Question 1

According to D'Aveni's book,Hypercompetition,which of the following statements is true?
A) Except for a few stable industries, strategy initiatives do not provide sustainable competitive advantage.
B) Hypercompetition is rare.
C) It is enough to gain competitive advantage by being the lowest cost competitor.
D) The theory of hypercompetition is not supported by any research.
E) The American home appliance industry was immune to hypercompetition.

Accepted Answer

D'Aveni's book argues that in most industries, strategy initiatives do not provide sustainable competitive advantage due to intense rivalry, frequent disruptions, and rapid changes in customer preferences and technology. This leads to hypercompetition, where competitors engage in rapid and unpredictable moves to gain any advantage over each other. Therefore, option A is the correct statement. Option B is incorrect since D'Aveni argues that hypercompetition is becoming more common in modern business. Option C is incorrect since a low-cost strategy may not be enough to sustain competitive advantage in a hypercompetitive market. Option D is incorrect since D'Aveni's argument is based on empirical research and case studies. Option E is incorrect since no industry is immune to hypercompetition, according to D'Aveni.

Question 2

The book Hypercompetition was written by
A) Porter.
B) D'Aveni.
C) Mintzberg.
D) Maslow.
E) Drucker.

Accepted Answer

The book Hypercompetition was written by Richard D'Aveni, a professor at the Tuck School of Business at Dartmouth College. The book presents a new model of competition beyond Porter's five forces framework, emphasizing the importance of rapid strategic maneuvering and creating new market spaces in the face of intense competition.

Question 3

Which of the following is not one of the risks of a cost leadership strategy?
A) The technology that the organization has been using changes.
B) Pricing for higher quality that is too far above the price of the competition.
C) Competitors can achieve viable imitations.
D) Other bases for cost leadership erode.
E) Proximity in differentiation is lost.

Accepted Answer

Option B is not a risk of a cost leadership strategy as it contradicts the very essence of cost leadership, which is to offer products or services at a cheaper price than the competition. Therefore, pricing for higher quality that is too far above the price of the competition is actually a risk of a differentiation strategy.

Question 4

The focus strategies will likely predominate when many small- and medium-sized local companies compete for relatively small shares of the total market in a(n)
A) united industry.
B) fragmented industry.
C) consolidated industry.
D) isolated industry.
E) integrated industry.

Accepted Answer

Fragmented industries are characterized by many small- and medium-sized local companies competing for relatively small shares of the total market. This makes it difficult for companies to compete on price or cost, so they often employ focus strategies to differentiate themselves and target niche markets.

Question 5

Morgan Motor Car Company manufactures classic British sports cars.Which of Porter's strategies is this company following?
A) differentiation focus
B) cost leadership
C) stuck in the middle
D) differentiation
E) cost focus

Accepted Answer

Morgan Motor Car Company targets a specific market segment (enthusiasts of classic British sports cars) with a unique product offering, which aligns with the differentiation focus strategy. This strategy involves offering a product or service that is perceived as unique or high-quality within a specific market segment.

Question 6

According to Porter,a business unit in a competitive marketplace with no generic competitive strategy is
A) achieving synergy.
B) practicing innovative leadership.
C) stuck in the middle.
D) not goal directed.
E) last in line.

Accepted Answer

According to Porter, being stuck in the middle means that the business unit has no clear generic competitive strategy and is trying to simultaneously pursue both low cost and differentiation strategies, without excelling at either. Therefore, being stuck in the middle is the most appropriate choice from the given options.

Question 7

Research suggests that a differentiation strategy is more likely to generate higher profits than a lower cost strategy because differentiation creates
A) a better entry barrier.
B) a better exit barrier.
C) a better niche market.
D) a more sustainable competitive advantage.
E) no clear long-term strategy.

Accepted Answer

The answer of Research suggests that a differentiation strategy is...

Question 8

As an industry matures while overcoming fragmentation and becomes dominated by a small number of large companies,it tends to become a(n)
A) united industry.
B) fragmented industry.
C) consolidated industry.
D) isolated industry.
E) integrated industry.

