CH4 QB Introduction to business strategy Flashcards
In the home computer market, laptop computers are an example of a: A product form B brand C product class D generic product
A Laptop or desktop computers are both examples of product form (A). Home
computers would be referred to as either a product class or a generic product (C and
D) since those two terms can be used interchangeably. A particular manufacturer’s
brand version of a home computer would be B
Nevin works for Dorchester plc. Nevin’s manager has asked him to undertake an internal
analysis of the company as part of a strategic planning review.
Which three of the following analytical techniques will be useful in this context?
A Value chain analysis
B Porter’s five forces analysis
C The BCG Matrix
D PESTEL analysis
E Analysis of distinctive competencies
F Ansoff’s Matrix
A,C,E
Options B and D are methods of analysing the company’s external environment – B
analyses the task (or market) environment, whilst D analyses the macro environment.
F is a means of assessing potential growth strategies of the company.
Sharma is carrying out a PESTEL analysis for her employer, Decron plc. During her research
Sharma has realised the ageing of the UK’s population is a potentially important strategic
issue for the company. In which section of her analysis should Sharma record this matter?
A P
B S
C T
D L
B Age is a demographic factor that falls under the Social aspect of PESTEL analysis (B).
P = political, T = technological, L = legal.
The Marketing Director of Birstall plc is formulating whether one of the company’s
products, which is aimed at a small niche market, should be differentiated from its close
competitors. At this stage she is unsure how such differentiation would be achieved in
practice. The decision on whether to differentiate or not is a decision concerning the
company’s:
A functional strategy
B business strategy
C competitive strategy
D product/market strategy
C Competitive strategy (C) is concerned with how the business will compete in terms of
source of competitive advantage (cost or differentiation) and extent of competitive
scope (broad or narrow). A functional strategy (A) would be concerned with the role of
the marketing function itself within the company. Business strategy (B) is concerned in
particular with how the marketing mix would be adjusted in due course if a competitive
strategy of differentiation was decided upon. Product/market strategy (D) is concerned
with how the business will grow (Ansoff’s Matrix). SAMPLE PAPER
Cassion plc has entered a market and achieved a reasonably dominant position in just
under a year. Cassion plc is pleased that the threat of new entrants into the market seems to
be relatively low.
Which of the following factors is likely to have contributed towards this situation?
A Low initial capital costs
B A customer base consisting of a few large customers
C A highly competitive supplier market
D The market is for services rather than manufacturing
B The relatively concentrated customer base (B) means that existing players have a
distinct advantage, and it also gives the customers higher bargaining power, so makes
the sector less attractive to new entrants. Low initial capital costs (A) reduce risk in a
project by decreasing the break-even point, allowing time to build up a large customer
base. This can encourage new entrants. C may increase rivalry but it does not affect
new entrants; D has no effect.
With regard to Porter’s Five Forces Analysis and new entrants into a market, which of the
following pairs of statements is correct?
Encourages new entrants ; Erects a barrier to new entrants
A High competition ; Low capital costs
B A monopoly supplier of a vital component ; High competition
C One large customer; A monopoly supplier of a vital component
D Low competition ; High capital costs
D Low levels of competition in an industry make it more attractive for new entrants. High
capital costs involve risk and fund raising challenges which can act as a barrier to new entrants.
In the past a major stakeholder in Justin plc has exerted considerable influence over the
environmental impact of the company’s manufacturing operations. Specifically, a
production facility was temporarily closed down for three weeks as a result of one recent
campaign orchestrated by this stakeholder. The stakeholder writes regularly to the
company’s chairman about a range of environmental issues involving the company.
In terms of Mendelow’s matrix which of the following strategies should Justin plc pursue for
this stakeholder?
A Keep this stakeholder informed at all times about the company
B Keep this stakeholder satisfied with regard to the company and its strategies
C Take minimum effort with regard to this stakeholder as he always complains
D Treat this stakeholder as a key player when formulating future strategies
D In terms of Mendelow’s matrix, this stakeholder clearly possesses both a high level of
interest in the company’s affairs and a high level of power (influence) over them. In
such circumstances, the recommended strategy is one of treating the stakeholder
concerned as a key player.
