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Chapter 02: Strategic Planning for Competitive Advantage
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74. Delat Corp. is a large corporation that offers several product lines. On the company's Web site, the following content
is highlighted: "The aim of our business is to achieve profitability by offering our customers high-quality products that are
manufactured in a cost-effective manner. Our goals are to provide value to our customers, serve the community, and
preserve the environment." This content is most likely to be Delat Corp.'s _____.
a.
article of incorporation
b.
statement of qualification
c.
scenario planning
d.
mission statement
ANSWER:
d
75. In the context of a marketing mix, which of the following statements is true of a product?
a.
The heart of a marketing mix is the product offering and product strategy.
b.
A buyer must give up the need for a product in order to obtain its benefit.
c.
A product includes all the business activities concerned with storing and transporting raw materials.
d.
Products are often the most flexible in a marketing mix— the quickest elements to change.
ANSWER:
a
76. A marketing mix typically involves:
a.
distribution strategies.
b.
divestiture strategies.
c.
restrictive covenants.
d.
federal regulations.
ANSWER:
a
77. Which of the following statements is true of a niche strategy?
a.
Only large companies can implement a niche strategy.
b.
Companies that adopt a niche strategy have only a small number of customers.
c.
Only the companies that do not have competitors can adopt a niche strategy.
d.
Companies that adopt a niche strategy can only gain a price advantage over competitors.
ANSWER:
b
78. Apcon Mobiles Inc. is a popular cell phone manufacturing company. To acquire new customers, it decides to launch
its own SIM cards in highly competitive new markets. According to Ansoff's strategic opportunity matrix, which of the
following is true of Apcon Mobiles Inc.?
a.
Apcon Mobiles Inc.'s entry into new markets is likely to be risky.
b.
Apcon Mobiles Inc. follows a product development strategy.
c.
Apcon Mobiles Inc.'s follows a market penetration strategy.
d.
Apcon Mobiles Inc.'s entry into new markets is likely to be successful.
ANSWER:
a
79. In the context of a marketing mix, promotion includes:
a.
public relations activities.
b.
pricing strategies.
c.
after-purchase service.
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d.
storage and transportation of finished products.
ANSWER:
a
80. An effective marketing objective:
a.
is qualitative rather than quantitative.
b.
is compared to a benchmark.
c.
is written independently of the mission statement.
d.
is written after a marketing plan is drafted.
ANSWER:
b
81. A company can gain a cost competitive advantage by:
a.
reorganizing functional departments into cross-disciplinary teams.
b.
manufacturing highly customized products.
c.
providing extra options on products or services.
d.
manufacturing products using high-cost production techniques.
ANSWER:
a
82. Which of the following actions is associated with a niche strategy?
a.
Choosing a target market that is not crucial to the success of major competitors
b.
Manufacturing products in bulk and targeting average customers
c.
Selling products without extra frills or options
d.
Creating cross-departmental teams across all the strategic business units
ANSWER:
a
83. Which of the following examples illustrates a niche strategy?
a.
Libra Inc., a motor company, using new production techniques to achieve economies of scale
b.
Alpha Electronics deciding to dissolve one of its strategic business units
c.
Venus Inc. selling products similar to the ones available in the market
d.
Relish, a confectionery store, selling handcrafted chocolates in only one city
ANSWER:
d
84. Which of the following activities is carried out during implementation of a marketing plan?
a.
Defining the business mission
b.
Performing marketing audit
c.
Setting up strategic business units
d.
Creating and managing a task force
ANSWER:
d
85. When properly created, a strategic business unit (SBU):
a.
has a specific target market.
b.
plans collaboratively with other SBUs of the company.
c.
has no competitors.
d.
shares the mission of its parent company.
ANSWER:
a
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86. Nile Inc. is one of the leading shoe manufacturing companies in Baltonia. It manufactures canvas shoes that are
similar to those produced by other brands. The management of the company has decided to adopt a product/service
differentiation competitive strategy. In this scenario, Nile Inc. should:
a.
offer its products at the lowest rates in the market.
b.
produce aerobic, tennis, and baseball shoes that have specialized features.
c.
advertise their products through more media outlets than before.
d.
sell products to markets outside Baltonia.
ANSWER:
b
87. In the context of a marketing mix, which of the following business activities is most closely related to distribution
strategies?
a.
Attractiveness of the product packaging
b.
Targeting market segments
c.
Storage of raw materials
d.
Medium to be used for advertising
ANSWER:
c
88. The strategy options to invest heavily to gain better market share, acquire competitors to get the necessary market
share, or drop the SBU altogether are essential in maintaining _____ in high growth industries.
a.
cash cows
b.
stars
c.
dogs
d.
question marks
ANSWER:
d
89. _____ tells us that costs decline at a predictable rate as experience with a product increases.
a.
