A Low-Cost Leader

1.       A low-cost leader can translate its low-cost advantage over rivals into superior profit performance by

A    Cutting its price to levels significantly below the prices of rivals

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B    Either using its low-cost edge to underprice competitors and attract price-sensitive buyers in large enough numbers to increase total profits or refraining from price cutting and using the low-cost advantage to earn a bigger profit margin on each unit sold

C    Going all out to use its cost advantage to capture a dominant share of the market

D    Spending heavily on advertising to promote its cost advantage and the fact that it charges the lowest prices in the industry – it can then use this reputation for low prices to build very strong customer loyalty, gain repeat sales year after year, and earn sustained profits over the long-term

E    Outproducing rivals and thus having more units available to sell


2.       Strategic offensives should, as a general rule, be based on

A    Exploiting a company’s strongest strategic assets

B    Implementing and executing the chosen strategy efficiently and effectively

C    Sizing up an organization’s internal and external situation

D    Molding an organization’s character and identity

E    The buyer’s needs that the company seeks to satisfy


3.       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

A    To be the first 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 – first-mover disadvantages usually overwhelm first-mover advantages)

D    To be the last-mover – playing catch-up is usually fairly easily and nearly always much cheaper than any other option

E    To carefully weigh the first-mover advantages against the first-mover disadvantages and act accordingly


4.       Easy-to-copy 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

D    Should never be incorporated in a company’s product offering if its differentiation strategy is to succeed

E    Lead to vigorous price competition


5.       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 five generic competitive strategies?

A    Whether to focus on building competitive advantages

B    Whether to employ the element of surprise as opposed to doing what rivals expect and are prepared for

C    Whether to employ a market share leadership strategy

D    Whether to display a strong bias for swift, decisive, and overwhelming actions to overpower rivals

E    Whether to create and deploy company resources to cause rivals to defend themselves


6.       Which of the following is not a typical reason for companies to expand into the markets of foreign countries?

A    To gain access to new customers

B    To strengthen its capability to employ vertical integration strategies, especially those that involve partial integration (building positions in selected stages of the industry’s value chain)

C    To achieve lower costs and enhance the firm’s competitiveness

D    To capitalize on company competencies and capabilities

E    To spread business risk across a wider geographic market base


7.       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    Low-cost provider, broad differentiation, best-cost provider, focused low cost, and focused differentiation

D    Low-cost/low-price strategies, high-quality/high-price strategies, and medium-quality/medium-price strategies

E    Price leader strategies, price follower strategies, technology leader strategies, first-mover strategies, offensive strategies, and defensive strategies


8.        In which of the following instances is being a first-mover not particularly advantageous? A When moving first with a preemptive strike makes imitation difficult or unlikely

B    When first-time buyers remain strongly loyal to pioneering firms in making repeat purchases

C    When early commitments to new technologies, types of components, or emerging distribution channels produce an absolute cost advantage over rivals

D    When 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 mover

E    When being a pioneer helps build a firm’s image with buyers


9.       Multidomestic competition is best characterized as a situation where

A    The competitive arena among rival companies involves several neighboring countries rather than either a single country or the world market as a whole

B    Competition is mainly among the domestic companies of a few neighboring countries (five countries at most)

C    There are extensive trade restrictions, sharply fluctuating exchange rates, and high tariff barriers in many country markets that work against the formation of a true world market

D    Competition among domestic companies predominates, and foreign competitors are a minor factor

E    There is no international or global market; just a collection of mostly self-contained country markets


10.   To succeed with a low-cost 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) perform value chain activities more cost-effectively than rivals and (2) be proactive in revamping the firm’s overall value chain to eliminate or bypass nonessential cost-producing activities

E    Outsource the biggest majority of value chain activities


11.   Companies that compete on an international basis have a competitive advantage over their purely domestic rivals

A    To achieve a larger domestic interest by developing sufficient resource strengths and competitive capabilities for success

B    To benefit from coordinating activities across different countries’ domains – not 100% sure on this one though

C    Solely for the benefit of their shareholders

D    That guarantees the generation of big profits, big returns on investment, and big cash surpluses after dividends are paid

E    All of the above


12.   The major avenues for achieving a cost advantage over rivals include

A    Revamping the firm’s value chain to eliminate or bypass some cost-producing activities and/or outmanaging rivals in the efficiency with which value chain activities are performed

B    Having a management team that is highly skilled in cutting costs

C    Being a first mover in adopting the latest state-of-the-art technologies, especially those relating to low-cost manufacture