Seago plc provides exclusive scuba-diving holidays for people over 60 years of age. In
terms of Michael Porter’s generic competitive strategies, this represents a strategy of:
A differentiation
B cost leadership
C cost focus
D differentiation focus
D The exclusivity of the holidays indicates an emphasis on generating competitive
advantage through differentiation rather than low cost, whilst their specialist nature
and precise target market (age 60+) indicate a focus strategy rather than a broad
competitive scope.
Martin is a Product Manager with Mangrove plc. He is preparing an assessment for the
company’s directors of each of the company’s product lines. In preparing his assessment,
Martin is making use of the BCG matrix. He has classified one particular product, the Pluton,
as having a low market share in a high growth market. Martin should recommend to the
directors that, with regard to the Pluton, the company should pursue:
A either a hold or a divest strategy
B either a hold or a harvest strategy
C either a build or a harvest strategy
D a build strategy
C With a low market share of a high growth market, the Pluton would be classified as a
Question mark within the BCG matrix, for which the possible recommended strategies
are Build or Harvest. Option A relates to a Dog, option B to a Cash Cow and option D
to a Star.
Nextron plc manufactures washing machines. It has a 20% share of the UK market. The
company wants to increase its revenues so has decided to add tumble dryers to its range of
products. In terms of Ansoff’s matrix, this represents a growth strategy of:
A market penetration
B market development
C product development
D diversification
C The company is introducing a new product but clearly targeted at the same market as
its existing products, hence growth by means of product development.
The board of directors of Swinson plc is evaluating whether to pursue a new strategic option for a major strategic business unit. The final decision should be judged against which three of the following criteria? A A cost of entry test B An acceptability test C A suitability test D A feasibility test E An attractiveness test F A payoffs test
B,C,D
Gerry Johnson and Kevan Scholes recommend evaluating strategies against the
following criteria:
Suitability – does the strategy fit the strengths, objectives and image of the company?
Feasibility – does the company have the necessary resources to pursue the strategy
effectively?
Acceptability – is the strategy acceptable to the company’s stakeholders?
Arto plc manufactures the Zulon. The Zulon’s dominant market share has continued for over
five years, but market growth has now almost ceased. Zulon’s product manager does not
believe that the product merits further significant financial support. In terms of the BCG
matrix, which of the following strategies should the product manager recommend?
A Hold
B Harvest
C Divest
D Build
B With a high market share in a low/no growth market, the Zulon is clearly a Cash Cow.
The two strategy options are Hold (which implies continuing to support the product
financially to maintain its position) or Harvest (which implies running down investment
in the product and just managing the product for cash flow during its final years). The
product manager appears to rule out the Hold strategy (withdraw investment), hence
Harvest is the key (B).
Which of the following statements about a product life cycle diagram is true?
A The life cycle diagram predicts when the decline phase will start
B Sales growth always follows the introduction of a product
C Profits are normally highest during the maturity phase
D The mature phase usually lasts about 10 years
C The maturity phase is the phase during which profits from the product are usually
maximised (C). The decline phase starts after the maturity phase ends, but the diagram
will not predict when that will be (A). Sales growth is never guaranteed – the
introduction could be a flop (B). There is a vast range of mature phase lengths and it
cannot be said that they are usually 10 years (D).
Millward Ltd sells garden sheds. It has a number of local competitors who regularly use
price cuts and other sales promotions to win business. Its competitors have noticed that
Millward Ltd responds to price cuts by matching prices and then launching a leafleting
campaign to houses in the local area. In terms of Philip Kotler’s competitor reaction profiles,
Millward Ltd is:
A laid back
B a tiger
C selective
D stochastic
B Millward Ltd is consistently aggressive in its responses to competitor actions – a 'tiger' reaction profile (B).
Manson Ltd aims to pursue a differentiation strategy for its Portex sliding-door product.
Which three of the following will form part of this strategy?
A Action to minimise labour and overhead costs
B Action to improve productivity
C Improved product features and benefits
D Promotion of the Portex brand
E Use of higher quality materials in the manufacturing process
C,D,E
Differentiation means distinguishing your products and services from competitors’
offerings in ways that target customers will value. Therefore, better products using
superior component parts (E), distinctive branding (D) and improved features and
benefits (C) can all help. Options A and B would most likely underpin a competitive
strategy based on low cost rather than differentiation.
