Deck 6: Business-Level Strategy and the Industry Environment

Question 1

Through chaining,companies increase their buying power,which allows them to negotiate large price reductions with their suppliers,which in turn promotes their competitive advantage.

Answer 1

True

Question 2

Fragmented industries typically have low barriers to entry.

Answer 2

True

Question 3

Innovators and early adopters are typically reached through specialized distribution channels,and products are often sold by word of mouth.

Answer 3

True

Question 4

The shakeout strategy of share-increasing is put in place by allocating resources to attract customers from weak companies exiting the market.

Question 5

Both innovators and early adopters enter the market while the industry is in its embryonic stage.

Question 6

Because franchisees essentially own their own businesses,they are less motivated to make the companywide business model work and instead pursue strategies that they feel are appropriate for their unique circumstances.

Question 7

Different strategies are often required to support and strengthen a company's business model as a market develops over time.

Question 8

Development of a mass market is the stimulus for an industry to change from embryonic to growth.

Question 9

As a result of fierce competition in the shakeout stage,an industry becomes fragmented.

Question 10

The challenge in a fragmented industry is to figure out the best set of strategies to overcome a fragmented market so that the competitive advantages associated with pursuing one of the different business models can be realized.

Question 11

A fragmented industry is composed of a large number of small and medium-sized companies.

Question 12

Broad cost leadership is the most appropriate generic strategy for a fragmented industry.

Question 13

To be successful in a growth industry,it is important to remain focused on the needs of the early adopters of the new product.

Question 14

Reaching the early majority requires successful niche marketing and narrow market segmentation.

Question 15

The late majority refers to the customers who purchase a new technology or product only when it is clear it will be around for a long time.

Question 16

McDonald's created the first national chain of fast-food restaurants in a previously fragmented industry.This is called consolidation.

Question 17

One characteristic of embryonic industries is poorly developed distribution channels.

Question 18

Strategic managers at Clear Channel Communications recognized from the beginning that the major way to make small radio stations profitable was to obtain economies of scale.

Question 19

Barnes & Noble owns thousands of retail outlets and is pursuing a strategy called franchising.

Question 20

Companies in a weak competitive position in the growth stage of the industry life cycle can use a market concentration strategy to find a viable competitive position.

Question 21

Franchising is a business-level strategy that allows companies to

A)spread overhead and administrative costs over a large number of franchises.
B)enjoy the competitive advantages of cost leadership or differentiation.
C)hedge the costs of supplies.
D)expand beyond their base of support.
E)engage in new businesses that were previously beyond reach.

Question 22

An embryonic industry is one that

A)has not yet been thought of.
B)is just beginning to develop.
C)has sufficiently developed so that early industry leaders have already been identified.
D)has initial government backing because of its importance to the general populace.
E)none of these choices.

Question 23

Firms sometimes pursue a chaining strategy to

A)obtain the advantages of cost leadership.
B)create product diversity.
C)retain current market share.
D)spread overhead costs.
E)establish a number of unrelated business units.

Question 24

Amazon.com and eBay are examples of companies that

A)used the Internet to increase retail sales.
B)employed technology to consolidate what had previously been a fragmented industry.
C)pursue a cost-leadership model.
D)all of these choices.
E)none of these choices.

Question 25

By failing to adapt to their customers' changing demographics,needs and preferences,and continuing a "if it's not broken,don't fix it" strategy,Mattel's Barbie doll line lost significant market share to MGA's Bratz doll line,eventually leading to a costly lawsuit.

Question 26

In the embryonic stage of the industry life cycle,a company's investment needs are low because the market is generally quite small.

Question 27

A new product's relative advantage refers to the degree to which a new product is perceived as better at satisfying customer needs than the product that it supersedes.

Question 28

A horizontal merger is a

A)consolidation of small firms from disparate industries.
B)consolidation of suppliers in an effort to ensure availability of vital components.
C)merger of firms within the same industry.
D)conglomerate acquisition.
E)violation of antitrust regulations.

Question 29

Market penetration involves the creation of new or improved products to replace existing ones.

Question 30

Most embryonic industries arise from

A)a technological breakthrough.
B)serendipity.
C)patents.
D)government research.
E)university research and development programs.

Question 31

A price-cutting strategy will keep out an entrant that plans to adopt a new production technology.

Question 32

Which of the following is not a characteristic of a fragmented industry?

A)Low barriers to entry
B)Diseconomies of scale
C)Constant entry of new competitors
D)Very specialized customer needs
E)High barriers to exit

Question 33

Market development finds new market segments for a company's products.

Question 34

A fragmented industry is one composed of a

A)small number of large firms.
B)large number of small firms.
C)large number of small and medium-sized firms.
D)small number of small firms.
E)large number of one-person firms.

Question 35

A divestment strategy's success is often dependent upon good timing.

