MGMT 466 Exam 2 - FLASHCARDS - Chapter 4
What is concerned with making choices among two or more alternatives?
Strategy
What uses digital technology to help a firm understand its customers and their needs with greater clarity as a foundation for developing innovations that create more value for those customers?
Digital strategy
True or false: Information and the technologies available to gather and analyze it are at the core of a firm’s effort to form a digital strategy?
TRUE
True or false: A digital strategy is developed and implemented in combination with other firm strategies?
TRUE
What do firms seek to do through selecting and implementing one or more strategies?
− gain strategic competitiveness.
− earn above-average returns
True or false: strategies are purposeful?
TRUE
True or false: strategies engage rivals in marketplace competition?
TRUE
True or false: strategies demonstrate a shared understanding of the firm’s vision and mission?
TRUE
True or false: A strategy consistent with the conditions and realities of a firm’s external and internal environments marshals, integrates, and allocates available resources, capabilities, and competencies to align them properly with opportunities in the external environment?
TRUE
What is an integrated and coordinated set of commitments and actions a firm uses?
Business level strategy
True or false: a business level strategy is something that every firm must develop and implement?
TRUE
What is the purpose of a business level strategy?
The purpose of a business-level strategy is to create differences between the firm’s position and those of its competitors
True or false: to position itself differently from competitors, a firm must decide if it intends to perform activities differently or if it will perform different activities?
TRUE
True or false: strategy defines the path that provides the direction of actions organizational leaders take to help their firms achieve success?
TRUE
True or false: strategic competitiveness results only when the firm satisfies a group of customers by using its competitive advantages as the basis for competing in individual product markets?
TRUE
True or false: Effective global competitors establish reach, richness, and affiliation with their customers?
TRUE
What is the dimension of relationships with customers that revolves around the firm’s access and connection to customers?
Reach
What is depth and detail of the two-way flow of information between the firm and customers?
Richness
What is concerned with facilitating useful interactions with customers?
Affiliation
What is the process of dividing customers into groups based on their needs?
Market segmentation
What is the dimension of relationships with customers that revolves around the firm’s access and connection to customers?
Reach
True or false: business models are part of a comprehensive business-level strategy?
TRUE
What is a framework for how the firm will use processes to create, deliver, and capture value?
Business model
What is the path the firm will follow to gain a competitive advantage by exploiting its core competencies in a specific product market?
Business level strategy
True or false: a firm’s business model explains how the firm intends to make money?
TRUE
Those leading a company should view that selection of the business model as one that will require adjustment in response to conditions that change from time to time in the firm’s external environment?
TRUE
What occurs when a firm determines that its current business model is outdated and successfully replaces it with a newer one?
Business model innovation
True or false: Business-model innovation is difficult because of inertia, which is all forces that cause an organization to resist change?
TRUE
If a business model has been highly successful over a long time, is it even more difficult to change to a different model?
Yes
What is depth and detail of the two-way flow of information between the firm and customers?
Richness. Ex: Amazon. 2 way communication
What type of model is where a firm licenses its trademark and the processes?
Franchise model
What type of model is where the firm provides a basic product to customers for free and earns revenues and profits by selling a premium version of the service?
Freemium model
What type of model is where for a fee, a firm provides advertisers with high-quality access to its target customers?
Advertising model
What model is where a firm offers a product to customers on a regular basis such as once-per-month, once-per-year, or upon demand?
Subscription model
What model is where a business matches those wanting a particular service with those providing that service?
Peer to peer model
What is an example of the freemium model?
Drop box, spotify
What is an example of the franchise model?
McDonalds, Panera
What is an example of the peer to peer model?
Airb&b
What is an example of the subscription model?
Netflix, Spotify
True or false: Spotify uses both the subscription and freemium model?
TRUE
What is an Internet-based location for exchanges of information, goods, or services to occur between producers, consumers, and other members of the platform community?
Digital platform
What does a digital platform help manage?
Manage autonomous complementors, stakeholders that work with, but typically are not in direct competition with, the platform provider
What are the two types of digital platforms?
Innovation platforms and transaction platforms
What type of platforms facilitate the development of complementary products and services such as Android, Google?
Innovation platforms
What type of platforms facilitate buying and selling goods and services?
Transaction platforms
What is a major advantage of a digital platform model?
It can be scaled quickly with relatively lower costs than many other business models
True or false: A differentiation strategy is what has driven the popularity of most successful digital platforms?
TRUE
What are the five business level strategies?
