The best of the generic business strategies is the integrated cost
leadership/differentiation strategy.
a. True
b. False
The worldwide geographic area structure differs from the worldwide product divisional
structure in the level of centralization of decision making.
a. True
b. False
Autonomous strategic behavior results in internal innovations that are highly consistent
with the firm’s current strategy.
a. True
b. False
Blixin Concrete Products, an established firm, is seeking a technologically advanced
partner for a strategic alliance.
If the potential partner is a new entrepreneurial venture, the main benefit the Blixin
Concrete can offer is probably
a. investment capital.
b. management expertise.
c. research and development competencies.
d. social networks.
Organizational mission statements typically do not include statements about
profitability and earning above-average returns.
a. True
b. False
Invention is defined as the adoption of a similar innovation by different firms.
a. True
b. False
The lowest level of diversification is the level.
a. single-business
b. dominant business
c. related constrained
d. unrelated
In a diversified firm, capital allocation can be adjusted according to more specific
criteria than is possible with external market allocation of capital.
a. True
b. False
Value chain activities in the value chain create value, whereas support functions
generate costs.
a. True
b. False
CaseScenario2:HeartsongLLC.
Heartsong LLC is a designer and manufacturer of replacement heart valves based in
Peoria, Illinois. While a relatively small company in the medical devices field, it has
established a worldwide reputation as the provider of choice of high-quality,
leading-edge artificial heart valves. Most of its products are sold to large regional
hospital systems and research hospitals around the world, though primarily to
customers in the United States and Europe. Specialty heart centers are another
emerging, but fast-growing market for its valves. Heartsong has recently embarked on
an expansion strategy that requires it to increase its volume, which in turn will demand
more component parts than it can source domestically- both from an economic and
volume standpoint. The firm has determined that such growth is only viable if it
produces these parts itself overseas for a lower cost, or outsources the production
entirely to a joint venture it establishes with a local manufacturer, which could both
produce the parts more cheaply and in higher volumes. It is considering starting up an
owned production facility in Luxembourg, or seeking a joint venture with a precision
manufacturer in China.
The advantages of a joint venture with a precision manufacturer in China is shared
costs, shared resources, and shared risks, but there may be problems integrating the two
corporate cultures.
The Renault Nissan approach to managing its collaboration involves less reliance on
contracts and more reliance on trust, respect, and transparency (i.e., the
opportunity-maximization approach to managing cooperative strategies).
a. True
b. False
CaseScenario3:Bunnywac.
Bunnywac is a global producer and seller of batteries for consumer electronics, and
competes primarily by providing battery products equal in performance at a lower price.
The worldwide battery industry suffers from issues of overcapacity and
commoditization, brand segmentation and proliferation, the growing strength of global
retailers, and the low-cost threat of new entrants from Asia. Bunnywac has grown
quickly into one of the leading players in the battery industry primary through
horizontal acquisitions, and is now counted among the top four companies in North and
Latin America. Its presence in Europe and Latin America is negligible. A key factor in
Bunnywac’s rapid growth is its technology outsourcing arrangement with Mats. Mats is
one of Japan’s largest technology holding companies and Bunnywac’s core battery
technology is licensed from Mats. Bunnywac’s license with Mats expires soon and it is
concerned that Mats will not renew it, or will renew it only for a substantial price
premium. Consequently, Bunnywac’s CEO is exploring the possibility of developing its
core technology in-house.
What aspects of Bunnywac’s development of its core battery technology do not fit the
notion of strategic behavior that you identified above?
Global warming and energy consumption are aspects of the technological environment
segment that firms should monitor.
a. True
b. False
If conflict in a strategic alliance or joint venture is not manageable, a(n) may be a better
option.
a. licensing strategy
b. exporting strategy
c. acquisition
d. new wholly owned subsidiary
When resources and capabilities serve as a source of competitive advantage for a firm,
the firm has created a(n)
a. strategic mission.
b. inspiring vision.
c. core competence.
d. sustainable market niche.
United Technologies Corp. (UTC) uses acquisitions of firms such as Otis Elevator
Company (elevators, escalators, and moving walkways) and Carrier Corporation
(heating and air conditioning systems) as the foundation for implementing its related
diversification strategy.
a. True
b. False
Coca Cola and PepsiCo are examples of firms that have found it unnecessary to
aggressively pursue international strategies because of extensive growth opportunities
available in the U.S. market.
a. True
b. False
The “liability of foreignness” is the
a. inability of most U.S. managers to truly comprehend foreign cultures.
b. political disadvantage that U.S. firms have when doing business abroad.
c. overall risk of participating outside a firm’s domestic country when entering global
competition.
d. strong cultural preference for “buying local,” which puts foreign firms at a
disadvantage when competing in the U.S. market.
