Business Policy Ch. 8

Question 1

Reasons for Low success rate of strategies

Answer 1

1. ) Failure to segment Markets appropriately
2. ) Paying too much for a new acquisition
3. ) Falling behind competition in R&D
4. ) Not recognizing the benefit of computers in managing information

Question 2

Successful Strategy implementation requires the ability to

Answer 2

1. ) Market goods and services well
2. ) Raise needed working capital
3. ) Produce Technologically sound goods
4. ) deploy sound information systems

Question 3

Market Segmentation

Answer 3

subdividing a market into distinct subsets of customers according to needs and buying habits.

Question 4

Market Segmentation is key to

Answer 4

market development, product-development, market penetration, and diversification strategies

Question 5

Market Segmentation allows firms to

Answer 5

operate with limited resources because mass production, mass distribution, and mass advertising are not required

Question 6

Market Segmentation directly affects

Answer 6

marketing mix variables

• product
• place
• promotion
• price

Question 7

Markets can be segmented based upon

Answer 7

geographic
demographic
psychographic
behavioral.

Question 8

Product Positioning

Answer 8

developing schematic representations that reflect how products or services compare to competitors’ on dimensions most important to success in the industry.

Question 9

Product Positioning Steps

Answer 9

1. ) Select key criteria that effectively differentiate products or services in the industry.
2. ) Diagram a two-dimensional product-positioning map with specified criteria on each axis.
3. ) Plot major competitors’ products or services in the resultant four-quadrant matrix.
4. ) Identify areas in the positioning map where the company’s products or services could be most competitive in the given target market. Look for vacant areas (niches).
5. ) Develop a marketing plan to position the company’s products or services appropriately.

Question 10

Financial Budget

Answer 10

a document that details how funds will be obtained and spent for a specified period of time

Question 11

Three ways to evaluate the worth of a business

Answer 11

1. ) What a firm owns (net worth or stockholders’ equity)
2. ) What a firm earns (five times annual profit)
3. ) What the firm will bring in the market

Question 12

What a firm owns (net worth or stockholders’ equity)

Answer 12

Net worth = the sum of common stock, additional paid-in capital, and retained earnings (a.k.a. shareholders’ equity).
After calculating the net worth, add or subtract an appropriate amount for goodwill (intangibles) and overvalued or undervalued assets.

Question 13

What a firm earns (five times annual profit)

Answer 13

The worth of any business should be based largely on the future benefits its owners may derive through net profits.
A conservative rule of thumb is to establish a business’s worth as five times the firm’s current annual profit.

Question 14

What the firm will bring in the market

Answer 14

First, base the firm’s worth on the selling price of a similar company.
Second, use the price-earnings ratio method.
Divide the market price of the firm’s common stock by the annual earnings per share and multiply this number by the firm’s average net income for the past five years

Question 15

Going public means

Answer 15

selling off a percentage of the company to others in order to raise capital. Going public dilutes the owners’ control of the firm.

Question 16

Three major R&D approaches to implementing strategies.

Answer 16

First firm to market new technological products.

Innovative imitator of successful products, thus minimizing the risks and costs of start-up.

Low-cost producer by mass-producing similar but less expensive products.

Question 17

Collaboration in R&D between companies is on the rise due to

Answer 17

new competitive pressures
rising research costs
increasing regulatory issues
accelerated product development schedules.

Question 18

Information collection, retrieval, and storage can be used to create competitive advantages in ways such as

Answer 18

Cross-selling to customers
Monitoring suppliers
Keeping managers and employees informed
Coordinating activities among divisions
Managing funds.