12.4 Strategic Management Flashcards
According to Boston Consulting Group’s portfolio model for competitive analysis, the strategy for a strong cash cow should be
Hold
A hold strategy is used for strong cash cows. It is necessary if the business is to continue to generate large net cash inflows. Harvesting might impair a strong cash cow’s ability to generate long-term positive net cash inflows.
In the Boston Consulting Group (BCG) growth-share matrix, which strategic business units are strong competitors in high growth markets but usually have modest net cash flow?
Stars
A strong competitor in a high growth industry
Star
The most favorable condition for the attractiveness of an industry is
the existence of high entry barriers and low exit barriers.
According to the growth-share matrix approach developed by the Boston Consulting Group, a harvest strategy is most likely to be used for SBUs that are
Weak cash cows and possibly question marks and dogs
A typical life cycle progression for a successful firm within the Boston Consulting Group’s growth-share matrix is
Question mark, star, cash cow, dog
A company is trying to decide which competitive strategy it should try to implement. Since the company has recently started producing Halloween products and selling them in its Halloween stores a few months prior, it is trying to focus on low costs. The company believes that this will give it a competitive advantage since much of the competition across the nation is selling more expensive Halloween products. Which competitive strategy should the company most likely try to implement?
A. Differentiation.
B. Cost focus.
C. Cost leadership.
D. Focused differentiation.
C. Cost leadership.
Cost leadership seeks a competitive advantage through lower costs that have a broad competitive scope. Since the company is selling its products at low costs and it has many competitors across the nation, it has a broad competitive scope.
A company is the leading company in the premium bottled water industry. Its growth is mainly driven by the negative health publicity on carbonated soft drinks and other sweetened beverages. Extensive inventory and distribution infrastructure is needed to compete in this industry. Its main packaging materials can be sourced either locally or easily imported from overseas. With its 60% market share, the company is able to influence prices and competitive activity. The second biggest competitor holds 20% market share, while the remaining 20% is shared by many small companies. Supermarkets and other grocery retailers are the largest customer segment, accounting for approximately 45% of sales. The supermarkets and grocery retailers are driving volume growth and are undergoing consolidation into larger supermarket conglomerates. Using Porter’s 5 Forces, which one of the following statements best reflects the industry environment?
A. High profitability due to high power of buyers and sellers.
B. Low profitability due to low threat of substitutes and new entrants.
C. Low profitability but can increase due to increasing power of buyers.
D. High profitability but can decrease due to increasing power of buyers.
D. High profitability but can decrease due to increasing power of buyers.
The company is able to achieve high profitability in the growing premium bottled water industry. However, the supermarkets and grocery retailers are undergoing consolidation into larger supermarket conglomerates, which will result in stronger buyer bargaining power and puts collective pressure on the company.
Which factor most likely encourages entry into an existing market?
A. Governmental subsidies for new investors
B. Low fixed exit costs
C. High product differentiation, principally produced by trademarks
D. Knowledge of the industry, with high investments in development
A. Governmental subsidies for new investors
Subsidies for new firms lower entry barriers. Thus, new firms may enter the industry and intensify competition. Government policy also may affect competition by means of regulations that encourage or discourage substitutes or affect costs, that govern competitive behavior, or that limit growth. Government also may be a buyer or supplier.
