Ch 6: Stengthening a compnay's competitive postion

Question 1

Aggressive strategic offensive are called for when a firm:

Answer 1

1. Spots opportunity to gain profitable market share
2. Has no choice but to weaken the rival’s advantages
3. Can reap benefits of a competitive edge (market share, higher prof. marg., rapid growth)

Question 2

Best offense use a

Answer 2

firm’s resource strengths to attack its rival’s weaknesses.

Question 3

List principle offensive strategy options:

Answer 3

1. Direct frontal assault: match or exceed the strengths of a rival
2. Flanking attack: focused on competitive weaknesses of rivals
3. Cut prices*
4. Leapfrogging rivals by being the first to introduce the next gen. techno. or products
5. Adopting and improving on others good ideas and companies*
6. Attacking rival’s profitable market segments.
7. Use hit-and-run or guerilla warfare tactics to grab market share from rivals*
8. Preemptively capture rare opportunities or secure an industry’s limited resources*
9. Maneuvering around competitors to capture unoccupied market territory

Question 4

What kind of companies are the best targets for offensive attacks?

Answer 4

1. Vulnerable market leaders
2. Runner-up firms with weaknesses in areas where we are strong.
3. Struggling enterprises that are going under
4. Small local firms with limited capabilities

Question 5

What does Blue Ocean strategies mean?

Answer 5

strategies that offer growth in revenues and profits by discovering or inventing new industry segments that create altogether new demand (and new set of rivals).

Question 6

Defensive strategies defend against competitive challenges by:

Answer 6

1. Lowering the risk of being attacked
2. Weakening the impact of any attack
3. Influencing challengers to leave us alone
   (Defensive strategy protect advantages, but rarely create any)

Question 7

List defensive strategies:

Answer 7

1. Retaliation
2. Blocking (lobbying for higher tariffs)
3. Retrenchment (refocus, and let go of the weak segments)

Question 8

How to defend a competitive position?

Answer 8

1. Introduce new features
2. Add new models
3. Broaden product line to fill vacant niches
4. Maintain economy-priced models
5. Announce new products or price changes
6. Grant volume discounts or better financing terms

Question 9

What are some ways we could signal challengers that retaliation is likely, in order to dissuading or diverting competitors?

Answer 9

1. Public announcement
2. Publicly committing the firm to a policy of matching competitors’ terms or prices
3. Maintaining a war chest of cash
4. Making a strong counter response to weak competitor moves to enhance the firm’s image as a tough defender

Question 10

When does first movers earn big payoff?

Answer 10

They do when:

1. Pioneering helps build reputation and image
2. Early commitments produce cost advantages over rivals
3. First-time customers remain strongly loyal
4. Moving first make imitation extra hard or unlikely

Question 11

When does late mover have an advantage:

Answer 11

1. When pioneering is more costly than imitation
2. When innovators’ products fail
3. When potential buyers are skeptical about the new product
4. When rapid market and technology change allow fast follower to leapfrog pinoeers

Question 12

Questions to ask when deciding between being a first-mover or late-mover?

Answer 12

1. does market takeoff depends on new products and services?
2. Is new infrastructure required before buyer demand can surge?
3. Will buyers need to learn new skills or adopt new behaviors? Will buyers encounter high switching costs?
4. Are there influential competitors in a position to delay or derail the efforts of a first-mover?

Question 13

What does scope of a firm’s operations mean?

Answer 13

It describes the breadth and strength of its activities and the extent of its reach into geographic, product, and service market segments

Question 14

Dimensions of a firm’s scope:

Answer 14

1. Breadth of its product and service offerings
2. The range of activities it performs internally
3. The extent of its geographic market presence
4. Its mix of business

Question 15

What is the difference between horizontal and vertical scope?

Answer 15

Horizontal: product and service segments within the market
Vertical: the activities that comprise the industry’s value chain system

Question 16

Strategic objectives of M&A:

Answer 16

1. Extend into new product categories
2. Create cost-efficient operations
3. Expand Geo-coverage
4. Gain quick access to new techno. or complementary resources and capabilities
5. Lead the convergence of industries whose boundaries are blurred

Question 17

Why M&A may fail?

Answer 17

1. Cost savings are smaller than expected
2. Gains in competitive capabilities take much longer to realize
3. Failure to mesh the corporate cultures together
4. Managers and employees at the acquired company keep doing the same stuff
5. Dissatisfied employees leave
6. Mistakes are made in deciding which activities to leave alone and which to change

Question 18

Advantages of a vertical integration strategy:

Answer 18

1. Strengthen the firm’s competitive position

2. Boost profitability

Question 19

For a backward vertical integration to work firms must be able to:

Answer 19

1. Achieve the same scale of economies as suppliers

2. Match or beat suppliers’ production efficiency with the same quality

Question 20

When backward vertical integration becomes a consideration?

Answer 20

1. When suppliers have large profit margins
2. When the item being supplied is a major cost component
3. When the requisite techno. skills are easily mastered
4. When powerful suppliers always raise prices

Question 21

What are the benefits of integrating forward?

Answer 21

1. Gain better access to end users
2. Improve market visibility
3. Include the purchasing experience as a differentiating feature

Question 22

It is appealing to integrate vertically forward when:

Answer 22

1. It lowers distribution costs
2. It produces a relative cost advantage over rivals
3. It produces higher profit margins
4. Allow for charging lower prices to end users
5. Number of buyers prefer to make online purchases

Question 23

Out sourcing as opposed to vertical integration should be considered when:

Answer 23

1. It is cheaper and more efficient
2. Not crucial for our competitive adv.
3. It improves organizational flexibility (to switch suppliers)
4. Reduces risk exposure to changing techno. and buyer preferences
5. Allow us to concentrate on our core business

Question 24

The big risk of outsourcing is

Answer 24

Hollowing out strategically-important capabilities, leading to reduction of the firm’s strategic competitiveness and long-run success

Question 25

Firms join strategic alliances based on

Answer 25

1. strategically relevant collaboration
2. Joint contribution of resources
3. Shared risk
4. Shared control
5. Mutual dependence

Question 26

Reasons for alliances:

Answer 26

1. Expedite development of new techno
2. Overcome technical expertise deficits
3. Bring together personnel to create new skill sets and capabilities
4. Improve supply chain efficiency
5. Gain economies of scale in production and marketing
6. Acquire and improve market access