Question 36

By their choices of competitive actions and decisions about product attributes,managers can speed up or slow down the rate of progress of an industry through the stages of the industry life cycle.

Question 37

Product proliferation refers to the strategy of filling the niches by catering to the needs of customers in all market segments.

Question 38

As the supermarket industry began to grow with the opening hundreds of new stores,supermarkets were able to

A)capture economies of scale not previously available.
B)monopolize new markets.
C)increase costs and reduce profitability.
D)buy from vendors in smaller quantities.
E)all of these choices.

Question 39

A leadership strategy aims at growing in a declining industry by picking up the market share of companies that are leaving the industry.

Question 40

The goal for companies in the growth stage of the industry life cycle is to avoid falling too far behind industry leaders.

Question 41

To compete in the fragmented restaurant industry,Red Lobster Corporation built and now operates hundreds of stores across the United States and Canada.Red Lobster is using which type of strategy?

A)Acquisitions
B)Horizontal mergers
C)Franchising
D)Diversification
E)Chaining

Question 42

Which of the following strategies for fragmented industries grants the right to use the parent's name,reputation,and business model in a particular location or area in return for a fee and often a percentage of the profits?

A)Chaining
B)Horizontal merger
C)Vertical merger
D)Franchising
E)B2B

Question 43

At the growth stage of an emergency market,

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 choices.

Question 44

Which of the following factors tends to accelerate customer demand for a product?

A)The product's relative advantage
B)The product's compatibility
C)The simplicity of the product's use
D)The degree to which a product can be experimented with
E)All of these choices

Question 45

In some situations,pricing strategies can be used to

A)deter entry by other companies.
B)create exit barriers.
C)create emotional attachment to a product.
D)all of these choices.
E)none of these choices.

Question 46

Factors leading to the slow growth of demand in embryonic industries include all of the following except the

A)poor quality of the first products.
B)lack of complementary products.
C)lack of venture capital for innovative products.
D)high production costs of the products.
E)lack of distribution channels for the products.

Question 47

Which of the following best describes an industry that consists of many small firms?

A)Mature
B)Growth
C)Fragmented
D)Declining
E)Diverse

Question 48

The growth stage of a product's life cycle is the

A)time when companies attempt to secure their grip over customers in existing market segments.
B)best time to explore horizontal merger opportunities.
C)time to plan an exit strategy.
D)opportunity to reduce investment in a product.
E)opportune moment to reduce advertising expenditures.

Question 49

Which of the following is a true statement?

A)All new markets develop at about the same rate.
B)Market growth rates are getting shorter over time.
C)Companies cannot do much to affect a market growth rate.
D)The major influence on market growth rates is government regulation.
E)Market growth is typically a smooth,unbroken,upward-climbing S-shape.

Question 50

Which of the following customer groups represents the leading wave or edge of the mass market?

A)Early adopters
B)Early majority
C)Innovators
D)Late majority
E)Laggards

Question 51

Which of the following customer groups is not very price sensitive?

A)Early adopters
B)Early majority
C)Innovators
D)Early adopters and early majority
E)Early adopters,early majority,and innovators

Question 52

In general,different markets

A)develop at similar rates.
B)develop at different rates.
C)develop at lower than anticipated rates.
D)develop at higher than anticipated rates.
E)none of these choices.

Question 53

In a harvest strategy,a company

A)limits its investment in a business.
B)decreases its investment in a business.
C)reduces to a minimum the assets it uses in a business.
D)extracts as much investment or profit from the business as it can.
E)all of these choices.

Question 54

Consumer demand for products of an embryonic industry is

A)high and ready to explode.
B)frequently limited at first.
C)nonexistent because consumers lack product information.
D)tentative for the first two years.
E)insatiable.

Question 55

Customers who have a practical interest in using a new technology in the future and who are willing to experiment and envision new uses for the technology are called

A)early adopters.
B)the early majority.
C)innovators.
D)laggards.
E)the late majority.

Question 56

Firms in fragmented industries most often follow which generic strategy?

A)Differentiation
B)Cost leadership
C)Focused low cost
D)Stuck in the middle
E)Focused differentiation

Question 57

The first group of customers to enter the market for a new product are called

A)early adopters.
B)first users.
C)innovators.
D)adventurers.
E)initial customers.

Question 58

Which of the following is not a characteristic of fragmented industries?

A)A large number of small competitors
B)Low economies of scale
C)Many custom-made or specialty firms
D)High barriers to entry
E)Low consolidation

Question 59

One strategy used to consolidate fragmented industries is

A)vertical mergers.
B)chaining.
C)product proliferation.
D)price signaling.
E)nonprice competition.

Question 60

There are many real estate offices in most locations.Some of them are small independent firms; some are larger and affiliated with national chains.Thus,the real estate sales industry is

A)fragmented.
B)vertically integrated.
C)homogeneous.
D)mature.
E)embryonic.