A market opportunity analysis (MOA)
b.
An experience curve
c.
Marketing myopia
d.
Ansoff's strategic opportunity matrix
ANSWER:
b
90. In the context of the Boston Consulting Group's (BCG's) portfolio matrix, which of the following is true of question
marks?
a.
It operates in a high-growth industry with a low market share.
b.
It generates more cash than it needs to maintain its market share.
c.
It has low growth potential and a small market share.
d.
It does not require any cash to maintain its market.
ANSWER:
a
91. Jove Inc. is a chocolate manufacturer in the city of Lumberne. While most of the companies in the market produce not
more than three basic varieties of chocolates, Jove Inc. sells over 20 different varieties of flavored chocolates. Other
companies are almost out of business because they are unable to replicate Jove's collection. This gives Jove an edge over
the other chocolate makers in Lumberne. This is an example of _____.
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a.
a divestment
b.
market penetration
c.
a sustainable competitive advantage
d.
diversification
ANSWER:
c
92. In the context of SWOT analysis, marketers can identify strengths and weaknesses by focusing on:
a.
employee capabilities.
b.
the aspects of the marketing environment.
c.
demographic forces.
d.
macroenvironmental factors.
ANSWER:
a
93. In the context of a marketing mix, which of the following is an element of promotion?
a.
Pricing strategies
b.
Personal selling
c.
Product packaging
d.
Manufacturing strategies
ANSWER:
b
94. In the context of following up on a marketing plan, _____ entails gauging the extent to which marketing objectives
have been achieved during the specified time period.
a.
implementation
b.
control
c.
evaluation
d.
environmental scanning
ANSWER:
c
95. The distribution strategy in a marketing mix is concerned with:
a.
transporting raw materials or finished products.
b.
educating customers about product benefits.
c.
providing after-purchase services to customers.
d.
public relations activities.
ANSWER:
a
96. In the context of following up on a marketing plan, _____ provides the mechanisms for evaluating marketing results in
light of the plan's objectives and for correcting actions that do not help the organization reach those objectives within
budget guidelines.
a.
implementation
b.
control
c.
environmental scanning
d.
marketing myopia
ANSWER:
b
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97. Addoso Inc. manufactures electronic gadgets. The marketing managers at Addoso Inc. have discovered that a new
competitor is gaining more customers. In the context of SWOT analysis, which of the following actions should be
prioritized by the marketing managers at Addoso Inc.?
a.
They must analyze aspects of its marketing environment.
b.
They must focus on organizational resources.
c.
They should ignore macroenvironmental forces.
d.
They should focus on lowering product prices.
ANSWER:
a
98. Which of the following statements is true of the innovation matrix?
a.
As a company moves away from its core capabilities, it traverses a range of innovation.
b.
If an SBU of a firm is in a market with low overall attractiveness it must be harvested.
c.
Products are matched with markets in order to develop alternative marketing strategies.
d.
Clear-cut sectors define modern businesses' growth better than the fluid growth model.
ANSWER:
a
99. In the context of a marketing mix, the product includes:
a.
the name of the brand.
b.
the point of purchase.
c.
the elements of advanced strategic planning.
d.
personal selling.
ANSWER:
a
100. _____ multiplied by the number of units sold equals total revenue for a firm.
a.
Discount
b.
Price
c.
Overhead cost
d.
Profit margin
ANSWER:
b
101. Drafi Arts Corp. makes and sells original handicraft products. The management of the company has been
successfully using a niche strategy for years. In this case, which of the following is most likely to be true of Drafi Arts
Corp.?
a.
It serves only a limited geographic market.
b.
It offers products at a lower price than that of the competition.
c.
It develops products that are similar to those of its competitors.
d.
It lowers costs by removing frills and options from its products.
ANSWER:
a
102. Defining a business in terms of goods and services rather than in terms of the benefits customers seek is called
_____.
a.
marketing myopia
b.
marketing inertia
c.
marketing dissonance
d.
marketing blockage
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ANSWER:
a
103. Choqlate King Inc. is a large company that manufactures and sells chocolate bars. It plans to adopt a product
development strategy. In this case, Choqlate King Inc. will:
a.
focus on attracting new customers and retain existing ones.
b.
offer chocolates at competitive prices.
c.
introduce a range of low-calorie chocolates .
d.
use existing assets to provide added convenience to existing customers.
ANSWER:
c
104. According to Ansoff's strategic opportunity matrix, a firm using the market penetration alternative would try to:
a.
increase market share among existing customers.
b.
attract new customers to existing products.
c.
create new products for present markets.
d.
introduce new products into new markets.
