Question 1

Product engineering,creative flair,and strong cooperation from channels are commonly required skills and resources for which of Porter's generic strategies?
A) cost leadership
B) differentiation
C) cost leadership focus
D) differentiation focus
E) collusion

Accepted Answer

Product engineering and creative flair are necessary for creating unique and differentiated products or services, which is the focus of the differentiation strategy. Strong cooperation from channels can also help in effectively reaching and communicating the unique value proposition to the target market.

Question 2

One risk of a cost leadership strategy is that the technology for production or of products may change.

Accepted Answer

If the technology for production or of products changes, the cost leader may not be able to maintain their cost advantage and may have to invest in new technology, which can be expensive. This can lead to a loss of their cost leadership position and decreased profitability.

Question 3

An example of a company following a cost focus strategy is Potlach Corporation,which makes house brands of toilet paper for Safeway and other grocery store chains.

Accepted Answer

Potlatch Corporation's focus on producing cost-effective and generic toilet paper brands for grocery chains is an example of a cost focus strategy. This strategy involves delivering products or services at a lower cost than competitors while still meeting basic customer needs. Potlatch Corporation's focus on cost reduction allows them to offer cheaper toilet paper products without sacrificing quality, appealing to cost-conscious consumers who prioritize value over brand recognition.

Question 4

Incentives based on meeting strict quantitative targets are a common organizational requirement for which of Porter's generic competitive strategies?
A) cost leadership
B) differentiation
C) cost leadership focus
D) differentiation focus
E) collusion

Accepted Answer

Cost leadership strategy focuses on achieving lower costs compared to competitors while maintaining similar quality. Incentives based on meeting strict quantitative targets can help achieve this goal by encouraging employees to identify inefficiencies and find ways to reduce costs.

Question 5

When firms follow each other's lead to reduce the level of competition such as GE and Westinghouse did in steam turbines,it is referred to as
A) explicit collusion.
B) a strategic alliance.
C) a mutual service consortium.
D) conscious parallelism.
E) partnering.

Accepted Answer

Conscious parallelism refers to a situation where firms in an industry follow each other's lead in terms of pricing or other strategic decisions, without explicitly colluding or forming a formal agreement. This behavior can reduce competition and increase profits for all firms involved. The example given in the question of GE and Westinghouse cooperating to reduce competition in steam turbines is a classic example of conscious parallelism.

Question 6

Cost leadership is the ability of a company or business unit to design,produce,and market a comparable product more efficiently than its competitors.

Accepted Answer

Cost leadership is a strategy where a company aims to achieve a competitive advantage by producing a product or service at a lower cost compared to its competitors while maintaining similar quality. This allows the company to offer its products at a lower price and attract price-conscious customers.

Question 7

An example of a company that was "stuck in the middle" was K-Mart as the company tried to imitate both Walmart's low-cost strategy and Target's differentiation strategy.

Accepted Answer

K-Mart struggled to find a clear positioning in the market, as it tried to compete on both price and differentiation, ultimately leading to its decline.

Question 8

Collusion
A) may be explicit or tacit.
B) may be tacit and therefore legal.
C) is rarely practiced by competing firms.
D) cannot occur without direct communication among firms.
E) is a popular competitive strategy.

Accepted Answer

Collusion can be either explicit, meaning firms directly communicate and coordinate their pricing and output strategies, or it can be tacit, where firms simply observe each other's actions and adjust their own actions accordingly. Tacit collusion is not necessarily illegal, although it can still be anti-competitive. Collusion is not a popular competitive strategy and is illegal in most countries.

Question 9

The two general types of cooperative strategies are
A) competitive and functional.
B) collusion and competitive.
C) strategic alliances and collusion.
D) strategic alliances and competitive.
E) competitive and collusive alliances.

Accepted Answer

Strategic alliances and collusion are the two general types of cooperative strategies. Strategic alliances involve two or more firms working together to achieve strategic goals, while collusion typically involves firms working together in secret to limit competition, often in ways that are illegal or regulated.

