Costly-to-imitate capabilities can emerge for all of the following reasons EXCEPT
a. lack of scientific transference.
b. social complexity.
c. unique historical conditions.
d. causal ambiguity.
Examples of incremental innovations include iPods, PDAs, Wi-Fi, and web browser
software.
a. True
b. False
All of the following were traditionalsources of competitive advantage EXCEPT
a. labor costs.
b. access to financial resources.
c. protected markets.
d. a highly educated labor market.
Factors of production in Porter’s model of international competitive advantage include
all of the following EXCEPT
a. labor.
b. capital.
c. infrastructure.
d. technology.
An English professor spends her summers writing low-brow romance novels that sell
directly to paperback. She writes under a fictional name because she is embarrassed to
admit to her colleagues and students how she earns the extra money for foreign
vacations. The professor is correct in her concern that she is serving customer needs
that are objectively inferior and bad.
a. True
b. False
The firm’s envisioned future encourages employees to stretch beyond their expectations
of accomplishment and requires significant change and progress to be realized.
a. True
b. False
Which type of diversification is most likely to create value through financial
economies?
a. related constrained
b. operational and corporate relatedness
c. unrelated
d. related linked
Hilliard Pharmaceuticals and Ahrens Vitamins, Inc., have high market commonality,
both geographically and in the market segments in which they compete. Hilliard, the
number two firm in the industry, has undertaken a major strategic attack upon Ahrens,
the market leader. Which of the following statements is most likely to be TRUE?
a. Ahrens will not respond aggressively since this is a strategic move and not a tactical
action.
b. As the market leader, Ahrens has little to fear from an attack by Hilliard and will not
expend organizational slack on a major response.
c. Ahrens will respond aggressively because of the high multimarket contact between
Hilliard and Ahrens.
d. Ahrens will respond after a long delay as the nutrition supplement industry is a
slow-cycle industry.
A cross-functional product development team has been examining a proposed new
product intensively for 6 months. The team has decided that although the product is
unique and technologically advanced, the cost of production will exceed the price that
the consumer would be willing to pay. At this point, the product development team
should
a. engage in creative destruction.
b. recommend that the product be sold at a loss in order to create a new market.
c. turn over the product evaluation to a new product-development team which may have
more passion for the product.
d. recommend that the project be set aside.
CaseScenario3:WaltDisneyCompany.
Walt Disney Company is famed for its creativity, strong global brand, and uncanny
ability to take service and experience businesses to a higher level. In the 1970s, the
company realized nearly 90 percent of its revenues from its cartoons and the
Disneyland theme park in Anaheim, CA. By the beginning of the twenty-first century,
Disney had not only opened up more parks and ramped up its output of animated films,
it had also diversified into many businesses well beyond its traditional core of
high-quality cartoon animation and theme parks. For instance, the Disney empire
diversified vertically and horizontally into retail (The Disney Store, since licensed to
The Children’s Place), cruise lines, theaters, motels, and the Disney Press. It also moved
into new product offerings such as sports franchises, TV networks (ABC and ESPN)
and stations, Miramax, Broadway shows (Beauty and the Beast), and vacation clubs.
International growth included EuroDisney and Hong Kong Disney and new releases of
TV shows, videos, and movies worldwide. Indeed, while many of Disney’s businesses
had some tie to Mickey Mouse, only about 28 percent of total revenues now came
directly from its parks.
What level and type of diversification best characterized Disney in the 1970s?
A. dominant business
B. related constrained
C. related linked
D. unrelated
Define the three major dimensions of organizational structure: specialization,
centralization, and formalization. How do these dimensions vary in organizations
implementing the cost leadership, differentiation, and cost leadership/differentiation
strategies?
Describe the organizational structures used to implement cooperative strategies, giving
attention to the role of the strategic center firm.
Describe a firm with which you are familiar. Which business-level strategy does it use
and what are the risk to that particular firm?
Identify the five forces that underlie the five forces model of competition. Explain
briefly how they affect industry profit potential.
CaseScenario2:Raptec.
