Chpter 4 management

Question 1

A prerequisite to effective strategic planning is identifying-

Answer 1

the unit or level for that planning is to be done

Question 2

The planning could be at the

Answer 2

the corporate level, the business unit level, or the product level

Question 3

A strategic business unit (SBU) meets the following criteria:

Answer 3

1. It has a clearly defined market.
2. It faces identifiable competitors in an external market (as op­posed to being an internal supplier).
3. As a separate, distinct, and identifiable unit whose assets do not depend on the existence of another SBU, its manager has con­trol over planning and decision areas that determine success of the business

Question 4

creates opportunities for employees to advance in the organization, creates a bigger impact in the market and may increase an organization’s profitability

Answer 4

Growth

Question 5

Product/market expansion strategies involve growth through;

Answer 5

(1) penetration of existing markets with existing products,
(2) development of new products aimed at existing markets,
(3) development of new markets for existing products and finally,
(4) development of new products aimed at new markets.

Question 6

In a market penetration strategy, management has the advantage of both

Answer 6

product knowledge and knowledge of existing markets.

Question 7

The obvious disadvantage is the fact that the products will eventually pass through various

Answer 7

product life-cycle stages ending with sales decline and extinction

Question 8

is a strategy that involves growth through increasing sales of existing products in existing markets

Answer 8

Market penetration

Question 9

This expansion of sales can come about by:

Answer 9

(l) altering purchase patterns of existing customers—getting them to buy more when they purchase or to purchase more frequently,

(2) attracting nonusers to purchase the product, and

(3) attracting purchasers of competitors’ products to switch, thereby increasing market share

Question 10

Alternative 1 and 2 involve increasing the

Answer 10

total size of the market

Question 11

While alternative 3 involves increasing

Answer 11

market share

Question 12

is a strategy of increasing sales through the introduction of new products/services to existing markets

Answer 12

Service/product development

Question 13

Product development involves altering existing products/services by:

Answer 13

adding new features,
(2) offering different quality levels, or
(3) offering different sizes of the product

Question 14

is a strategy which entails offering existing products to new markets

Answer 14

Market development

Question 15

These markets can be:

Answer 15

(l) new geographical markets such as foreign countries or
(2) new market segments not currently using the product

Question 16

may be used to supplement or complement the basic strategy chosen

Answer 16

diversification strategies

Question 17

Integration strategies take two basic forms

Answer 17

horizontal integration and vertical integration

Question 18

Horizontal integration strategies take the form of

Answer 18

alliances, acquisitions, or mergers between providers of similar products, such as hotel groups

Question 19

more formalized versions of strategic alliances, a firm seeks to combine strengths and overcome the weaknesses of their respective organizations, often with some exchange or pooling of management control of the venture

For example, a company may seek distribution of its products in foreign markets and form a joint venture with a company already operating in those markets

Answer 19

Joint Ventures

Question 20

Here, as in the joint venture, two organizations seek to do better

Answer 20

together what they had been doing alone

Question 21

Merger

Answer 21

separate organizations become a single entity through some exchange of ownership

Question 22

Typically, the conditions driving such a major ownership change portend dramatic, often

Answer 22

negative consequences

Question 23

are often threatened without some major operational changes

Answer 23

Market share, profitability, and organizational viability

Question 24

are why mergers don’t work out sometime

Answer 24

differences in organizational cultures

Question 25

Acquisitions, on the other hand, do

Answer 25

not result in a new entity but the acquiring firm uses its name with the newly acquired organization

Question 26

takes place when companies introduce or acquire new products in new markets

Answer 26

Diversification strategy

Question 27

There are three basic types of this diversification strategy:

Answer 27

(l) product/technology related,
(2) market related, and
(3) non-product/nonmarket related

Question 28

an arrangement between two companies to undertake a mutually beneficial project while each retains its independence.

Answer 28

A strategic alliance

Question 29

Organizations which don’t want to acquire other organizations through forward or backward integration, can accomplish some of the benefits of vertical integration through a concept called

Answer 29

supply chain (also called value chain) management

Question 30

supply chain (also called value chain) management

Answer 30

involves focusing on managing the relationship among the entire sequence or chain of suppliers that are involved in the creation or delivering of a product. affects relationships with upstream suppliers and downstream users

Question 31

Effective supply chain management can create a competitive advantage for a marketer by:

Answer 31

Increased innovation
Decreased costs
Improved resolution of conflict among chain members
Improved cooperation among members

Question 32

To measure the riskiness or the chances of success of diversification, there are three tests used:

Answer 32

1. The Attractiveness Test – The industries or markets chosen for diversification must be attractive. Porter’s 5 Forces Analysis can be done to determine the attractiveness of an industry.
2. The Cost-of-entry Test – The cost of entry must not capitalize all future profits.
3. The Better-off Test – There must be synergy; the new unit must gain a competitive advantage from the corporation or vice-versa.

Question 33

focuses on maintaining existing market share and profitability rather than growth

Answer 33

a stability strategy

Question 34

Companies engage in a stability strategy for several reasons:

Answer 34

First, it may not be by choice but rather the fact that the industry is growing slowly or not at all

Second, costs associated with corporate growth may not be worth the minimal increase in revenues

Finally, focusing on growth might impact quality levels, detailed marketing efforts, or customer service

Question 35

Retrenchment strategies may take one of three forms: turnaround, divestment, or liquidation

-may transform the business into a leaner, more efficient business by reducing costs, and pruning product lines.

Answer 35

turnaround strategy

Question 36

where a corporation sells off one or more of its business units

Answer 36

divestment strategy

Question 37

occurs when a company chooses to sell the business units and terminate the business

Answer 37

liquidation

Question 38

an SBU represents

Answer 38

an investment for a parent company

Question 39

In the BCG framework,an SBUs are classified on the basis of their

Answer 39

relative market share and growth potential

Question 40

a well-known consulting organiza­tion, developed a portfolio approach to strategic planning

Answer 40

The Boston Consulting Group

Question 41

an SBU with a high relative market share compared to other competitors in the market, but it is in an industry that has a low annual growth rate

Answer 41

Cash Cows

Question 42

those SBUs that have a high relative market share and are also in an industry with expected high rates of growth

Answer 42

Stars

Question 43

are those SBUs that have a low relative market share but are in industries which have a high annual rate of growth

Answer 43

Problem Children

Question 44

SBUs that not only have low relative market share but also are in industries which have low growth potential

Answer 44

Dogs

Question 45

was developed with the intention of overcoming the limitations of the BCG Matrix

Answer 45

The GE 9-Cell Matrix

Question 46

This model is based on two variables;

Answer 46

business strength and long-term industry attractiveness


Question 47

represent those that have strong/average business strength and are in an industry with high/medium long-term attractiveness

Answer 47

SBU green cells

Question 48

have low/medium/high long-term industry attractiveness and the business strength is strong/average/weak and need to be dealt with cautiously

Answer 48

The SBUs in the yellow zone

Question 49

have low/medium long-term industry attractiveness and only average or weak business strength

Answer 49

SBUs in the red zone

Question 50

While all of the firm’s resources need to be analyzed before any diversification strategy is attempted, two are the most important and should be considered before all others

Answer 50

One is financial fit and the other is whether or not the firm can, in the proposed diversification, add value for the customer

Question 51

simply asks if the firm has the financial resources to engage in diversification

Answer 51

Financial resource fit

This involves the firm having not only the money for the diversification, but the financial expertise to manage the diversification as well

Question 52

eats up a lot of cash and the new business unit is unable to support itself or grow

Answer 52

cash hog

Question 53

if a business doesn’t have

Answer 53

value