Questions

Question 1

Michael Porter argued that when analyzing opportunities and threats, managers should pay particular attention to five forces that are the major threats that an organization will encounter. Which of the following forces would be affected by your customers' loyalty to your products?

1. The level of rivalry among organizations in an industry

2. The potential for entry into an industry

3. The power of suppliers

4. Substitute products

Question 2

Which of the following best describes the concept of the learning curve?

1. Time-to-market decreases as a function of the number of innovations developed.

2. Technical performance increases in an S-shaped curve as a function of effort.

3. The ability to learn is normally distributed across firms (i.e., a bell-shaped curve).

4. Cost per unit drops as a function of the cumulative output (total number of units produced).

Question 3

The competition among firms in the same strategic group will be ________ between firms belonging to different strategic groups even if they sell similar products or services.

1. similar in intensity to that

2. more intense than that

3. less intense than that

4. variable in intensity than that

Question 4

An independent group of suppliers, such as farmers, gather to form a cooperative in order to sell their products to buyers directly, replacing their previous distributor. This is an example of

1. forward integration.

2. backward integration.

3. threat of substitute products.

4. threat of entry.

Question 5

Which of Porter’s generic strategies is associated with a narrow market scope and commodity products?

1. Cost focus

2. Differentiation focus

3. Cost differentiation

4. Differentiation

Question 6

Which of the following is true regarding a differentiation strategy?

1. A firm selects a unique position on one or more attributes (dimensions) that are important to buyers in general.

2. A corporation is split into a number of different strategic business units (SBUs).

3. A single firm develops a broad portfolio of products targeting a number of different markets.

4. A firm identifies the needs of a specific group of buyers and tailors its strategy to serve that group to the exclusion of other groups.

Question 7

The term 'stuck in the middle':

1. means that the firm's cost structure is not low enough to allow it to attractively price its products and that its products are not sufficiently differentiated to create value for its target customer.

2. indicates that the customers of the firm are willing to pay only a mid-range price for the product.

3. means adhering to a middle of the road strategy in the face of negative outcomes.

4. reflects the fact that the customers of the firm have only moderate expectations regarding product quality.

Answers

Question 1

B

If your customers are loyal to your products, it would be difficult for potential entrants to enter in the market. The loyalty comes from the perception that your products are different from your competitors. This means that you have adopted a differentiation strategy

Question 2

D

While you accumulate more experience through producing the same item several times, you will find ways to produce the same item more efficiently.

Question 3

B

Rivalry can be best understood within strategic groups. This means competing against direct rivals (the other firms within that same strategic group). Outside firms there are other firms willing to enter the strategic group if there is economic advantage there. Mobility barriers are keeping outside groups from entering.

Question 4

A

Vertical integration is an important determinant of the bargaining power of suppliers or customers. Backward integration refers to the acquisition of the firm by any of our customers, or firm’s acquisition of any of its suppliers. On the other hand, forward integration basically refers to the acquisition of the firm by its suppliers. So, in the context of Porter’s five forces analysis, the threat of integration changes the bargaining power of the different forces.

Question 5

A

Cost leadership and differentiation are the two basic competitive strategies. The other important dimension here is market scope. One could select a market or a segment of that particular market. Selecting a market segment means choosing a focus strategy. This focus strategy can in its own right be build upon cost or differentiation. Within commodity product competition is only possible to achieve a competitive advantage through cost leadership. Cost Focus is the combination of cost leadership and a narrow scope.

Question 6

A

• Option B is about different strategies, not differentiation strategy.

• Option D is about a focus strategy, and therefore obviously not about differentiation strategy.

• Option C is about segmentation. This is different from a differentiation strategy.

Question 7

A

The term Stuck in the Middle means that there is no clear competitive strategy: An undefined strategy inbetween cost leadership and differentiation.