ANSWER:
a
105. A premise of the Boston Consulting Group model states that:
a.
diversification strategies can be risky when firms enter unfamiliar markets even with little or no competition in
those markets segments.
b.
the cash generated from cash cows should be allotted to question marks and dogs instead of stars.
c.
management must find a balance among the SBUs that yields the overall organization's desired growth and
profits with an acceptable level of risk.
d.
companies must rely on new, unfamiliar assets to develop the type of breakthrough decisions that would
determine their sustainability in the future.
ANSWER:
c
106. Marketers at Libra Electronics Inc. are developing promotional strategies to increase product sales. They want to
promote the company's products among the public. In this case, which of the following is an effective promotional
strategy that the marketers can follow to improve product/brand awareness among the public?
a.
They can limit the products' availability to a few retail stores in the city.
b.
They can raise the prices of the products to signify high quality.
c.
They can reduce frills or options from the products.
d.
They can print pamphlets that elaborate the products' features.
ANSWER:
d
107. In the context of SWOT analysis, which of the following can be considered a strength of an organization?
a.
Imitable products and services
b.
A new unserved market
c.
A superior production technology
d.
Increased taxes on products
ANSWER:
c
108. Which of the following practices can help businesses gain a cost competitive advantage?
a.
Using simplified production techniques
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Chapter 02: Strategic Planning for Competitive Advantage
b.
Using expensive raw materials
c.
Customizing products with extra frills
d.
Focusing on serving marginal customers
ANSWER:
a
109. Discuss the process of market opportunity analysis.
ANSWER:
Answers will vary. The target market strategy identifies the market segment or segments on which a firm
should focus. This process begins with a market opportunity analysis (MOA)—the description and
estimation of the size and sales potential of market segments that are of interest to the firm and the
assessment of key competitors in these market segments. After the firm describes the market segments, it
may target one or more of them.
110. List the three types of competitive advantages and define them.
ANSWER:
Answers will vary. There are three types of competitive advantage: cost, product/service differentiation, and
niche.Having a cost competitive advantage means being the low-cost competitor in an industry while
maintaining satisfactory profit margins.A product/service differentiation competitive advantage exists when a
firm provides something that is unique and valuable to buyers beyond simply offering a lower price than that
of the competition.A niche competitive advantage seeks to target and effectively serve a single segment of
the market.
111. Explain the characteristics of strategic business units (SBUs).
ANSWER:
Answers will vary. Large companies may manage a number of very different businesses, called strategic
business units (SBUs). Each SBU has its own rate of return on investment, growth potential, and associated
risks, and requires its own strategies and funding. When properly created, an SBU has the following
characteristics:
• A distinct mission and a specific target market
• Control over its resources
• Its own competitors
• A single business or a collection of related businesses
• Plans independent of the other SBUs in the total organization.
In theory, an SBU should have its own resources for handling basic business functions: accounting,
engineering, manufacturing, and marketing. In practice, however, because of company tradition,
management philosophy, and production and distribution economies, SBUs sometimes share manufacturing
facilities, distribution channels, and even top managers.
112. Discuss how strategic planning can be made effective.
ANSWER:
Answers will vary. Effective strategic planning requires continual attention, creativity, and management
commitment. Strategic planning should not be an annual exercise in which managers go through the motions
and forget about strategic planning until the next year. It should be an ongoing process because the
environment is continually changing and the firm's resources and capabilities are continually evolving.
Sound strategic planning is based on creativity. Managers should challenge assumptions about the firm and
the environment and establish new strategies.
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Chapter 02: Strategic Planning for Competitive Advantage
company image, value, and many other factors.Price is what a buyer must give up in order to obtain a
product. It is often the most flexible of the four Ps—the quickest element to change. Marketers can raise or
lower prices more frequently and easily than they can change other marketing mix variables. Price is an
important competitive weapon and is very important to the organization because price multiplied by the
number of units sold equals total revenue for the firm.
114. Explain how a business mission has to be defined.
ANSWER:
Answers will vary. The foundation of any marketing plan is a firm's mission statement, which answers the
question "What business are we in?" The way a firm defines its business mission profoundly affects the
firm's long-run resource allocation, profitability, and survival. The mission statement is based on a careful
analysis of benefits sought by present and potential customers and an analysis of existing and anticipated
environmental conditions. The firm's mission statement establishes boundaries for all subsequent decisions,
objectives, and strategies.A mission statement should focus on the market or markets the organization is
attempting to serve rather than on the good or service offered. Otherwise, a new technology may quickly
make the good or service obsolete and the mission statement irrelevant to company functions. Business
mission statements that are stated too narrowly suffer from marketing myopia—defining a business in terms
of goods and services rather than in terms of the benefits customers seek. In this context, myopia means
narrow, short-term thinking. For example, Frito-Lay defines its mission as being in the snack-food business
rather than in the corn chip business. The mission of sports teams is not just to play games but also to serve
the interests of the fans.Alternatively, business missions may be stated too broadly. "To provide products of
superior quality and value that improve the lives of the world's consumers" is probably too broad a mission
statement for any firm except Procter & Gamble. Care must be taken when stating what business a firm is in.
