Companies and business units of large diversified firms using the cost leadership
strategy should use strategic controls.
a. True
b. False
The fastest and easiest way for a firm to diversity its portfolio of businesses is through
acquisition because
a. of barriers to entry in many industries.
b. it is difficult and time intensive for companies to develop products that differ from
their current product line.
c. innovation in both the acquired and the acquiring firm is enhanced by the exchange
of competencies resulting from acquisition.
d. unrelated acquisitions are usually uncomplicated because the acquired firm is
allowed to continue to function independently as it did before acquisition.
The most effective leadership style is _______ leadership.
a. pragmatic
b. charismatic
c. inspirational
d. transformational
A firm can predict that a competitor whose products suffer from poor quality is likely to
be less aggressive in its competitive actions until those quality problems are corrected.
a. True
b. False
The joint venture among BuzzFeed, CNN, and YouTube was formed to develop new
sources of competitive advantages in the fast-cycle entertainment business.
a. True
b. False
Stage in the family life cycle is a ______ factor.
a. demographic
b. socioeconomic
c. psychological
d. perceptual
Managers must adopt a new mind-set that values________ and the challenges that
evolve from constantly changing conditions.
a. valuable
b. rare
c. costly to imitate
d. nonsubstitutable
In the balanced scorecard framework, _______ controls are used to assess the
organization’s success in creating a climate that supports change and innovation.
a. learning and growth
a. merger.
b. unrelated acquisition.
c. horizontal acquisition.
d. vertical acquisition.
Identify and define the different types of strategic alliances.
CaseScenario2:Palmetto.
Palmetto was an early pioneer of personal data assistants (PDAs) and dominates that
market space (in terms of market share) with its core product, the Palmetto Pidgy.
Because this product category was entirely new to the market, Palmetto had to
internally develop the hardware and software sides of the business, and today it is both
a manufacturer of PDAs and a programmer and licensor of its PDA operating system
software. Recently, however, the hand-held device maker’s performance has taken a
dive as a result of slumping sales and costly inventory problems. Palmetto has also had
difficulty coordinating its software and hardware businesses, in part because of the near
absence of a coherent structure and the differing economics underlying the two.
Specifically, hardware for PDAs is increasingly a cost-based business, while software is
a highly differentiated one. While Palmetto is doing pretty well in both businesses, its
own resource base does not allow it to compete any differently than that proscribed for
other industry participants (that is, it competes on cost with hardware and features with
software). In addition to the issues created by these fundamental differences, other large
companies are entering both the equipment (such as Sony) and software (such as
Microsoft) sides of its business, putting further pressure on margins. Management has
decided that it is unable to focus on the complexities of each of these businesses so it is
opting to break Palmetto into two separate, independent public companies – Pal, Inc.
will be devoted to hardware and Mettolink, Inc. will be devoted to software.
How would the implementation of this structure differ for Mettolink?
Describe how an acquisition program can result in managerial time and energy
absorption.
CaseScenario2:Plasco.
Plasco is a $3 billion U.S.-based manufacturer of flexible plastic products like trash
cans, reheatable and freezable food containers, and a broad range of other plastic
storage containers designed for home and office use. Historically, Plasco has been the
category killer for most of its products and has devoted tremendous resources to new
product development on an ongoing basis-this research intensity has allowed the
company to release, on average, a new product every day over the past 5 years. Despite
its past strength and high brand awareness, Plasco’s profitability has been eroded by
dramatic increases in the cost of plastic resin, the primary input into its plastic products.
Moreover, the retail channel has experienced rapid consolidation resulting in a shift in
the balance of power from branded manufacturers like Plasco, to strong retailers like
Walmart, who in turn have been unwilling to help Plasco absorb the higher resin costs.
Enhancing Walmart’s power is the fact that it can always turn to alternative
high-volume sources of consumer plastic products like Sterlite. Further hampering
Plasco’s recovery is the emergence of feisty little foreign competitors like Zig
Industries, a $250 million Israeli firm that has begun to take part of Plasco’s market
share in plastic toolboxes. Ironically, Plasco was the first company to offer plastic
toolboxes some 20 years ago. This innovation changed the market dramatically and
Plasco’s first mover strategy rewarded it with a rapidly growing new segment and a
dominant market position. Today, Plasco’s toolboxes are viewed as rather boring, while
Zig’s products are ingeniously designed to catch the customer’s eye in the aisle (better
merchandising the product) and capture their interest (and pocketbook) with many new
and novel features. Zig is also able to provide this new line of toolboxes at between 10
percent to 15 percent less than Plasco.
Is the toolbox business a slow-, standard-, or fast-cycle business?
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).
Is the furniture industry described above attractive?
Describe the three major types of organizational structure and their appropriate use.