Raptec operates in three principal business segments: Direct Attached Storage (“DAS”),
Storage Networking Solutions (“SNS”), and Software. These hardware and software
products are found in high-performance networks, servers, workstations, and desktops
from the world’s leading OEMs, and are sold through distribution channels to Internet
service providers, enterprises, and medium and small businesses and consumers. Since
the time it went public, Raptec has experienced rapid growth and consistently profitable
operations. In early 2002, Raptec announced its plan to spin-off the software segment,
subsequently incorporated as Axio, Inc., in the form of a fully independent and separate
company. Software was Raptec’s most profitable and fastest growing segment. By
mid- 2002 Raptec had completed the initial public offering of approximately 15 percent
of Axio’s stock, and then distributed the remaining Axio stock to Raptec’s stockholders
in a tax-free distribution. Axio’s family of products includes category leaders in
CD/DVD burning, digital photography, and digital video. Axio’s new management team
is composed of Lex Luthor, CEO, and previously the President of New Business
Development for Universal Studios Recreation Group; Karal Kool, COO, and
previously General Manager of Raptec’s OEM Solutions Group; and R. Elliot Maxter,
CFO, and previously corporate controller for Raptec. The interim four-member board of
directors is currently comprised of Raptec senior officers, but the terms of the public
offering require them to step down in 2 months. Thus, Axio will need to construct a new
board, which in turn will be responsible for overseeing Axio’s management and their
compensation.
What characteristics will you look for in appointing new board members?
Discuss the difficulties in establishing performance-based compensation plans for
executives.
CaseScenario2:Raptec.
Raptec operates in three principal business segments: Direct Attached Storage (“DAS”),
Storage Networking Solutions (“SNS”), and Software. These hardware and software
products are found in high-performance networks, servers, workstations, and desktops
from the world’s leading OEMs, and are sold through distribution channels to Internet
service providers, enterprises, and medium and small businesses and consumers. Since
the time it went public, Raptec has experienced rapid growth and consistently profitable
operations. In early 2002, Raptec announced its plan to spin-off the software segment,
subsequently incorporated as Axio, Inc., in the form of a fully independent and separate
company. Software was Raptec’s most profitable and fastest growing segment. By
mid- 2002 Raptec had completed the initial public offering of approximately 15 percent
of Axio’s stock, and then distributed the remaining Axio stock to Raptec’s stockholders
in a tax-free distribution. Axio’s family of products includes category leaders in
CD/DVD burning, digital photography, and digital video. Axio’s new management team
is composed of Lex Luthor, CEO, and previously the President of New Business
Development for Universal Studios Recreation Group; Karal Kool, COO, and
previously General Manager of Raptec’s OEM Solutions Group; and R. Elliot Maxter,
CFO, and previously corporate controller for Raptec. The interim four-member board of
directors is currently comprised of Raptec senior officers, but the terms of the public
offering require them to step down in 2 months. Thus, Axio will need to construct a new
board, which in turn will be responsible for overseeing Axio’s management and their
compensation.
How should the board design the executive compensation scheme for Luthor, Kool, and
Maxter?
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.
Does CI’s launch of the software product better fit the notion of autonomous or induced
strategic behavior?
What do firms need to know about their competitors? What legal and ethical
intelligence-gathering techniques can be used to obtain this information?
CaseScenario1:SycoInc.(SI).
Syco, Inc. (SI) was founded the late 1800s and grew through acquisition from being
primarily a large discount retailer into a highly diversified firm. Beyond retailing (still
SI’s dominant business), by the middle of the 1990s its lines of business included
significant market positions in insurance, consumer credit cards, stock brokerage,
commercial and residential real estate brokerage, and an online Internet portal. Each of
the non-retail businesses was average in its relative industry performance. Consistent
with the decentralized structure at SI and arms-length corporate oversight, each of these
businesses was also rapidly developing their own unique brands and customer
following. However, within a short period of time it became apparent that the retail
business was failing. SI’s vast mall-based department store holdings were suffering
from deferred maintenance and merchandising that did not appear to be popular with its
once large consumer base. At the same time, highly efficient and focused low-cost
competitors like Walmart were beginning to take significant market share from SI. On
the verge of bankruptcy by early 2000, SI’s management chose to sell off its insurance,
real estate, and stock brokerage units; it also spun off its credit card and portal
businesses in separate public offerings.
Why do you suppose SI entered the non-retail businesses through acquisition? Is this a
cheaper route than starting up these businesses from scratch?