Questions and Answers
Which component of strategy involves detailing the desired levels of accomplishment on one or more performance dimensions over specified time periods for the organization as a whole?
Goals and objectives
Decisions about the organization’s scope and resource deployments across its divisions or businesses are the primary focus of which strategy?
Corporate strategy
Sustainable competitive advantage is a major component of business strategy.
False
Within the scope of corporate strategy, which of the following falls?
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In business-level strategies, how are resources allocated?
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What is a marketing plan?
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Which of the following strategy components address issues such as the time frame in which each target should be attained and the target level of performance to be achieved on each dimension?
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The principles of _____ involve meeting humanity's needs without harming future generations.
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What is the expansion for the acronym SMART used in specifying corporate objectives?
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Which of the following indexes is used to measure the profitability criterion?
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A _____ policy relates to the breadth or diversity of product lines, their level of technical sophistication, and the target level of product quality relative to competitors.
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Which of the following businesses seldom adheres to a policy of low competitive prices?
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High advertising and sales promotion expenditures have a negative impact on ROI for _____ businesses.
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A _____ is defined as being composed of individuals and organizations who are interested in and willing to buy a good or service to obtain benefits that will satisfy a particular need.
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Match the following macroenvironmental trends with their impact areas:
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Which of the following is typically a part of using customer equity to estimate the value of alternative marketing actions?
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What are the components of sustainable competitive advantage at the corporate level?
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How can customer equity be used to estimate the value of alternative marketing actions?
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What are the various sources of synergy for a firm?
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Strategic business units refer to:
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Which of the following is true of an analogy forecasting method?
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Which of the following is true of a live test market?
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Which of the following is an example of a mathematically-driven approach to forecast sales?
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Which of the following statements is true of an adoption process?
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Which of the following adopters forms the smallest group in the diffusion of innovation curve?
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Which force increases industry attractiveness?
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Rivalry among competitors is greater when:
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The threat of new entrants is less when:
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Which factor increases a buyer’s bargaining power?
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Opportunities are attractive at the micro level on the market side when:
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For an industry, attractive opportunities are available at the micro level when:
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Which is considered a critical success factor in retailing?
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What is used to assess the impact and timing of an environmental event in a firm?
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Describe the sociocultural environment and economic environment of a business’s macroenvironment.
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Explain the challenges in macro-level market and industry analysis.
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Define critical success factors.
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In a _____ approach, a central person or persons take the responsibility for forecasting and prepare an overall sales forecast.
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Which approach is used to prepare a sales forecast in decentralized firms?
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What is true of a statistical forecasting method?
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RobustTires uses time series analysis to forecast sales and market potential, which forecasting method does this exemplify?
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What is true of surveys in forecasting?
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Which technique did HoneyDew use to forecast sales for its new walnut fudge candy product?
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What method is best suited to forecast sales of new products?
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Forecasting based on past characteristics of a different product category is an example of which method?
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Study Notes
Market-Oriented Perspectives
- A market-oriented organization focuses on understanding and satisfying customers' needs and wants.
- Product-oriented organizations, on the other hand, focus on the product itself, emphasizing its features, quality, and price.
Strategic Management
- Corporate strategy involves decisions about the organization's scope, resource deployments, and sustainable competitive advantage.
- Business strategy involves allocating resources to accomplish the firm's objectives within a specific product-market.
- Marketing strategy focuses on effectively allocating and coordinating marketing resources and activities to accomplish the firm's objectives within a specific product-market.
Market Analysis
- Market analysis involves identifying and understanding the characteristics of customers, competitors, and the external environment.
- The 4Cs of a market analysis include:
- Characteristics of customers (e.g. demographics, needs, wants)
- Competitors (e.g. market share, strengths, weaknesses)
- Company (e.g. resources, capabilities)
- Collaborators (e.g. suppliers, partners)
Marketing Plan
- A marketing plan is a written document that outlines the current situation, objectives, marketing strategies, and resource allocations for a specific product or service.
- It provides a concrete history of a product's strategies and performance over time, aiding institutional memory and educating new managers.
Corporate Objectives
- Corporate objectives are statements of what the organization wants to achieve in terms of its overall performance.
- Objectives should be specific, measurable, achievable, relevant, and time-bound (SMART).
- Performance criteria used to assess corporate objectives include profitability, contribution to owners, competitive strength, and growth.
Sustainable Competitive Advantage
- A sustainable competitive advantage is a unique advantage that a firm has over its competitors and can maintain over time.
- Strategic inertia is the tendency for firms to automatically continue strategies that were successful in the past, even though current market conditions are changing.
- Early entrants into newly emerging industries are especially likely to be internally focused and not very market-oriented due to rapid growth in demand and resource constraints.
E-Commerce
- E-commerce categories include:
- Business-to-business (B2B)
- Business-to-consumer (B2C)
- Consumer-to-business (C2B)
- Consumer-to-consumer (C2C)
- Examples of e-commerce include Amazon (B2C) and PriceTag.com (C2B).
Market Segmentation
- Market segmentation is the process of dividing a larger market into smaller groups of consumers with similar needs, circumstances, and characteristics.
- A market segment is a distinct subset of people with similar needs, circumstances, and characteristics that lead them to respond in a similar way to a particular product or service offering.
Corporate Strategy Decisions
- Corporate strategy decisions involve addressing issues such as the time frame in which each target should be attained and the target level of performance to be achieved on each dimension.
- Objectives should be specified, measurable, attainable, relevant, and time-bound (SMART).
- The principles of sustainability involve meeting humanity's needs without harming future generations.