Cost leadership
Differentiation
Focused cost leadership
Focused differentiation
Integrated cost leadership/differentiation
What is the effectiveness of each business level strategy dependant on?
opportunities and threats in a firm’s external environment.
strengths and weaknesses derived from its resource portfolio
True or false: it is critical for the firm to select a business-level strategy that represents an effective match between the opportunities and threats in its external environment and the strengths of its internal organization based on its core competencies?
TRUE
What business level strategy is an integrated set of actions taken to produce products with features that are acceptable to customers at the lowest cost, relative to that of competitors?
Cost leadership
What business level strategy commonly sells standardized goods or services, but with competitive levels of differentiation, to the industry’s most typical customers?
Cost leadership
What are the different support functions related to the cost leadership strategy?
Finance
Human resource management
Information technology management
Research and development
What are the different value chain activities related to the cost leadership strategy?
Supply chain management
Operations
Distribution
Marketing (including sales)
Follow up service
What are activities that manage financial resources to ensure positive cash flow and low debt costs?
Finance
What are activities that develop policies to ensure sufficient hiring and retention to keep costs low, and training to ensure high employee efficiency?
Human resource management
What are activities that develop and maintain information technologies and systems that support efficient operations?
Information technology management
What is process development research to make product/service creation processes more efficient?
Research and development
What are activities that maintain effective relationships with suppliers to maintain efficient flow of goods?
Supply chain management
What are activities that build economies of scale and manage operations for maximum capacity?
Operations
What is use of low cost modes of transporting goods and delivery times and locations the produce lowest cost?
Distribution
What is careful advertising aimed at high volume markets; low prices to encourage high sales volume?
Marketing
What is efficient follow up to reduce returns and encourage repeat purchases?
Follow up services
What are factors that influence the degree of rivalry that firms encounter when implementing the cost leadership strategy?
- Organizational size
- Resources possessed by rivals
- A firm’s dependence on a particular market
- Location
- Prior competitive interactions between firms
- A firm’s reach, richness, and affiliation with customers
True or false: Powerful customers or buyers can force a cost leader to reduce its prices?
TRUE
True or false: Competitive forces mean that prices typically will not be reduced below the level at which the cost leader’s next-most-efficient industry competitor can earn average returns unless the low-cost leader is trying to push the next-most-efficient competitor out of the market?
TRUE
True or false: A cost leader generally operates with margins less than its competitors earn?
FALSE. A cost leader generally operates with margins greater than its competitors earn?
How does cost leadership affect the bargaining power of suppliers?
A powerful cost leader may be able to force its suppliers to hold down their prices, which would reduce the suppliers’ margins in the process
How does cost leadership affect potential new entrants?
Over time, the efficiency of a cost leader enhances its profit margins, which in turn creates an entry barrier to potential competitors
True or false: New entrants must be willing to accept less than average returns until they gain the experience required to approach the cost leader’s efficiency?
TRUE
When faced with product substitutes, does the cost leader have more flexibility than its competitors?
Yes
True or false: to retain customers, a cost leader can often reduce its product’s price?
TRUE
What are competitive risks associated with the cost leadership strategy?
- A loss of competitive advantage to newer technologies.
- A failure to detect changes in customers’ needs.
- The ability to imitate the cost leader’s competitive advantage through competitors’ own distinct strategic actions.
What type of business level strategy is Dollar General?
Cost leadership
What is an integrated set of actions taken to produce products (at an acceptable cost) that customers perceive as being different in ways that are important to them?
Differentiation strategy
What are target customers for whom the firm creates value because of the how its products differ from those produced and marketed by competitors?
Differentiators
What is a new product or service development that solves the customer’s problem and benefits both the customer and the company?
Product innovation
True or false: product innovation is critical to the successful use of the differentiation strategy?
TRUE
Does a differentiation strategy allow the firm to outperform rivals and earn above-average returns?
Yes
True or false: to maintain success, a differentiation strategy consistently upgrades differentiated features that customers value?
TRUE
True or false: to maintain success, a differentiation strategy creates new valuable features without significant cost increases?
TRUE
True or false: Firms using the differentiation strategy seek to differentiate their products from competitors’ products on as many dimensions as possible?
TRUE
True or false: Firms use the value chain to determine if they are able to link the activities required to create value by using the differentiation strategy?
TRUE
True or false: firms using the differentiation strategy can successfully position themselves in terms of Porter’s five forces?
TRUE
What is an integrated set of actions taken to produce products that serve the needs of a particular segment of customers?
Focus strategy
What are examples of market segments firms may choose to serve by implementing a focus strategy?
- A particular buyer group
- A different segment of a product line
- A different geographic market
What is an example of a particular buyer group?
Senior citizens
What is an example of a different segment of a product line?
