Question 1

Which of the following refers to the process by which companies increase or decrease product prices to convey their competitive intention to other companies and so influence the way they price their products?
A) Cost cutting
B) Price signaling
C) Preemption
D) Non-price competition
E) Horizontal mergers

Accepted Answer

Price signaling refers to the process of adjusting product prices to indicate the company's competitive intentions to other companies. By doing so, the company can influence the way its competitors price their products. This is a common practice in industries where price competition is intense.

Question 2

Are the generic business-level strategies of differentiation and cost leadership incompatible? Explain.

Accepted Answer

The answer of Are the generic business-level strategies of differentiation...

Question 3

Which of the following is an example of a company following a strategy of consolidating a fragmented industry through horizontal merger?
A) Mail Boxes Etc. grew through the investments of local owner-managers.
B) America Online grew by acquiring rivals such as Netscape, CompuServe, and ICQ.
C) Sears funded growth with cash from operations in its existing stores.
D) Software House International is licensed to sell over 100,000 products in a dozen countries.
E) Heinz started with just one product, pickled horseradish, and today manufactures almost 6,000 foods.

Accepted Answer

America Online grew by acquiring rivals such as Netscape, CompuServe, and ICQ, which is an example of a company following a strategy of consolidating a fragmented industry through horizontal merger.

Question 4

If a firm operating in a fragmented industry can find a way to __________, the profit potential is high.
A) backwards integrate
B) consolidate the industry
C) change its generic strategy
D) diversify
E) change strategic groups

Accepted Answer

Consolidating the industry by merging or acquiring smaller competitors can lead to increased market power and lower competition, allowing the firm to charge higher prices and increase profitability. Backwards integration, diversification or changing generic strategy might not necessarily address the issue of fragmentation and may not provide such high profit potential. Changing strategic groups may not be applicable in the context of a fragmented industry.

Question 5

If a firm has the resources to serve a stable pocket of demand in a declining industry, then it should pursue a __________ strategy.
A) harvest
B) product development
C) product proliferation
D) niche
E) divestiture

Accepted Answer

A niche strategy focuses on serving a small, specific target market with specialized products or services. In a declining industry, there may still be a stable pocket of demand that a firm can serve effectively by tailoring their offerings to meet the specific needs of that market. This allows the firm to avoid direct competition with larger players in the industry and potentially increase profitability by charging higher prices for specialized offerings. Harvest and divestiture strategies are typically used in industries where there is little or no growth potential, while product development and proliferation strategies are focused on expanding a firm's offerings to new markets or customers.

Question 6

All of the following strategies are used to grow and consolidate fragmented industries except
A) chaining.
B) using the Internet and IT
C) franchising.
D) horizontal merger.
E) vertical merger

Accepted Answer

Vertical merger is not typically used to grow and consolidate fragmented industries; it involves merging with a company at a different stage of the supply chain, rather than consolidating within the same industry level.

Question 7

Which of the following refers to the process by which one company informally takes the responsibility for setting industry prices?
A) Price leadership
B) Non-price competition
C) Capacity control
D) Market development
E) Price signaling

Accepted Answer

Price leadership refers to the process by which one company informally takes the responsibility for setting industry prices. This can happen when a dominant player in the industry sets the price, and all other players follow suit.

Question 8

One strategy used to consolidate fragmented industries is
A) vertical mergers.
B) horizontal merger
C) product proliferation.
D) chaining
E) non-price competition.

Accepted Answer

Horizontal merger involves the consolidation of companies that produce similar products or offer similar services. This strategy is often used to consolidate fragmented industries and increase market power. By merging with other companies in the same industry, a single company can gain economies of scale, reduce competition, increase market share, and improve profitability.

Question 9

For each of the generic strategies-cost leadership, differentiation, and focus-describe one advantage and one disadvantage.

Accepted Answer

The answer of For each of the generic strategies-cost leadership,...

Question 10

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

Accepted Answer

The answer of A telecommunications firm is working on the...

Question 11

Competitive intensity in a declining industry is greatest when
A) exit barriers are high.
B) the product has high differentiation.
C) the industry is declining slowly instead of rapidly
D) the industry cannot keep up with demand.
E) industry fixed costs are low.