D    Outsourcing high-cost activities to cost-efficient vendors

E    Paying lower wages and salaries than rivals


13.   For backward vertical integration into the business of suppliers to be a viable and profitable strategy, a company

A    Must first be a proficient manufacturer

B    Must be able to achieve the same scale economies as outside suppliers and match or beat suppliers’ production efficiency with no drop-off in quality

C    Must have excess production capacity, so that it has ample in-house ability to undertake additional production activities

D    Needs to have a wide product line, so that it can supply parts and components for many products

E    Should have a distinctive competence in production process technology and at least a core competence in manufacturing R&D


14.   In which one of the following market circumstances is a broad differentiation strategy generally not well suited?

A    When buyer needs and preferences are too diverse to be fully satisfied 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 product offerings apart

D    When there are many ways to differentiate the product or service and many buyers perceive these differences as having value

E    When technological change is fast paced and competition revolves around rapidly evolving product features


15.   A focused low-cost 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 budget-priced 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 firm can lower costs significantly by limiting its customer base to a well-defined buyer segment


16.   Which of the following are not generic strategy options for competing in foreign markets?

A    An export strategy and a multidomestic strategy

B    Global strategies keyed either to low-cost or differentiation

C    Cross-border transfer strategies and home-field advantage strategies

D    Using strategic alliances and joint ventures with foreign competitors as the primary vehicles for entering and competing in foreign markets

E    Franchising and licensing strategies


17.   Question: Which of the following is the most unlikely element of a localized multidomestic strategy?

A    Granting country managers fairly wide strategy-making latitude

B    Plants scattered across many host countries, each producing product versions for local area markets

C    Marketing and distribution adapted to the buying habits, customs, and culture of each host country

D    Preference for local suppliers (use of some local suppliers may be mandated by host governments)

E    Selling direct to buyers (perhaps via the company’s website) to avoid having to establish networks of wholesale/retail dealers in each country market


18.   A think-global, act-global approach to crafting a global strategy involves

A    Pursuing the same basic competitive strategy theme (low cost, differentiation, best cost, focused) in all countries where the firm does business

B    Selling much the same products under the same brand names everywhere and expanding into most, if not all, nations where there is significant buyer demand

C    Integrating and coordinating the company’s strategic moves worldwide

D    Utilizing the same competitive capabilities, distribution channels, and marketing approaches worldwide

E    All of the above


19.   A greenfield venture in a foreign market is

A    One where the company creates a subsidiary business by setting up all aspects of the operation upon entering the market from the ground up

B    One where foreign facilities and marketing strategies are shared with local businesses

C    One where the company learns through training by the foreign entity on how to compete

D    One that supports exports into a foreign market by marketing indirectly through local rivals

E    One that offers lower risk and a faster path to returns


20.   Profit sanctuaries are country markets or geographic regions whereby a

A    Company can rank the competitive advantage opportunities in each industry

B    Company possesses good strategic fit with other businesses and identifies the value chain where this fit occurs

C    Company derives substantial profits because of its protected market position or unassailable competitive advantage

D    Company creates substantial investment strategies because it is losing competitive advantage over competitors

E    Company that invests its dividends in expanding its foreign market presence


21.   The advantages of using an acquisition strategy to pursue opportunities in foreign markets include

A    Having a high level of control and speed as an entry strategy to overcome trade barriers

B    Allowing a company to achieve scalable economies

C    Eliminating the costs and risks associated with establishing a foreign business location

D    Being able to achieve variable product quality and competitive product performance

E    Being able to export goods at higher costs than rivals in those locations


22.   A strategy to be the industry’s overall low-cost provider tends to be more appealing than a differentiation or best-cost or focus/market niche strategy when

A    There are many ways to achieve product differentiation that buyers find appealing

B    Buyers use the product in a variety of different ways and have high switching costs in changing from one seller’s product to another

C    The offerings of rival firms are essentially identical, standardized, commodity-like products

D    Entry barriers are high and competition from substitutes is relatively weak

E    The market is composed of many distinct segments with varying buyer needs and expectations


23.   Outsourcing the performance of value chain activities presently performed in-house 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 financial success

C    Outsourcing won’t adversely hollow out the company’s technical know-how, competencies, or capabilities

D    It reduces the company’s risk exposure to changing technology and/or changing buyer preferences

E    All of these


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

A    Picking a good partner

B    Recognizing that the alliance must benefit both sides

C    Minimizing the amount of resources that the partners commit to the alliance

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


25.   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 and/or retail dealers

C    Control price at the retail level

D    Bypass distributors-dealers and sell direct to consumers at the company’s website

E    Build a core competence in mass merchandising


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