Accepted Answer

When an industry becomes dominated by a small number of large companies, it tends to become consolidated. Consolidation occurs when companies in an industry merge, acquire or form alliances with each other to increase their market power and reduce competition. This leads to fewer players in the industry and increased concentration of power among those remaining players. On the other hand, a fragmented industry has many small players with no one dominant player.

Question 9

Differentiation is a viable strategy for earning above-average returns in a specific business because the resulting increased value to the customer
A) lowers costs.
B) lowers price sensitivity.
C) lowers customer loyalty.
D) lowers market share.
E) lowers entry barriers.

Accepted Answer

By differentiating a product or service, it becomes less comparable to competitors' offerings, and customers become less sensitive to price, leading to increased profits.

Question 10

Which strategy is a firm following if it provides a unique and superior value in a narrow market?
A) differentiation focus
B) cost leadership
C) differentiation
D) cost focus
E) stuck in the middle

Accepted Answer

The firm is following the differentiation focus strategy, which entails providing a unique and superior value in a narrow market. This strategy involves targeting a specific market segment and offering products or services that are distinct from competitors.

Question 11

Which of Porter's broad mass market competitive strategies requires tight cost control,frequent detailed control reports,and cost minimization in areas like R&D,service and advertising?
A) focus
B) differentiation
C) cost leadership
D) focus differentiation
E) concentration

Accepted Answer

The competitive strategy that requires tight cost control, frequent detailed control reports, and cost minimization in areas like R&D, service, and advertising is cost leadership. This strategy involves offering the lowest prices in the market while still maintaining a profit margin, which requires a constant focus on cost reduction and efficiency.

Question 12

Competitive scope is
A) the breadth of the company's target market.
B) a business strategy.
C) the common thread found in the firm's mission statement.
D) the foundation of the choice between cost leadership and differentiation strategies.
E) an element of the marketing mix.

Accepted Answer

The answer of Competitive scope is
A) the breadth of the...

Question 13

As an industry becomes hypercompetitive,firms initially respond by
A) raising entry barriers.
B) moving into untapped markets.
C) attacking the strongholds of other firms.
D) competing on cost and quality.
E) working their way to a situation of perfect competition.

Accepted Answer

When faced with hypercompetition, firms usually respond by competing on cost and quality in order to differentiate themselves from their competitors. This allows them to maintain their market share and even gain new customers. Raising entry barriers or attacking the strongholds of other firms may be effective strategies in the short term, but in the long term they can create regulatory or legal issues. Moving into untapped markets may also be a viable option, but it requires significant resources and may not be sustainable in the long run. Working towards a situation of perfect competition is not typically a viable option because perfect competition is characterized by low profit margins, high competition, and few barriers to entry which means there is little incentive for firms to remain in the industry.

Question 14

When a company is concerned that the higher price it charges for its higher quality is too far above the price of the competition,the company is likely addressing a risk of following which competitive strategy?
A) cost leadership
B) focus
C) stuck-in-the-middle
D) differentiation
E) competitive scope

Accepted Answer

Differentiation strategy involves offering unique products or services that justify a higher price. When a company worries its prices are too high compared to competitors, it's concerned about the sustainability of its differentiation strategy, fearing that customers may not perceive enough value in the higher quality to warrant the higher price.

Question 15

A method developed in the mid-1990s as an efficient means to quickly consolidate a fragmented industry can be referred to as a
A) merger.
B) strategic rollup.
C) cost strategy.
D) differentiation strategy.
E) focus strategy.

Accepted Answer

The method described in the question, developed in the mid-1990s to consolidate a fragmented industry quickly, is called a strategic rollup. A strategic rollup refers to acquiring many small companies in the same industry and consolidating them into a larger, more efficient entity. This approach allows companies to gain economies of scale, reduce competition, and increase their market share. Therefore, option B is the best choice.

Question 16

The last stage of a hypercompetitive industry is reached when the remaining large global competitors
A) raise entry barriers.
B) move into untapped markets.
C) attack the strongholds of other firms.
D) compete on cost and quality.
E) work their way to a situation of perfect competition in which no one has any advantage and profits are minimal.

