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Chapter 03 - Business Strategies and Their Marketing Implications

Chapter 03 Business Strategies and Their Marketing Implications Multiple Choice Questions 1. Strategic business units refer to !. a set of managers in a firm that deal "ith market audits. B. in-house departments of a firm that are engaged in strategic planning. C. components of a firm engaged in multiple industries or businesses. #. e$clusi%e units of businesses that perform S&'T anal(ses for the compan(. !ns"er c )e%el of #ifficult( *as( +age ,1 -. &hich of the follo"ing is an ideal characteristic of SB.s/ !. Control o%er those factors necessar( for successful performance B. ! common set of product-markets C. 0on-accountabilit( for their o"n profits #. ! heterogenous set of markets to ser%e "ith a limited number of related technologies !ns"er a )e%el of #ifficult( *as( +age ,1 3. 0o t"o SB.s "ithin a firm compete for the same customers "ith similar products. &hich SB. characteristic is being emphasi1ed here/ !. ! heterogeneous set of markets B. 2esponsibilit( for their o"n profitabilit( C. Control o%er factors necessar( for successful performance #. ! uni3ue set of product-markets !ns"er d )e%el of #ifficult( *as( +age ,1 4. ! business a%oids direct confrontation "ith its ma5or competitors b( concentrating on narro"l( defined market niches. !ccording to Michael +orter6 "hich of the follo"ing competiti%e strategies does this e$emplif(/ !. Maintaining cost leadership in a specific market segment B. .sing market penetration strategies to gain a foothold in a saturated market C. 7ocusing on an elite customer segment #. #ifferentiating bet"een competitors8 products !ns"er c )e%el of #ifficult( Medium +age ,3
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Chapter 03 - Business Strategies and Their Marketing Implications

<. ! business pursuing a prospector strateg( !. operates "ithin a broad product-market domain that undergoes periodic redefinition.

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Chapter 03 - Business Strategies and Their Marketing Implications

B. %alues being a second or third entrant in product-markets related to its e$isting market base. C. responds primaril( "hen it is forced to b( en%ironmental pressures. #. attempts to locate and maintain a secure position in relati%el( stable product or ser%ice areas. !ns"er a )e%el of #ifficult( Medium +age ,4 ,. !=n> ????? strateg( tries to protect its domain b( offering lo"er prices6 higher 3ualit(6 or better ser%ice than competitors. !. prospector B. anal(1er C. defender #. reactor !ns"er c )e%el of #ifficult( *as( +age ,4 @. &hich of the follo"ing statements is true of a reactor strateg(/ !. It competes primaril( b( stimulating and meeting ne" market opportunities. B. It responds rapidl( to earl( signals concerning areas of opportunit(. C. It is more aggressi%e in marketing established products than its competitors. #. It lacks an( "ell-defined competiti%e strateg(. !ns"er d )e%el of #ifficult( ;ard +age ,4 A. In a=n> ????? strateg(6 a business attempts to maintain a strong position in its core productmarket but also seeks to e$pand into ne"Busuall( closel( relatedBproduct-markets. !. reactor B. anal(1er C. prospector #. defender !ns"er b )e%el of #ifficult( *as( +age ,4 C. ????? businesses ha%e an intermediar( t(pe of business strateg( that makes fe"er and slo"er product market changes than ????? businesses but are less committed to stabilit( and efficienc( than ????? businesses. !. +rospectorD defenderD reactor B. +rospectorD reactorD defender C. #efenderD anal(1erD reactor
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Chapter 03 - Business Strategies and Their Marketing Implications

#. !nal(1erD prospectorD defender !ns"er d

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Chapter 03 - Business Strategies and Their Marketing Implications

)e%el of #ifficult( ;ard +age ,4

10. ????? businesses usuall( operate in broad6 d(namic domains "here neither technolog( nor customer segments are "ell established. !. +rospector B. #ifferentiated defender C. )o"-cost defender #. !nal(1er !ns"er a )e%el of #ifficult( *as( +age @0 11. &hich of the follo"ing businesses tends to operate in a stable domain "here both the product technolog( and the customer segments are mature/ !. +rospector B. 2eactor C. )o"-cost defender #. !nal(1er !ns"er c )e%el of #ifficult( *as( +age @0 1-. Identif( the performance dimension that is commonl( measured in terms of sales gro"th relati%e to competitors or changes in market share. !. !daptabilit( B. *ffecti%eness C. S(nerg( #. *fficienc( !ns"er b )e%el of #ifficult( *as( +age @1