Products for professional painters
What is an example of a different geographic market?
Northern or southern Italy
What can a firm do that leads to a focus strategy being successful?
Serves a segment whose unique needs are so specialized that broad-based competitors choose not to serve that segment
Creates value for a segment that exceeds the value created by industry-wide competitors
True or false: a focus strategy leads to success when the firm serves a segment whose unique needs are so specialized that broad-based competitors choose not to serve that segment?
TRUE
True or false: a focus strategy leads to success when the firm creates value for a segment that exceeds the value created by industry-wide competitors?
TRUE
What two strategies can firms use to create value for customers in specific and unique market segments?
Focused cost leadership strategy
Focused differentiation strategy
What type of business level strategy does Dollar General use?
Cost leadership
What type of business level strategy does Jiffy Lube use?
Cost leadership
What type of business level strategy does Tesla use?
Cost differentiation
True or false: Porter’s five competitive forces are virtually identical to those of the industry-wide cost leadership and differentiation strategies?
TRUE
What strategy finds a firm engaging simultaneously in primary value chain activities and support functions to achieve a low-cost position with some product differentiation?
The integrated cost leadership/differentiation strategy
What do firms seek to do when using the integrated cost leadership/differentiation strategy?
firms seek to produce relatively low-cost products that have some differentiated features that their customers value
True or false: Firms that use the integrated cost leadership/differentiation strategy successfully usually adapt quickly to new technologies and rapid changes in their external environments?
TRUE
True or false: Developing two sources of competitive advantage increases the number of primary value-chain activities and support functions in which the firm becomes competent?
TRUE
What is required to learn how to use primary value-chain activities and support functions in ways to produce differentiated products at relatively low costs?
Flexibility
What are the three sources of flexibility used to implement the integrated cost leadership/differentiation strategy successfully?
- flexible manufacturing systems.
- information networks.
- total quality management systems.
What is a computer-controlled process that firms use to produce a variety of products in moderate, flexible quantities with a minimum of manual intervention?
Flexible manufacturing system
What is the goal of a flexible manufacturing system?
Eliminate the “low cost versus product variety” trade-off that is inherent in traditional manufacturing technologies
What allows a firm to change quickly and easily from making one product to making another?
Flexible manufacturing system
What allows a firm to increase its effectiveness in responding to changes in its customers’ needs, while retaining low-cost advantages and consistent product quality?
Flexible manufacturing system
What allows a firm to reduce the lot size needed to manufacture a product efficiently?
Flexible manufacturing system
What allows a firm to have a greater capacity to serve the unique needs of a narrow competitive scope?
Flexible manufacturing system
What is a customer relationship management system? (CRM)?
An information-network process that firms use to manage relationships with customers
What is a blue ocean strategy?
represent untapped market space, the creation of new demand, and the resulting opportunity of highly profitable growth
What term describes a new market with little competition, or an unknown market space that is yet to be explored?
Blue ocean
What do blue oceans allow firms do do in regards to pricing?
- Charge a higher price than the cost leader– higher value creation
- Can lower its price below that of the differentiator because of its lower cost structure
True or false: a blue ocean can allow a firm to charge a higher price than the cost leader– higher value creation?
TRUE
True or false: a blue ocean can allow a firm to lower its price below that of the differentiator because of its lower cost structure?
TRUE
What term describes a market or industry that is already established and has cutthroat competition? Refers to the fierce battle between companies for revenue, market share, and success, which is often depicted as “bloody”
Red ocean
What type of ocean strategy is where costs increase, profits fall, growth shrinks, and there is commoditization of products?
Red ocean
What are characteristics of a blue ocean strategy?
Not about technology innovation– link existing technology to buyers’ value
Very often from within the industry
Don’t use competition as a benchmark
Reduce costs while offering customers more value
True or false: blue ocean strategies are not about technology innovation and link existing technology to buyers’ value?
TRUE
True or false: blue ocean strategies don’t use competition as a benchmark?
TRUE
True or false: blue ocean strategies reduce costs while offering customers more value?
TRUE
Is Cirque du Soleil a blue ocean strategy?
Yes
How is Cirque du Soleil a blue ocean strategy?
Created uncontested market space and made the competition irrelevant. It also reduced costs while giving customers more value such as through no spending on animals or concessions and instead on themes and set design. Reinvented the circus. People used to theater and concerts were willing to pay more for a circus ticket.
True or false: Ikea and Trader Joe’s are examples of blue ocean strategies?
TRUE
With a blue ocean strategy, is there a simultaneous pursuit of differentiation and low cost in a way that creates a leap in value for both the firm and the consumer?
Yes