Accepted Answer

The last stage of a hypercompetitive industry is reached when the remaining large global competitors work their way to a situation of perfect competition in which no one has any advantage and profits are minimal. At this point, companies compete solely on price, and there is little differentiation between products. This often results in a market shakeout, with many companies exiting the industry or merging with other firms.

Question 17

Most entrepreneurial ventures follow
A) differentiation strategies.
B) focus strategies.
C) no strategies.
D) cost leadership strategies.
E) stuck in the middle strategies.

Accepted Answer

Entrepreneurial ventures often have limited resources and capabilities, making it difficult to compete with larger, established companies in a broad market. Therefore, they often use a focus strategy, concentrating on a narrow target market where they can differentiate themselves and create a competitive advantage. This allows them to better allocate their resources and build a strong reputation before expanding.

Question 18

Walt Disney Company competes successfully in the entertainment industry using which of Porter's competitive strategies?
A) differentiation focus
B) stuck in the middle
C) cost leadership
D) differentiation
E) cost focus

Accepted Answer

Walt Disney Company uses the differentiation strategy by offering unique and innovative products and experiences such as their theme parks, movies, and merchandise that are not offered by their competitors.

Question 19

Which of Porter's competitive strategies is likely to predominate in a fragmented industry?
A) cost leadership
B) differentiation
C) cost focus
D) stuck in the middle
E) cooperative

Accepted Answer

In a fragmented industry where there are many small competitors, cost focus is the most effective strategy. This involves targeting a specific market segment and offering lower prices than competitors. This can be achieved through a variety of means such as lower overhead costs, more efficient supply chain management, or smaller profit margins. Differentiation and cost leadership may be more difficult to attain due to the high competition and lack of resources to invest in innovative or extensive marketing efforts.

Question 20

Strict targets to improve efficiency are likely to be found in organizations following which of Porter's generic competitive strategies?
A) cost leadership
B) differentiation
C) stuck in the middle
D) differentiation focus
E) cooperative

Accepted Answer

Strict targets to improve efficiency are usually associated with cost leadership strategy, as this strategy focuses on producing goods or services at a low cost while maintaining acceptable quality standards. To achieve this, companies need to constantly improve their efficiency by reducing waste, streamlining processes, and optimizing resource utilization.

Quiz 6: Strategy Formulation: Business Strategy

According to D'Aveni's book,Hypercompetition,which of the following statements is true?

The book Hypercompetition was written by

Which of the following is not one of the risks of a cost leadership strategy?

The focus strategies will likely predominate when many small- and medium-sized local companies compete for relatively small shares of the total market in a(n)

Morgan Motor Car Company manufactures classic British sports cars.Which of Porter's strategies is this company following?

According to Porter,a business unit in a competitive marketplace with no generic competitive strategy is

Research suggests that a differentiation strategy is more likely to generate higher profits than a lower cost strategy because differentiation creates

As an industry matures while overcoming fragmentation and becomes dominated by a small number of large companies,it tends to become a(n)

Differentiation is a viable strategy for earning above-average returns in a specific business because the resulting increased value to the customer

Which strategy is a firm following if it provides a unique and superior value in a narrow market?

Which of Porter's broad mass market competitive strategies requires tight cost control,frequent detailed control reports,and cost minimization in areas like R&D,service and advertising?

Competitive scope is

As an industry becomes hypercompetitive,firms initially respond by

When a company is concerned that the higher price it charges for its higher quality is too far above the price of the competition,the company is likely addressing a risk of following which competitive strategy?

A method developed in the mid-1990s as an efficient means to quickly consolidate a fragmented industry can be referred to as a

The last stage of a hypercompetitive industry is reached when the remaining large global competitors

Most entrepreneurial ventures follow

Walt Disney Company competes successfully in the entertainment industry using which of Porter's competitive strategies?

Which of Porter's competitive strategies is likely to predominate in a fragmented industry?

Strict targets to improve efficiency are likely to be found in organizations following which of Porter's generic competitive strategies?