Question 1

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

Accepted Answer

While marketing is important for any business, the cost leadership strategy focuses on reducing costs to offer products or services at lower prices than competitors, rather than heavily investing in marketing.

Question 2

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

Accepted Answer

One key aspect of tacit collusion is the presence of a price leader who sets the market price for the industry. This reduces the incentive for other firms to undercut the price and engage in price competition, as they can all benefit from the higher prices set by the price leader. Therefore, choice C is the most likely condition for successful tacit collusion.

Question 3

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 real business strategy that focuses on reducing costs in order to offer lower prices and surpass rivals on this front.

Question 4

Tacit collusion

Accepted Answer

Tacit collusion involves firms coordinating their actions without explicitly communicating, and conscious parallelism is a common form of tacit collusion. This can be seen in the example of GE and Westinghouse pricing their turbine engines at similar levels without directly communicating with each other. It is not illegal, but can still result in anti-competitive outcomes. The other answer choices are not accurate - A refers to explicit collusion, B is unlikely as more competitors would make coordination more difficult, D is not a clear statement, and E is not necessarily true as a price leader can still participate in tacit collusion.

Question 5

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, it may become difficult for a company that relies on cost leadership to maintain its low cost advantage. They may need to invest in new technology to stay competitive, which could increase their costs and undermine their profitability.

Question 6

The two general types of cooperative strategies are

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 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 was known for trying to imitate both Walmart's low-cost strategy and Target's differentiation strategy. This left them in a position known as being "stuck in the middle", as they were unable to successfully compete with either company in their respective strategies.

Question 8

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

Accepted Answer

This describes the behavior of firms conspiring to manipulate output and prices in order to increase profits. This is illegal behavior and violates antitrust laws. Strategic alliance is a voluntary agreement between companies to share resources or expertise. A strategic roll up is a series of acquisitions in the same industry in order to gain market share. A merger is a joining of two companies, and licensing is the granting of permission to use intellectual property.

Question 9

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

Accepted Answer

Product engineering and creative flair are required for differentiation strategy, which aims to offer unique and valuable products or services to customers. Strong cooperation from channels is also important for differentiation strategy as it helps in effectively delivering and promoting the unique features of the products or services to the target market. Cost leadership strategy, on the other hand, focuses on achieving low costs and high efficiency, while cost leadership focus and differentiation focus strategies are narrower in scope and target specific market segments. Collusion is not a valid Porter's generic strategy.

Question 10

Collusion

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 11

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

Accepted Answer

Amenities to attract highly skilled labor, scientists, or creative people are a feature of differentiation strategy, as it focuses on offering unique or superior products or services that attract customers to pay a premium price. By providing attractive amenities, a company can differentiate itself from competitors, appeal to highly skilled labor, scientists, or creative people, and ultimately gain a competitive advantage. Cost leadership and cost leadership focus strategies prioritize offering products or services at a lower cost than competitors, while differentiation focus strategy focuses on offering unique or superior products or services to a narrow segment of the market. Collusion is not a Porter's generic competitive strategy.

Question 12

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

Business strategy is all about 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.

Question 13

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

Accepted Answer

The mention of a collusion lawsuit and a secret salary cap points to the National Football League (NFL) as the correct answer.

Question 14

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?

Accepted Answer

Porter's advice pertains to the generic competitive strategy of differentiation, which emphasizes creating a unique product or service perceived as better than the competition, thereby commanding a premium price. For this strategy to be effective, a division needs to excel in marketing, product engineering, creativity, basic research, and reputation.

Question 15

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

Accepted Answer

A cost leader's lower costs give them an advantage in the market because they can still afford to price their products lower than their competitors during times of heavy competition while still earning a profit.

Question 16

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

Accepted Answer

Incentives based on meeting strict quantitative targets are closely related to the cost leadership strategy, which involves minimizing costs to offer products or services at a lower price than competitors. Meeting quantitative targets is often tied to cost reduction and efficiency gains, which are key components of the cost leadership strategy. The other options, including differentiation, cost leadership focus, differentiation focus, and collusion, do not necessarily involve strict quantitative targets as a key component of the strategy.

Question 17

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

This is true as Potlach Corporation focuses on reducing costs in order to produce private label toilet paper for grocery store chains. This cost focus strategy allows them to compete with other toilet paper companies and meet the demands of their customers at a lower price point.

Question 18

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?

Accepted Answer

The answer of Intense supervision of labor, sustained capital investment...

Question 19

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

Accepted Answer

Cost proximity is the process in which 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. This helps the company to differentiate itself from its competitors while ensuring that customers are willing to pay the higher price for the added quality.

Question 20

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

Accepted Answer

Conscious parallelism refers to a situation where firms in an oligopoly market independently follow the same pricing, marketing or production strategies as their competitors in order to reduce the level of competition. In this case, GE and Westinghouse followed each other's lead to reduce competition in the market for steam turbines. This behavior is not necessarily illegal, but can be seen as anti-competitive if it leads to higher prices or reduced output.

Quiz 6: Strategy Formulation: Business Strategy