1.

Which of the following is not a strategic disadvantage of

vertical integration?

a.  D. Vertically integrated companies are often slow to

embrace technological advances or more effi cient
production methods when they are saddled with older
technology or facilities.

b.  C. Integrating into more industry value chain segments

increases business risk if industry growth and profi tability
sour.

c.  E. Integrating backward potentially results in less

fl exibility in accommodating shifting buyer preferences
when a new product design doesn't include parts and
components that the company makes in-house.

d.  A. It greatly reduces the opportunity for capturing

maximum scale economies and achieving the lowest
possible operating costs.

e.  B. Vertical integration increases a fi rm's capital

investment in the industry.
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2. A low-cost provider's basis for competitive advantage is
_______________

a.  A. Using an everyday low pricing strategy to gain the

biggest market share.

b.  E. A reputation for charging the lowest prices in the

industry.

c.  D. Meaningfully lower overall costs than competitors.

d.  C. High buyer switching costs because of the

company's diff erentiated product off ering.

e.  B. Bigger profi t margins than rival fi rms.

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3. In which of the following situations is being fi rst to initiate a
particular move not likely to result in a positive payoff ?
 a.  A. When potential buyers are skeptical about the
benefi ts of a new technology or product being pioneered by
a fi rst mover.

b.  C. When fi rst-time buyers remain strongly loyal to a

pioneering fi rm in making repeat purchases.

c.  D. When moving fi rst can constitute a preemptive

strike, making imitation extra hard or unlikely.

d.  E. When moving fi rst can result in a cost advantage

over rivals.

e.  B. When pioneering helps build up a fi rm's image and

reputation with buyers.
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4. Being fi rst to initiate a particular move can have a high payoff
when _______________

a.  E. All of these.

b.  B. early commitments to new technologies, new-style

components, new or emerging distribution channels, and so
on, can produce an absolute cost advantage over rivals.

c.  A. pioneering helps build up a fi rm's image and

reputation with buyers.

d.  C. fi rst-time customers remain strongly loyal to

pioneering fi rms in making repeat purchases.

e.  D. moving fi rst constitutes a preemptive strike, making

imitation extra hard or unlikely.
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5. The purposes of defensive strategies are to _______________

a.  C. Guard against adverse changes in the company's

macro-environment and insulate the company from the
impact of industry-driving forces.
 b.  A. aggressively retaliate against rivals pursuing
off ensive strategies and prevent price wars.

c.  B. restrict a competitive attack by a challenger,

weaken the impact of any attack that occurs, and infl uence
challengers to aim their off ensive eff orts at other rivals.

d.  D. strengthen a company's competitive advantage and

reduce its exposure to business risk.

e.  E. eliminate a company's resource weaknesses and

competitive defi ciencies, thereby making it invulnerable to
competitive attack from would-be challengers.
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6. Competitive strategies that provide distinctive industry
positioning and competitive advantage involve _______________

a.  C. Assembling a wide portfolio of company resources,

competitive capabilities, and core competencies.

b.  E. Choosing between (1) a market target that is either

broad or narrow, and (2) whether the company should
pursue a competitive advantage linked to low costs or
product diff erentiation.

c.  D. Developing a better credit rating than rivals.

d.  B. Striving for a high degree of customer loyalty to the

company's brand.

e.  A. A customer value proposition, profi t formula, and

collection of valuable resources.
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7. A blue ocean type of off ensive strategy _______________

a.  D. involves using innovative advertising and deep price

discounts to grab sales and market share from complacent
or distracted rivals.
 b.  B. involves deliberately attacking those market
segments where a key rival makes big profi ts.

c.  A. is a preemptive strike type of price-cutting off ensive

used by a market leader to steal customers away from
higher-priced rivals.

d.  C. involves abandoning eff orts to beat out competitors

in existing markets and, instead, inventing a new industry
or distinctive market segment that renders existing
competitors largely irrelevant and allows a company to
create and capture altogether new demand.

e.  E. employs highly creative, never-used-before strategic

moves to attack the competitive weaknesses of rivals.
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8. Successful diff erentiation allows a fi rm to _______________

a.  D. command a premium price for its product and/or

increase unit sales (because additional buyers are won over
by the diff erentiating features).

b.  E. Both A and D.

c.  A. gain buyer loyalty to its brand (because some

buyers are strongly attracted to the diff erentiating features
and bond with the company and its products).

d.  B. earn the highest profi t margins of any company in

the industry.

e.  C. attract many more buyers by charging a lower price

than rivals and thereby take sales and market share away
from rivals.
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9. Which of the following is not one of the principal off ensive
strategy options?

a.  E. Off ering an equal or better product at a lower price.

 b.  D. Attacking competitors' weaknesses.

c.  B. Launching preemptive strikes.

d.  A. Adopting and improving on the good ideas of other

companies.

e.  C. Blocking the avenues open to challengers.

