If consumer tastes change and a focuser’s niche disappears, the danger for the focuser is
that it might have difficulty shifting resources from its niche to another market segment.
An advantage of related diversification is that it allows a company to quickly gain entry
into a new industry where barriers are high.
If a company fails to take stakeholder claims into account, stakeholders may withdraw
their support.
Fortunately, whenever different functions work together, bureaucratic costs inevitably
declines.
A strategy can be defined as a set of related actions that managers take to increase their
company’s performance.
The three generic business-level strategies are cost leadership, differentiation, and mass
marketing.
Even when entry barriers are very high, new firms may still enter an industry if they
perceive that the benefits outweigh the costs of entry.
Unfortunately, successful innovation cannot transform the nature of industry
competition.
Emergent strategies arise in a company with careful long-term planning.
Location economies refer to the economic benefits that arise from performing a value
creation activity at central headquarters.
Fragmented industries typically have high barriers to entry.
Starbucks’ Frappuccino is distributed by Pepsi. Nestle and Coca-Cola announced an
agreement with Beverage Partners Worldwide through which Coca-Cola will distribute
and sell Nestle’s Nestea throughout the globe. These are examples of which of the
following?
A.Joint venture
B.New-venture division
C.Merger
D.Acquisition
E.Internal venture
When shopping for clothing such as shirts and jeans, Tyrone will only buy products
sold by the Eastern Clothing Company, even if other brands are cheaper. Eastern
Clothing Company has _____ with Tyrone.
A.switching costs
B.bargaining power
C.risk of entry
D.brand loyalty
E.economies of scale
Which of the following cognitive biases refers to the fact that decision makers who
have strong prior beliefs about the relationship between two variables tend to make
decisions on the basis of these beliefs, even when presented with evidence that their
beliefs are wrong?
A.Prior hypothesis bias
B.Reasoning by analogy
C.Illusion of control
D.Escalating commitment
E.Representativeness
The Internet is an example of a
A.technological force.
B.social force.
C.political and legal force.
D.demographic force.
E.global force.
General managers are found
A.only at the corporate level.
B.only at the business level.
C.only at the functional and business levels.
D.at the functional, business, and corporate levels.
E.only at the corporate and business levels.
Which of the following is not a true statement?
A.First movers are the first to recover the costs of a new technology.
B.First movers have higher pioneering costs than do later entrants.
C.Later entrants can avoid the mistakes of first movers.
D.Later entrants have lower pioneering costs than do first movers.
E.First movers are more likely to make mistakes than are later entrants.
Which of the following cognitive biases occurs when decision makers commit even
more resources if they receive feedback that the project is failing?
A.Prior hypothesis bias
B.Reasoning by analogy
C.Illusion of control
D.Escalating commitment
E.Representativeness
As an industry enters the shakeout stage,
A.rivalry among companies declines.
B.demand is still growing at a high rate.
C.prices rise.
D.excess capacity emerges.
E.new entrants come into the market.
At the growth stage of an industry,
A.ongoing technological progress makes a product easier to use.
B.key complementary products are developed.
C.companies in the industry find ways to reduce costs.
D.demand for the product increases.
E.all of these.
A strategy based on diversification may fail to add value because companies
A.seek to achieve differentiation instead of low cost.
B.diversify into areas in which they have some knowledge and miss out on profitable
opportunities in other areas.
C.make acquisitions rather than develop new technologies on their own.
D.incur bureaucratic costs that exceed the value created by the strategy.
E.seek to achieve cost leadership instead of differentiation.
A company pursuing unrelated diversification
A.relies more on output controls than on bureaucratic controls.
B.needs to create an internal transfer pricing scheme.
C.has a low need for integration among divisions.
D.should have a product team structure.
E.should use a centralized decision-making process.
Within a firm, a function is made up of workers who
A.perform the same types of tasks or hold similar positions.
B.are paid the same amount of compensation.
C.work at the same hierarchical level (for example, all middle managers).
D.have the same background and education.
E.have the same job title (for example, all are vice presidents).
The most expensive competitive strategy to pursue is
A.differentiation.
B.cost leadership.
C.focus.
D.growth.
E.hypercompetition.
When McDonald’s introduced the McCafe, it began offering a new product that was not
available in traditional McDonald’s stores. The introduction of the McCafe is an
example of which of the following?
A.Transferring competencies
B.Diversification
C.Commonality
D.Economies of scope
E.Bureaucratic costs