SEVI 3013 Stategic Management Exam 2 ch
5-10 UPDATED Exam Questions and
CORRECT Answers
What is meant by business-level strategy? What key questions should a business strategy
answer? - CORRECT ANSWER - How to overcome the five forces and achieve competitive
advantage. Porter's three strategies, Cost leadership, differentiation, focus strategy on cost
leadership, focus on differentiation.
Know and be able to describe the different generic business level strategies: Cost Leadership,
Differentiation, Focus - CORRECT ANSWER - · Low-cost position, and broad target market
is overall cost leadership, superior perceived value by customer and broad target market is broad
differentiation, low-cost position and narrow target market is cost focus, superior perceived value
by customer in a narrow target market is differentiation focus.
What key activities do firms pursue to achieve competitive advantage for each of these
strategies? - CORRECT ANSWER - Overall cost leadership is based on creatin a low-cost
position relative to a firm's peers, managing relationships in the entire value chain to lower costs.
Differentiation is based on products and/or services that are unique and valued, there's an
emphasis on nonprice attributes for the customer that will paya premium. Focus is based on
narrow product lines buyer segments, or targeted geo market, advantages are gained through
differentiation or cost leadership.
What is meant by the experience curve? How do cost leaders benefit from the experience curve?
- CORRECT ANSWER - With experience, unit costs of production processes decline as
output increases
What are the different ways that companies can differentiate themselves? - CORRECT
ANSWER - Create higher entry barriers due to customer loyalty, provide higher margins the
enable the firm to deal w/ supplier power, reduce the buying power b/c buyers will have a limited
number of alternatives for a product. Creates customer loyalty and hence less threats from
substitutes.
, What is meant by the industry life cycle? - CORRECT ANSWER - · Introduction, product is
unfamiliar to consumers, strategies are developing a product and get users to try it. growth, high
increase in sales, attract potential competitors, firm build recognition, strategies are created
branded differentiated products, win the consumers selective, and have the financial support
demand. Maturity, market becomes saturated, few new adopters (everyone who wants the
product already has it, strategies include creating efficient manufacturing operations b/c it helps
lower costs as the customers are price sensitive. decline sales and profits begin to fall, price
competition increases, competitors begin to leave strategies include maintaining the products
position, harvesting profits and reduce costs, exiting or consolidating/acquiring surviving firms.
What is a turnaround strategy? When is it applied? What options might a strategist consider
when a turnaround is needed? - CORRECT ANSWER - Involves reversing performance
decline and reinvigorating growth. Strategies include asset and cost surgery, selected market and
product pruning, piecemeal productivity improvements; meaning if I could just get this business
more profitable, how can I do I faster and efficiently and how can I come back to a healthy
company base. Finally, innovation can help reinvigorate a business.
Know what is meant by corporate strategy. What questions does it answer? What is the
relationship between business-level strategy and corporate strategy? - CORRECT ANSWER -
What business should a corporation compete in, how can the business be managed to create
"synergy".
What is diversification? What are the different strategies a firm might pursue to diversify their
business portfolio? - CORRECT ANSWER - Diversification creates value for shareholders
through mergers and acquisitions, strategic alliances, joint ventures, and internal development.
Diversification can destroy value by paying a premium for the target firm. failing to integrate the
new business into the corporate family.
What are the benefits of diversification? - CORRECT ANSWER - · Benefits include related
businesses horizontal relationships, intangible resources such as core competencies in marketing,
and tangible resources such as production facilities, distribution channels via vertical integration.
Unrelated businesses diversify with benefits as derived from hierarchical relationships, value
creation derived from corporate office, leveraging support activities in the value chain.
Understand and be able to describe related diversification. How do firms benefit from related
diversification? - CORRECT ANSWER - · Diverse the company's portfolio, it can be
horizontal or vertical. If the company want to buy a company that's around the same market
5-10 UPDATED Exam Questions and
CORRECT Answers
What is meant by business-level strategy? What key questions should a business strategy
answer? - CORRECT ANSWER - How to overcome the five forces and achieve competitive
advantage. Porter's three strategies, Cost leadership, differentiation, focus strategy on cost
leadership, focus on differentiation.
Know and be able to describe the different generic business level strategies: Cost Leadership,
Differentiation, Focus - CORRECT ANSWER - · Low-cost position, and broad target market
is overall cost leadership, superior perceived value by customer and broad target market is broad
differentiation, low-cost position and narrow target market is cost focus, superior perceived value
by customer in a narrow target market is differentiation focus.
What key activities do firms pursue to achieve competitive advantage for each of these
strategies? - CORRECT ANSWER - Overall cost leadership is based on creatin a low-cost
position relative to a firm's peers, managing relationships in the entire value chain to lower costs.
Differentiation is based on products and/or services that are unique and valued, there's an
emphasis on nonprice attributes for the customer that will paya premium. Focus is based on
narrow product lines buyer segments, or targeted geo market, advantages are gained through
differentiation or cost leadership.
What is meant by the experience curve? How do cost leaders benefit from the experience curve?
- CORRECT ANSWER - With experience, unit costs of production processes decline as
output increases
What are the different ways that companies can differentiate themselves? - CORRECT
ANSWER - Create higher entry barriers due to customer loyalty, provide higher margins the
enable the firm to deal w/ supplier power, reduce the buying power b/c buyers will have a limited
number of alternatives for a product. Creates customer loyalty and hence less threats from
substitutes.
, What is meant by the industry life cycle? - CORRECT ANSWER - · Introduction, product is
unfamiliar to consumers, strategies are developing a product and get users to try it. growth, high
increase in sales, attract potential competitors, firm build recognition, strategies are created
branded differentiated products, win the consumers selective, and have the financial support
demand. Maturity, market becomes saturated, few new adopters (everyone who wants the
product already has it, strategies include creating efficient manufacturing operations b/c it helps
lower costs as the customers are price sensitive. decline sales and profits begin to fall, price
competition increases, competitors begin to leave strategies include maintaining the products
position, harvesting profits and reduce costs, exiting or consolidating/acquiring surviving firms.
What is a turnaround strategy? When is it applied? What options might a strategist consider
when a turnaround is needed? - CORRECT ANSWER - Involves reversing performance
decline and reinvigorating growth. Strategies include asset and cost surgery, selected market and
product pruning, piecemeal productivity improvements; meaning if I could just get this business
more profitable, how can I do I faster and efficiently and how can I come back to a healthy
company base. Finally, innovation can help reinvigorate a business.
Know what is meant by corporate strategy. What questions does it answer? What is the
relationship between business-level strategy and corporate strategy? - CORRECT ANSWER -
What business should a corporation compete in, how can the business be managed to create
"synergy".
What is diversification? What are the different strategies a firm might pursue to diversify their
business portfolio? - CORRECT ANSWER - Diversification creates value for shareholders
through mergers and acquisitions, strategic alliances, joint ventures, and internal development.
Diversification can destroy value by paying a premium for the target firm. failing to integrate the
new business into the corporate family.
What are the benefits of diversification? - CORRECT ANSWER - · Benefits include related
businesses horizontal relationships, intangible resources such as core competencies in marketing,
and tangible resources such as production facilities, distribution channels via vertical integration.
Unrelated businesses diversify with benefits as derived from hierarchical relationships, value
creation derived from corporate office, leveraging support activities in the value chain.
Understand and be able to describe related diversification. How do firms benefit from related
diversification? - CORRECT ANSWER - · Diverse the company's portfolio, it can be
horizontal or vertical. If the company want to buy a company that's around the same market