A ______ cooperative strategy helps the firm diversify in terms of products offered,
markets served, or both.
a. corporate-level
b. business-level
c. national-level
d. industry-level
A stable alliance network is used in industries characterized by frequent product
innovations and short product life cycles.
a. True
b. False
CaseScenario2:Compliance,Inc.
Compliance, Inc. (CI) conducts clinical human and animal trials for the pharmaceutical
and biotechnology industries. Revenues are split evenly between early and late drug
development services and the firm is a leader in the laboratory technologies needed for
such testing. One of CI’s internal quality managers, Sharon Kline, has approached the
CEO with a new business proposal. She would like to see the firm take one of its
in-house software programs and develop it as a leadingÂedge commercial product for
three specific target markets€medical care providers, payers of medical care, like
insurance companies, and suppliers to medical care providers, like pharmaceutical
companies. The features of the software are easy to use and include electronic
distribution, data harvesting, and robust reporting capabilities. With this software
Sharon believes that medical care providers will be able to collect data to market to and
negotiate contracts with payers or employers, profile performance of individual
physicians or practice sites, identify best clinical practices, generate reports that satisfy
regulatory or accreditation requirements for provider sites, and supply professional
societies with data for influencing payer and government policies. Another target
market, insurance companies and other medical services payers, will be able to use the
software to profile performance of individual physicians or practice sites, identify best
clinical practices, generate reports that satisfy regulatory or accreditation requirements,
and collect data to market to and negotiate contracts with employers. Finally, the
software will allow suppliers to medical care providers to assess how products perform
compared to competitor products, assess outcomes in real-world compared to clinical
trial settings, obtain information on provider-specific practice patterns, determine
whether products are being used correctly, get “face- time” with physicians and HMOs,
obtain information on product switching behavior, offer providers a value-added
service, and meet FDA post-marketing surveillance requirements. CI has never
launched such a product before and, even if successful, software is a very different
product than the clinical trials services it provides now. The CEO must determine how
to build and manage this new business for CI.
Where does it appear that autonomous strategic behavior ends and induced strategic
behavior begins in the software situation at CI?
CaseScenario3:BarracudaInc.
Barracuda Inc. is a lamp-fixture manufacturer that is considering an entry strategy into
the U.S. home-furnishings manufacturing industry. The existing landscape consists of
many players but none with a controlling share. There are currently 2,500 home
furnishings firms, and only 600 of those have more than 15 employees. Average net
profit after tax is between 4 and 5 percent. While the industry still primarily comprises
single-business, family-run firms that manufacture furniture domestically, imports are
increasing at a fairly rapid rate. Some of the European imports are leaders in
contemporary design. Relatively large established firms are also diversifying into the
home- furnishings industry via acquisition. Supplier firms to the home-furnishings
industry are in relatively concentrated industries (such as lumber, steel, and textiles).
Retailers, the intermediate customer of the home-furnishings industry, have been
traditionally very fragmented. Customers have many products to choose from, at many
different price points, and few home-furnishing products have strong brands. Also,
customers can switch easily among high- and low-priced furniture and other
discretionary expenditures (spanning big-screen TVs to the choice of postponing any
furniture purchase entirely).
How intense is competitive rivalry likely to be among incumbents of the home-
furnishings manufacturing industry?
Discuss the effect of international diversification on a firm’s returns.
Describe the market for corporate control and its implications for organizations.
Define the agency relationship and managerial opportunism and discuss their strategic
implications.
What is strategic leadership, who has primary responsibility for strategic leadership,
and what are the five key strategic leadership actions?
Describe the four specific criteria that managers can use to decide which of their firm’s
capabilities have the potential to create a sustainable competitive advantage.
CaseScenario1:InternationalCowPacker.
International Cow Packers (ICP) is a $12 billion meat processor (slaughter, processing,
and packing). Founded in 1943, ICP has grown to become the largest beef and pork
processor in the United States (revenues come 90 percent from beef and 10 percent
from pork) and also has a growing export market to Japan. The company follows a
focused cost leadership strategy, delivering USDA-graded meats primarily to the
institutional (schools, prisons, hospitals) and supermarket channels. ICP’s entire value
chain is organized to deliver volume product at the industry’s lowest per-unit cost. Its
supplier industries, primarily cattle and swine feedlots, have relatively little power since
prices for these raw materials are determined in the commodity markets. While entry
barriers to the industry are high due to high minimum startÂup costs, industry rivalry is
extremely intense-primarily due to the fact that three large companies (including ICP)
control 80 percent of the market for processed meats. The threat of substitutes is high
with an increasing trend for consumers to favor poultry and other non-beef proteins.
Buyers are also powerful since supermarkets are relatively concentrated at a regional
level and end consumers have ample choices.
What can ICP do to decouple itself from the ups and downs of the pure commodity
markets? What specific actions might ICP undertake?