Accepted Answer

When exit barriers are high, firms find it difficult to leave the declining industry, increasing the level of competition among them. This is because firms continue to operate and fight for market share even when demand is shrinking, leading to overcapacity and price wars. High exit barriers can include long-term contracts, high fixed costs, or a high level of investment in specialized assets.

Question 12

Which of the following best describes an industry that consists of many small firms?
A) Fragmented
B) Growth
C) Mature
D) Declining
E) Diverse

Accepted Answer

A fragmented industry consists of many small firms with no dominant player in the market. Each firm has a small market share and operates independently. This type of industry is common in sectors such as retail, restaurants, and hospitality.

Question 13

To compete in the fragmented restaurant industry, Red Lobster Corporation built and operated hundreds of restaurants across the United States and Canada. Red Lobster is using which type of strategy?
A) Acquisitions
B) Chaining
C) Franchising
D) Diversification
E) Horizontal mergers

Accepted Answer

Red Lobster Corporation is using the chaining strategy, which involves building and operating multiple locations in order to create a consistent brand identity and increase market share. This is effective in the fragmented restaurant industry as it allows for greater reach and customer recognition. Acquisitions would involve purchasing other companies, diversification would involve expanding into other industries, and franchising would involve allowing others to use the brand name for a fee. Horizontal mergers involve merging with competitors, which is not applicable in this scenario.

Question 14

Empirical evidence shows that firms that pursue cost leadership or differentiation achieve returns that are about equivalent, firms that pursue both cost leadership and differentiation have the highest returns, and firms that are stuck in the middle have the lowest returns. Using concepts from this chapter, explain why this is so.

Accepted Answer

The answer of Empirical evidence shows that firms that pursue...

Question 15

A Japanese automaker begins selling its compact cars in Southeast Asia. This firm is pursuing a strategy of
A) market penetration.
B) market signaling
C) product proliferation.
D) market development
E) product development.

Accepted Answer

By beginning to sell its compact cars in Southeast Asia, the Japanese automaker is pursuing a strategy of market development, which involves entering new markets with existing products. Market penetration (A) involves increasing market share in an existing market, product proliferation (C) involves introducing new products into an existing market, and product development (E) involves creating new products for existing markets. Market signaling (B) involves sending a message to the market about the company's intentions or capabilities, which is not applicable in this scenario.

Question 16

Which of the following is not a characteristic of fragmented industries?
A) A large number of small competitors
B) High barriers to entry
C) Many "custom-made" or specialty firms
D) Few economies of scale
E) Low consolidation

Accepted Answer

High barriers to entry are not a characteristic of fragmented industries. Fragmented industries typically have low barriers to entry, allowing for a large number of small competitors to exist.

Question 17

Which of the following is not a strategy used in declining industries?
A) Leadership
B) Niche
C) Divestment
D) Harvest
E) Diversification

Accepted Answer

Diversification is not typically considered a strategy for dealing with declining industries. Instead, it involves entering new markets or industries to reduce dependence on the declining sector, rather than directly addressing the decline.

Question 18

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) Franchising
C) Vertical merger
D) Horizontal merger
E) B2B

Accepted Answer

Franchising is a strategy for fragmented industries that 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. Chaining refers to the ownership and operation of multiple units or outlets, while vertical and horizontal mergers involve the combination of companies at different stages of the supply chain or within the same industry. B2B (business-to-business) refers to transactions between companies rather than between companies and consumers.

Quiz 5: Business-Level Strategy and Competitive Positioning

Which of the following refers to the process by which companies increase or decrease product prices to convey their competitive intention to other companies and so influence the way they price their products?

Are the generic business-level strategies of differentiation and cost leadership incompatible? Explain.

Which of the following is an example of a company following a strategy of consolidating a fragmented industry through horizontal merger?

If a firm operating in a fragmented industry can find a way to __________, the profit potential is high.

If a firm has the resources to serve a stable pocket of demand in a declining industry, then it should pursue a __________ strategy.

All of the following strategies are used to grow and consolidate fragmented industries except

Which of the following refers to the process by which one company informally takes the responsibility for setting industry prices?

One strategy used to consolidate fragmented industries is

For each of the generic strategies-cost leadership, differentiation, and focus-describe one advantage and one disadvantage.

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

Competitive intensity in a declining industry is greatest when

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

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

A Japanese automaker begins selling its compact cars in Southeast Asia. This firm is pursuing a strategy of

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

Which of the following is not a strategy used in declining industries?

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?