economies of large-scale production, and demand conditions where a relatively large number of participants can profitably co-exist in meeting buyer needs and requirements.
C)is very conducive to the use of low-cost leadership and broad-appeal differentiation strategies (because it is in a fragmented industry environment that these strategies readily lead to industry domination).
D)tends to be more profitable and more likely to result in sustainable competitive advantage when a company employs a focused differentiation strategy instead of a focused low-cost strategy.
E)normally requires both forward and backward integration in order to achieve a viable long-term market position.

Companies that are focused on growing their revenues and earnings at a rapid or above-average pace year-after-year
A)typically form an array of strategic alliances with foreign firms to accelerate access to the markets of foreign countries and diversify their product lines so as to offer buyers a wide selection.
B)have to be aggressive first-movers and strive to build a dominant market share via merger and acquisition.
C)usually have to pursue global strategies and enter as many new foreign markets each year as their resources will permit.
D)have a portfolio of strategic initiatives that range from strengthening its existing businesses to entering businesses with promising growth opportunities to planting the seeds for entirely new ventures.
E)All of the above are correct.

In a fragmented industry
A)the standout competitive feature is the attempts of industry members to rapidly merge with and/or and acquire rival companies so as to overcome the shortcomings of market fragmentation.
B)participants generally have the strategic freedom to pursue broad or narrow market targets and low-cost or differentiation-based competitive advantages; some of the attractive strategy options are to construct and operate "formula facilities" in many different locations, specialize by product type or by customer type, or focus on a limited geographic area.
C)the market is usually local (which is why it takes thousands of sellers to cover all the different local markets).
D)one of the most suitable competitive strategy options is to expand internationally in order to gain first-mover advantages in the markets of attractive foreign countries; another of the suitable competitive strategy options is to form strategic alliances with sellers in each of the many local markets to gain broad access to many different local markets.
E)All of the above are correct.

To sustain their market positions, industry leaders usually need to consider which of the following strategic options?
A)A global expansion strategy, a fortify-and-defend strategy, a market consolidation strategy, or a strategic alliance strategy
B)A broad differentiation strategy, a multiple profit sanctuary strategy, a preemptive strike strategy, an acquisition strategy, a joint venture strategy, or a rapid diversification strategy
C)A stay-on-the-offensive strategy, a fortify-and-defend strategy, or a muscle-flexing strategy
D)A follow-the-leader strategy, a strategic alliance strategy, a market dominance strategy, an end-game strategy, or a rapid growth strategy
E)A content follower strategy, a harvest strategy, or a diversification strategy

The strategic options most suitable for runner-up competitors include
A)a strategy of imitating the strategic actions and approaches of the industry leader.
B)a "try harder" strategy, a vertical integration strategy, a low-cost leader strategy, a liquidation strategy, an abandonment strategy, and a retreat-to-a-vacant-niche strategy.
C)a growth-via-acquisition strategy, a vacant niche strategy, a specialist strategy, a superior product strategy, a distinctive image strategy, or a content follower strategy.
D)a rapid growth strategy, a "mover-and-shaker" offensive, a harvest strategy, an outsourcing strategy, an end-game strategy, and a content follower strategy.
E)a "try harder" strategy, an international expansion strategy based on exporting, a guerilla warfare strategy, and a home-field advantage strategy.

The strategic options for a company in an also-ran or declining competitive position include:
A)an outsourcing strategy, a guerilla warfare strategy, an end-run offensive, or an end-game strategy.
B)a franchising strategy, a licensing strategy, an export strategy, a liquidation strategy, or a focused differentiation strategy.
C)an immediate abandonment strategy, an end-game strategy, an offensive turnaround strategy keyed either to low-cost or differentiation, or a fortify-and defend strategy.
D)a preemptive strike strategy, a content follower strategy, a follow-the-leader strategy, a focused low-cost strategy, or a hide-in-a-vacant-niche strategy.
E)Both c and d.

Strategic efforts to turn around crisis-ridden companies typically involve such actions as
A)launching a retreat-to-a-vacant-niche strategy.
B)revenue-boosting initiatives, revising the existing strategy (perhaps radically), pursuing cost reduction (often quite aggressively), and/or selling some of the company's assets to raise cash to revitalize the remaining part of the business and perhaps pay down debt.
C)acquiring several smaller rivals so as to build a critical mass of customers and get in position to capture economies of scale.
D)initiating a preemptive strike strategy and then resorting to random guerilla raids on the positions of the industry leaders.
E)revising the company's business model and strategy so as to closely imitates the business model and strategy of a high-performing company of approximately the same size.

In which of the following instances is an end-game strategy not a reasonable strategic option for a weak business?
A)When the company is a second-tier runner-up and can readily outsource some key value chain activities to trusted strategic allies
B)When the firm's market share is becoming increasingly costly to maintain or defend
C)When reduced levels of competitive effort will not trigger an immediate or rapid decline in sales and the enterprise can re-deploy the freed resources to other higher-opportunity areas
D)When the industry's prospects are unattractive and rejuvenating the business would be too costly or at best marginally profitable
E)When the business is not a crucial or core component of a diversified company's overall business lineup

Which of the following does not qualify as a "commandment" for crafting successful business strategies?
A)Place top priority on crafting and executing strategic moves that will enhance a company's long-term competitive position.
B)Sell or close a crisis-ridden business immediately-turnaround strategies are doomed to fail; moreover, always harvest a weak business and quickly re-deploy the cash flows to more profitable business opportunities.
C)Strive to open up very meaningful gaps in quality or service or performance features when pursuing a differentiation strategy.
D)Be judicious in cutting prices without an established cost advantage.
E)Invest in creating a sustainable competitive advantage.