Question 61

Some researchers claim that the spread of new products is similar to a viral infection,suggesting that

A)products that are too new can hurt you.
B)new products change and mutate as rapidly as a virus does.
C)only high-technology products can stop the diffusion.
D)lead adopters become "infected" or enthused with the new product and subsequently infect others by telling them about it.
E)medical professionals are the first to hear of most new technologies.

Question 62

Which of the following factors that affect market growth rates refers to the degree to which a new product is perceived as better at satisfying customer needs than the product it supersedes?

A)Complexity
B)Relative advantage
C)Compatibility
D)Trialability
E)Observability

Question 63

Which of the following factors that affect market growth rates refers to the degree to which a new product is perceived as difficult to understand and use?

A)Complexity
B)Relative advantage
C)Compatibility
D)Trialability
E)Observability

Question 64

In which stage of the industry life cycle do both cost leaders and differentiators adopt a hold-and-maintain strategy to defend their business models and ward off threats from focused companies that might be appearing?

A)Late majority
B)Growth
C)Shakeout
D)Mature
E)Decline

Question 65

By the shakeout stage of a product's life cycle,demand is

A)holding steady.
B)decreasing rapidly.
C)increasing slowly.
D)increasing rapidly but showing signs of slacking off.
E)increasing and decreasing in alternate cycles.

Question 66

Which of the following shakeout strategies requires a company to limit or decrease its investment in a business and to extract,or milk,the investment as much as it can?

A)Market concentration strategy
B)Share-increasing strategy
C)Cost-leadership strategy
D)Hold-and-maintain strategy
E)Harvest strategy

Question 67

A telecommunications firm is working on the next generation of switching equipment that allows calls to be digitally transmitted from sender to receiver.If the new product will be sold to existing customers,the firm is pursuing a strategy of

A)product development.
B)market penetration.
C)product proliferation.
D)market signaling.
E)market development

Question 68

Which of the following factors that affect market growth rates refers to the degree to which the results of using and enjoying a new product can be seen and appreciated by other people?

A)Complexity
B)Relative advantage
C)Compatibility
D)Trialability
E)Observability

Question 69

Which of the following strategies helps companies with high cost structures,allowing them to survive without having to implement strategies to become more productive and efficient?

A)Price signaling
B)Nonprice competition
C)Capacity control
D)Market development
E)Price leadership

Question 70

A company can achieve a leadership position in a declining industry by

A)reducing new investments in plant.
B)pursuing horizontal mergers.
C)pursuing vertical mergers.
D)pursuing unrelated diversification.
E)implementing a harvest strategy.

Question 71

Product proliferation occurs in which stage of the product life cycle?

A)Embryonic
B)Growth
C)Shakeout
D)Maintenance
E)Maturity

Question 72

In deciding on a strategy,a company in a declining industry must do all of the following except

A)lower prices.
B)manage industry capacity.
C)evaluate its strengths relative to the remaining pockets of demand.
D)evaluate the severity of decline.
E)monitor its cash flow.

Question 73

Mature industries are generally characterized by

A)low entry barriers.
B)few economies of scale.
C)high transportation costs.
D)a small number of large firms.
E)rapidly fluctuating demand.

Question 74

Successful companies in a mature industry are most interested in

A)increasing entry barriers.
B)reducing the power of suppliers.
C)reducing the threat of substitute products.
D)reducing entry barriers.
E)reducing the power of buyers.

Question 75

In embryonic industries,customer demand is typically

A)high.
B)low.
C)growing rapidly.
D)variable.
E)slowly declining.

Question 76

John,a computer scientist,is willing to pay premium prices to be one of the first to have new versions of software packages.John is in the ____ customer group.

A)laggard
B)early majority
C)early adopter
D)late majority
E)innovator

Question 77

Which of the following strategies allows interdependent firms indirectly to coordinate their actions?

A)Cost cutting
B)Vertical integration
C)Preemption
D)Price signaling
E)Horizontal mergers

Question 78

All of the following factors cause excess industry capacity except

A)widely deployed,cost-reducing technological developments.
B)industry competitive factors.
C)new entrants into the industry.
D)declining customer demand.
E)powerful suppliers.

Question 79

Which of the following factors is crucial in choosing an investment strategy to pursue and thus maximize the profitability of a company's business model?

A)The competitive advantage that a company's business model gives it in an industry relative to competitors
B)The stage of the industry life cycle
C)The age of the firm
D)The competitive advantage that a company's business model gives it in an industry relative to competitors and the stage of the industry life cycle
E)All of these choices

Question 80

Competitive intensity in a declining industry is greatest when

A)the industry is declining slowly instead of rapidly.
B)the product is easy to differentiate.
C)exit barriers are high.
D)entry barriers are high.
E)technology is stable.