Question 10

Business strategy focuses on improving the competitive position of a company's or business unit's products or services within the specific industry or market segment that the company or business unit serves.

Accepted Answer

This statement is true. Business strategy is all about gaining a competitive edge in the market served by a company or business unit. A well-crafted business strategy can help a company to differentiate its products or services, create unique value propositions, and ultimately improve its market position, profitability, and growth prospects. Therefore, business strategy is a critical function for any organization that wants to stay ahead of the competition and build sustainable success over time.

Question 11

A secret salary cap was the contention in a 2012 collusion lawsuit filed against
A) KFC.
B) The National Football League.
C) GE.
D) Major League Baseball.
E) ESPN.

Accepted Answer

The National Football League was the defendant in a 2012 collusion lawsuit alleging that teams secretly agreed to a salary cap during the 2010 season, despite there being no official cap in place due to the league's labor dispute.

Question 12

The active cooperation of firms within an industry to reduce output and raise prices to get around the normal law of supply and demand is referred to as
A) a strategic alliance.
B) collusion.
C) a strategic roll up.
D) a merger.
E) licensing.

Accepted Answer

Collusion refers to the active cooperation between firms in an industry to reduce output and raise prices to manipulate the market. This is an illegal practice as it goes against the principles of fair competition and harms consumers. Strategic alliances, strategic roll-ups, mergers, and licensing may involve cooperation between firms, but they do not necessarily aim to manipulate prices and reduce output like collusion does.

Question 13

According to Barney,under which condition would tacit collusion most likely be successful?
A) There is a large number of identifiable competitors.
B) Costs vary among firms.
C) One firm tends to act as the price leader.
D) Sales are characterized by a low frequency of large orders.
E) There are low barriers to entry in the industry.

Accepted Answer

When one firm tends to act as the price leader, it is easier for other firms to follow its lead and coordinate their pricing decisions. This creates a situation where tacit collusion can be more successful.

Question 14

When a company following a differentiation strategy ensures that the higher price it charges for its higher quality is not priced too far above the price of the competition,the company is using the process of
A) low-cost differentiation.
B) cost leadership.
C) cost proximity.
D) basic differentiation.
E) price fixing.

Accepted Answer

The process described in the question is known as cost proximity, where a company tries to differentiate itself by offering higher quality products or services, but keeps its price close enough to that of the competition to avoid alienating customers. This approach allows the company to capture the benefits of differentiation (higher margins, customer loyalty), while avoiding the disadvantages (reduced demand due to higher prices). This approach is typical of companies following a differentiation strategy, where the focus is on offering unique and high-quality products/services to customers.

Question 15

One skill required of the cost leadership strategy is a strong marketing ability.

Accepted Answer

The cost leadership strategy focuses on reducing costs and operating efficiently. While marketing is important for any business, it is not a primary skill required for a cost leadership strategy. Instead, skills related to production efficiency, supply chain management, and cost control are more important.

Question 16

If it is to be successful,Porter advises that a division possess strong marketing abilities,product engineering,a creative flair,strong capability in basic research and a corporate reputation for quality or technological leadership,for which one of the following generic competitive strategies?
A) focus
B) differentiation
C) overall cost leadership
D) vertical growth
E) concentration

Accepted Answer

Porter's recommendation of possessing strong marketing abilities, product engineering, a creative flair, strong capability in basic research, and a corporate reputation for quality or technological leadership are all indicative of a differentiation strategy. This strategy focuses on setting a company apart from its competitors through unique, high-quality products or services, superior branding or marketing, or other distinguishing factors. By emphasizing these traits, a company can build a loyal customer base willing to pay higher prices for the perceived added value.

Question 17

Intense supervision of labor,sustained capital investment and access to capital are commonly required skills and resources for which of Porter's generic competitive strategies?
A) cost leadership
B) differentiation
C) cost leadership focus
D) differentiation focus
E) collusion

Accepted Answer

Cost leadership strategy requires intense supervision of labor, sustained capital investment, and access to capital to achieve the lowest cost of production and maintain competitive pricing.