Performance Criteria
- Performance criteria used to assess corporate objectives include:
- Profitability (e.g. return on net assets)
- Contribution to owners (e.g. economic value added)
- Competitive strength (e.g. market share, brand awareness, brand preference)
- Growth (e.g. percentage change in sales)### Market-Oriented Perspectives
- A processed-meat manufacturer launching a chain of retail outlets is an example of forward vertical integration.
- A generic drug manufacturer planning a foray into the design and manufacture of re-locatable structures is an example of unrelated diversification.
- Cash cows are businesses with a high relative share of low-growth markets.
- Low-share businesses in low-growth markets are called dogs.
- The growth-share matrix is a tool for evaluating a firm's business portfolio, but it has limitations, such as being sensitive to variations in how growth and share are measured.
Value-Based Planning
- Value-based planning provides a basis for comparing the economic returns to be gained from investing in different businesses pursuing different strategies.
- It attempts to assess the economic value a given strategy is likely to generate, but has limitations, such as relying on distorted accounting measures.
Customer Equity
- Customer equity is the sum of the lifetime values of a firm's current and future customers.
- It can be used to estimate the value of alternative marketing actions by calculating the economic return for a prospective marketing initiative based on its likely impact on the firm's customer equity.
Sustainable Competitive Advantage
- Sustainable competitive advantage at the corporate level is based on company resources that are rare, difficult to imitate, and non-substitutable, such as highly developed information systems, extensive market research operations, or cooperative long-term relationships with customers.
Business Strategies
- Strategic business units (SBUs) are components of a firm engaged in multiple industries or businesses.
- Ideal characteristics of SBUs include:
- A homogeneous set of markets to serve with a limited number of related technologies
- A unique set of product-markets
- Control over those factors necessary for successful performance
- Responsibility for their own profitability
- A prospector strategy involves operating in broad, dynamic domains where neither technology nor customer segments are well established.
- A defender strategy involves maintaining a strong position in a core product-market, but also seeks to expand into new, closely related product-markets.
- An analyzer strategy is an intermediate type of business strategy that makes fewer and slower product-market changes than a prospector strategy, but is less committed to stability and efficiency than a defender strategy.
- A reactor strategy lacks a well-defined competitive strategy.
Performance Dimensions
- The performance dimension of effectiveness is measured in terms of sales growth relative to competitors or changes in market share.
- The performance dimension of efficiency is measured in terms of profitability as a percent of sales and return on investment.
Synergy
- Synergy is the ability of a firm to achieve a competitive advantage through the coordination of its different business units or activities.
- Synergy can be achieved through the sharing of operational resources, facilities, and functions across business units.
Competitive Strategies
- A differentiated defender strategy involves maintaining a strong position in a core product-market, but also seeks to expand into new, closely related product-markets.
- A low-cost defender strategy involves protecting a domain by offering lower prices, higher quality, or better service than competitors.
- A reactor strategy lacks a well-defined competitive strategy.
Environmental Factors
- An industry in early growth stage is favorable to a prospector strategy.
- An established customer segment is favorable to a defender strategy.
- A large number of competitors is unfavorable to a prospector strategy.
Product Policy
- A product policy relates to the breadth or diversity of product lines, their level of technical sophistication, and the target level of product quality relative to competitors.
Distribution Policy
- A distribution policy involves the selection and management of channel members, such as wholesalers, retailers, and distributors.
- Prospectors rely more heavily on independent channel members than defenders to distribute their products.### Market-Oriented Perspectives
- Low-cost defenders invest in plant capacity and state-of-the-art equipment to minimize production costs and achieve scale effects.
- Standardization of product offerings and marketing programs across customer segments is a key strategy for low-cost defenders.
- Low-cost defenders focus on efficiency and low price, but other businesses should also strive to operate efficiently.
Pricing and Distribution Policies
- Low-cost defenders use pricing policies to offer low prices relative to competitors.
- Differentiated defenders and prospectors use higher prices to maintain profitability due to higher costs involved in differentiating products.
- Defenders maintain tight control over channel members to maintain strong positions in established markets.
- Prospectors rely on independent channel members and devote a larger percentage of sales to trade promotions.
Understanding Market Opportunities
- A market is defined as a set of individuals and organizations interested in and willing to buy a good or service to obtain benefits.
- An industry is a group of firms that offer a product or class of products that are similar and are close substitutes for one another.
- Demographic trends, such as immigration and aging population, influence market attractiveness.
Macroenvironmental Trends
- Sociocultural trends, such as fitness and nutrition, influence consumer behavior.
- Economic trends, such as interest rates and economic recession, impact industries.
- Technological trends, such as online marketing and social media, influence marketing strategies.
- Natural environment trends, such as the production of hybrid vehicles and recycled paper, indicate the impact of environmental concerns.
Porter's Five Competitive Forces
- Threat of new entrants, threat posed by substitute products, bargaining power of suppliers, and bargaining power of buyers are key forces that influence industry attractiveness.
- Rivalry among competitors is greater when low switching costs exist for buyers.
Micro-Level Analysis
- Opportunities are attractive at the micro level when the target market is likely to grow and the company has other segments that may provide a springboard.
- Attractive opportunities are available at the micro level when the company possesses something proprietary that is not easily duplicable and the company's business model is economically viable.
Critical Success Factors
- Critical success factors are those that tend to separate winners from losers within an industry.
- Identifying critical success factors involves asking which decisions or activities, if gotten wrong, will have severely negative effects on company performance and which decisions or activities, done right, will deliver disproportionately positive effects on performance.
Measuring Market Opportunities
- Forecasting methods include top-down, bottom-up, statistical, and survey methods.
- Time series analysis is a statistical method used to forecast sales and market potential.
- Surveys involve directly observing what real consumers do in the product-market or asking buyers about their intentions to estimate market potential.
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