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10. Which of the following is not a distinguishing feature of a low-
cost provider strategy?

a.  D. The strategic target is value-conscious buyers and

sustaining the strategy depends on frequent advances in
technology and occasional product innovations.

b.  B. The production emphasis is on continuously

searching for ways to reduce costs without sacrifi cing
acceptable quality and essential features.

c.  C. The marketing emphasis is on making virtues out of

product features that lead to low cost.

d.  A. The product line consists of a few basic models

having minimal frills and acceptable quality.

e.  E. Sustaining the strategy revolves around managing

costs down year-after-year and delivering good value at
economical prices.
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11. A company's competitive strategy deals with _____________

a.  D. Its plans for underpricing rivals and achieving

product superiority.

b.  E. The specifi c actions management intends to take to

strongly diff erentiate its product off ering from the off erings
of rival companies in the industry.
 c.  B. How it plans to unify its functional and operating
strategies into a cohesive eff ort aimed at successfully
taking customers away from rivals.

d.  C. The specifi cs of management's game plan for

securing a competitive advantage vis-à-vis rivals.

e.  A. The specifi c actions management plans to take to

develop a better value chain than rivals.
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12. Which of the following is typically the strategic impetus for
forward vertical integration?

a.  A. To charge lower retail prices and thereby attract a

bigger, more loyal clientele of customers.

b.  B. To charge lower retail prices and thereby attract a

bigger, more loyal clientele of customers.

c.  C. To gain better access to end users and better

market visibility.

d.  E. To gain better access to greater economies of scale.

e.  D. To achieve greater control over advertising and in-

store retail merchandising.
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13. Which one of the following is not a good type of rival for an
off ensive-minded company to target?

a.  C. Small local and regional companies with limited

capabilities.

b.  A. Market leaders that are vulnerable.

c.  E. Struggling enterprises that are on the verge of

going under.

d.  D. Other off ensive-minded companies with a sizable

war chest of cash and marketable securities.
 e.  B. Runner-up fi rms with weaknesses in areas where the
challenger is strong.
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14. The fi ve generic types of competitive strategies include
_______________

a.  E. Attacking competitor strengths, attacking

competitor weaknesses, market leadership strategies, and
product superiority strategies.

b.  D. Low-price strategies, premium price strategies,

middle-of-the-road strategies, and market share leadership
strategies.

c.  A. Off ensive strategies, defensive strategies,

diff erentiation strategies, and low-cost strategies.

d.  C. Off ensive strategies, defensive strategies,

technological leadership strategies, and product innovation
strategies.

e.  B. Low-cost provider, broad diff erentiation, focused

low-cost, focused diff erentiation, and best-cost provider.
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15. Easy-to-copy diff erentiating features _______________

a.  B. are less expensive to integrate into a product or

service off ering.

b.  D. should be patented before other companies imitate

the features.

c.  E. do not off er the promise of sustainable competitive

advantage.

d.  A. lead to excessive price competition.

e.  C. tend to satisfy the needs of most buyers.

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16. A hit-and-run or guerrilla warfare type of off ensive strategy
involves _______________

a.  C. tactics that work best if the guerrilla is the

industry's low-cost leader.

b.  B. undertaking surprise moves to secure an

advantageous position in a fast-growing and profi table
market segment; usually the guerrilla signals rivals that it
will use deep price cuts to defend its newly won position.

c.  E. surprising moves by small challengers that have

neither the resources nor the market visibility to mount a
full-fl edged attack on industry leaders.

d.  D. pitting a small company's own competitive strengths

head-on against the strengths of much larger rivals.

e.  A. random off ensive attacks used by a market leader to

steal customers away from unsuspecting smaller rivals.
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17. In which of the following cases are fi rst-mover disadvantages
not likely to arise?

a.  A. When the costs of pioneering are much higher than

being a follower and only negligible buyer loyalty or cost
savings accrue to the pioneer.

b.  B. When new infrastructure is needed before market

demand can surge.

c.  D. When customer loyalty to the pioneer is low.

d.  E. When technological change is rapid and following

rivals fi nd it easy to leapfrog the pioneer with next-
generation products of their own.

e.  C. When the pioneer's skills, know-how, and products

are easily copied or even bested by late movers.
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18. A broad diff erentiation strategy _______________
 a.  E. Both A and B.

b.  A. is an attractive competitive approach whenever

buyers' needs and preferences are too diverse to be
satisfi ed by a product that is essentially identical from
seller to seller.

c.  C. works best when the basis for diff erentiation is

superior performance features and buyer switching costs
are low.

d.  B. can produce sustainable competitive advantage if

the diff erentiating features possess strong buyer appeal
and can't be copied or easily matched by rivals.

e.  D. off ers a better chance for gaining market share than
low-cost or best-cost provider strategies, and typically
allows a fi rm to charge the highest price in the industry.
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19. Striving to be the industry's low-cost provider and achieving
lower costs than rivals entails _______________

a.  E. Both A and C.

b.  C. Doing a better job than rivals in performing

essential activities.

c.  A. Eliminating or curbing nonessential activities.

d.  D. Aggressive use of activity-based costing, utilizing

more best practices than rivals, and having a narrower
product line than rivals.

e.  B. Having a smaller labor force than rivals, paying

lower wages than rivals, locating all facilities in countries
where labor costs are low, and outsourcing many value
chain activities to suppliers with world-class technological
capabilities.
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20. A competitive strategy of striving to be the low-cost provider is
particularly attractive when _______________
 a.  D. buyers are not swayed by advertising and are not
very brand-loyal.

b.  B. most rivals are trying to diff erentiate their product

off ering from those of rivals.

c.  E. most rivals are pursuing best-cost or broad

diff erentiation strategies.

d.  A. buyers are large and incur low costs in switching

their purchases from one seller to another.

e.  C. there are many ways to achieve higher product

quality that have value to buyers.
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