Question 18

Amenities to attract highly skilled labor,scientists,or creative people are a common organizational requirement for which of Porter's generic competitive strategies?
A) cost leadership
B) differentiation
C) cost leadership focus
D) differentiation focus
E) collusion

Accepted Answer

Differentiation strategy involves offering unique attributes that are valued by customers, which often requires attracting highly skilled and creative individuals to develop and maintain these unique offerings.

Question 19

A cost leader's lower costs allow it to continue to earn profits during times of heavy competition.

Accepted Answer

By having lower costs, a cost leader can offer lower prices than competitors, making it difficult for competitors to compete solely on price. This allows the cost leader to maintain its market share even during times of heavy competition. Additionally, lower costs can also translate to higher profit margins, which can further aid the cost leader in weathering competition.

Question 20

Tacit collusion
A) involves direct communication among competing firms.
B) is most likely to be successful if there are many competitors.
C) is seen with conscious parallelism as practiced by GE and Westinghouse in the pricing of turbine engines.
D) is not illegal.
E) is most effective when the industry does not have a firm that acts as a price leader.

Accepted Answer

Tacit collusion refers to a situation where firms in an industry indirectly coordinate their actions by following a common pricing or output strategy without formally agreeing to do so. Conscious parallelism, as seen with GE and Westinghouse in the pricing of turbine engines, is an example of tacit collusion. This practice is not illegal in and of itself, but it can lead to antitrust concerns if it results in anticompetitive outcomes. Therefore, option C is correct. The other options are incorrect because:

A) Direct communication among competing firms would be an example of explicit collusion, not tacit collusion.
B) Tacit collusion is most likely to be successful if there are few competitors because it is easier to coordinate actions when there are fewer players in the market.
D) Tacit collusion is not illegal per se, but it can raise antitrust concerns if it leads to market inefficiencies or harms consumer welfare. 
E) Tacit collusion can be effective in industries where there is a well-established price leader who sets the market price, making it easier for other firms to follow suit, but it can also work in industries without a clear price leader.

Quiz 6: Strategy Formulation: Business Strategy

Product engineering,creative flair,and strong cooperation from channels are commonly required skills and resources for which of Porter's generic strategies?

One risk of a cost leadership strategy is that the technology for production or of products may change.

An example of a company following a cost focus strategy is Potlach Corporation,which makes house brands of toilet paper for Safeway and other grocery store chains.

Incentives based on meeting strict quantitative targets are a common organizational requirement for which of Porter's generic competitive strategies?

When firms follow each other's lead to reduce the level of competition such as GE and Westinghouse did in steam turbines,it is referred to as

Cost leadership is the ability of a company or business unit to design,produce,and market a comparable product more efficiently than its competitors.

An example of a company that was "stuck in the middle" was K-Mart as the company tried to imitate both Walmart's low-cost strategy and Target's differentiation strategy.

Collusion

The two general types of cooperative strategies are

Business strategy focuses on improving the competitive position of a company's or business unit's products or services within the specific industry or market segment that the company or business unit serves.

A secret salary cap was the contention in a 2012 collusion lawsuit filed against

The active cooperation of firms within an industry to reduce output and raise prices to get around the normal law of supply and demand is referred to as

According to Barney,under which condition would tacit collusion most likely be successful?

When a company following a differentiation strategy ensures that the higher price it charges for its higher quality is not priced too far above the price of the competition,the company is using the process of

One skill required of the cost leadership strategy is a strong marketing ability.

If it is to be successful,Porter advises that a division possess strong marketing abilities,product engineering,a creative flair,strong capability in basic research and a corporate reputation for quality or technological leadership,for which one of the following generic competitive strategies?

Intense supervision of labor,sustained capital investment and access to capital are commonly required skills and resources for which of Porter's generic competitive strategies?

Amenities to attract highly skilled labor,scientists,or creative people are a common organizational requirement for which of Porter's generic competitive strategies?

A cost leader's lower costs allow it to continue to earn profits during times of heavy competition.

Tacit collusion