115. Describe the nature of strategic planning.
ANSWER:
Answers will vary. Strategic planning is the managerial process of creating and maintaining a fit between the
organization's objectives and resources and the evolving market opportunities. The goal of strategic planning
is long-run profitability and growth. Thus, strategic decisions require long-term commitments of resources.A
strategic error can threaten a firm's survival. On the other hand, a good strategic plan can help protect and
grow the firm's resources. Strategic marketing management addresses two questions: (1) What is the
organization's main activity at a particular time? (2) How will it reach its goals?
116. Explain SWOT analysis.
ANSWER:
Answers will vary. Marketers must understand the current and potential environment in which the product or
service will be marketed. A situation analysis is sometimes referred to as a SWOT analysis—that is, the firm
should identify its internal strengths (S) and weaknesses (W) and also examine external opportunities (O) and
threats (T).When examining internal strengths and weaknesses, the marketing manager should focus on
organizational resources such as production costs, marketing skills, financial resources, company or brand
image, employee capabilities, and available technology.When examining external opportunities and threats,
marketing managers must analyze aspects of the marketing environment. This process is called
environmental scanning—the collection and interpretation of information about forces, events, and
relationships in the external environment that may affect the future of the organization or the implementation
of the marketing plan. Environmental scanning helps identify market opportunities and threats and provides
guidelines for the design of marketing strategy. The six most often studied macroenvironmental forces are
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Chapter 02: Strategic Planning for Competitive Advantage
be unrealistic for start-up firms or new products to command dominant market share, given other
competitors in the marketplace.
• Measurable: Managers need to be able to quantitatively measure whether or not an objective has
been met. For example, it would be difficult to determine success for an objective that states, "To
increase sales of cat food." If the company sells one percent more cat food, does that mean the
objective was met? Instead, a specific number should be stated, "To increase sales of Purina brand
cat food from $300 million to $345 million."
• Time specific: By what time should the objective be met? "To increase sales of Purina brand cat food
between January 1, 2014, and December 31, 2014."
• Compared to a benchmark: If the objective is to increase sales by 15 percent, it is important to know
the baseline against which the objective will be measured. Will it be current sales? Last year's sales?
For example, "To increase sales of Purina brand cat food by 15 percent over 2012 sales of $300
million."
118. Discuss the market penetration strategy of Ansoff's strategic opportunity matrix.
ANSWER:
Answers will vary. A firm using the market penetration alternative would try to increase market share among
existing customers. FTR Energy Services, a division of Frontier Communications, introduced a Green-e
certified energy service into New York, Ohio, and Indiana markets served by Frontier's telephone and
broadband services. Even though these markets were already served by separate, well-established energy
companies, FTR Energy hoped to penetrate the energy market by allowing customers to lock in competitive
rates and offering five percent cash back on energy usage. Customer databases would help managers
implement the market penetration strategy.
119. Discuss the general strategies for selecting target markets.
ANSWER:
Answers will vary. Target markets can be selected by appealing to the entire market with one marketing mix,
concentrating on one segment, or appealing to multiple market segments using multiple marketing mixes.
Target markets could be eighteen- to twenty-five-year-old females who are interested in fashion (Vogue
magazine), people concerned about sugar and calories in their soft drinks (Diet Pepsi), or parents who do not
have the time to potty train their children (Booty Camp classes where kids are potty trained).Any market
segment that is targeted must be fully described. Demographics, psychographics, and buyer behavior should
be assessed.
120. Discuss the process of implementing a marketing plan.
ANSWER:
Answers will vary. Implementation is the process that turns a marketing plan into action assignments and
ensures that these assignments are executed in a way that accomplishes the plan's objectives. Implementation
activities may involve detailed job assignments, activity descriptions, time lines, budgets, and lots of
communication. It requires delegating authority and responsibility, determining a time frame for completing
tasks, and allocating resources. Sometimes a strategic plan also requires task force management. A task force
is a tightly organized unit under the direction of a manager who, usually, has broad authority. A task force is
established to accomplish a single goal or mission and thus works against a deadline.Implementing a plan has
another dimension: gaining acceptance. New plans mean change, and change creates resistance. One reason
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specified elsewhere as soon as the plan has been communicated. Strong, forward-thinking leadership can
overcome resistance to change, even in large, highly integrated companies where change seems very
unlikely.