13. &hich performance dimension is measured in terms of profitabilit( as a percent of sales and return on in%estment/ !. S(nerg( B. *ffecti%eness C. *fficienc( #. !daptabilit(
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Chapter 03 - Business Strategies and Their Marketing Implications

!ns"er c )e%el of #ifficult( *as( +age @1 14. 7irst*nerg( Corp. combined se%eral autonomous business units that "orked together to make different electrical and energ( products. The units shared the production facilities6

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Chapter 03 - Business Strategies and Their Marketing Implications

marketing acti%ities6 and had a common sales force. B( sharing6 the group "as able to reduce the costs of both per-unit production and marketing. &hich dimension does 7irst*nerg( e$emplif( in this scenario/ !. S(nerg( of operating facilities B. Scope of strategic domain C. 2esource deplo(ment #. :oals and ob5ecti%es !ns"er a )e%el of #ifficult( Medium +age @-

1<. &hich of the follo"ing en%ironmental factors is fa%orable to a prospector strateg(/ !. !n industr( in late gro"th stage B. !n established customer segment C. ! large number of competitors #. !n industr( in earl( gro"th stage !ns"er d )e%el of #ifficult( *as( +age @3 1,. !n SB. has no outstanding strength in 2E# or product engineering in ????? businesses. !. prospector B. anal(1er C. differentiated defender #. lo"-cost defender !ns"er c )e%el of #ifficult( *as( +age @3

1@. ! defender strateg( is most useful for !. business units "ith a profitable share of one or more ma5or segments in a relati%el( mature and stable industr(. B. unstable6 rapidl( changing en%ironments resulting from ne" technolog(6 shifting customer needs6 or both. C. industr( structures that are still e%ol%ing "ith one or more competitors holding large shares in ma5or segments.

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Chapter 03 - Business Strategies and Their Marketing Implications

#. business units "ith strong research and de%elopment6 product engineering6 and marketing capabilities. !ns"er a )e%el of #ifficult( ;ard +age @4 1A. ! ????? polic( relates to the breadth or di%ersit( of product lines6 their le%el of technical sophistication6 and the target le%el of product 3ualit( relati%e to competitors. !. pricing B. product

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Chapter 03 - Business Strategies and Their Marketing Implications

C. promotion #. distribution !ns"er b )e%el of #ifficult( *as( +age @@ 1C. &hich of the follo"ing businesses seldom adheres to a polic( of lo" competiti%e prices/ !. 2eactor B. +rospector C. )o"-cost defender #. !nal(1er !ns"er b )e%el of #ifficult( Medium +age @C -0. &hich of the follo"ing statements is true of distribution policies/ !. +rospectors rel( more hea%il( on independent channel members than defenders to distribute their products. B. Maintaining tight control o%er the beha%ior of channel members is an appropriate polic( for prospectors. C. #efender businesses are likel( to de%ote a larger percentage of sales to trade promotions than prospector businesses. #. #efenders rel( on trade promotion tools and other incenti%es to induce support from their independent channel members. !ns"er a )e%el of #ifficult( ;ard +age @C -1. ;igh ad%ertising and sales promotion e$penditures ha%e a negati%e impact on 2'I for ????? businesses. !. prospector B. differentiated defender C. lo"-cost defender #. anal(1er !ns"er c )e%el of #ifficult( Medium +age A0 Essay Questions

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Chapter 03 - Business Strategies and Their Marketing Implications

--. *$plain the characteristics of strategic business units. !ns"er Ideall(6 strategic business units ha%e the follo"ing characteristics 1> ! homogeneous set of markets to ser%e "ith a limited number of related technologies. Minimi1ing di%ersit( across an SB.8s product-market entries enables the unit8s manager to better formulate and implement a coherent and internall( consistent business strateg(.

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Chapter 03 - Business Strategies and Their Marketing Implications

-> ! uni3ue set of product-markets6 in the sense that no other SB. "ithin the firm competes for the same customers "ith similar products. Thus6 the firm a%oids duplication of effort and ma$imi1es economies of scale "ithin its SB.s. 3> Control o%er those factors necessar( for successful performance6 such as production6 2E# and engineering6 marketing6 and distribution. This does not mean an SB. should not share resources6 such as a manufacturing plant or a sales force6 "ith one or more other business units. But the SB. should determine ho" its share of the 5oint resource is used to effecti%el( carr( out its strateg(. 4> 2esponsibilit( for their o"n profitabilit(. )e%el of #ifficult( Medium +age ,1 -3. #iscuss the appropriate conditions for a lo"-cost defender strateg(. !ns"er Successful implementation of a lo"-cost defender strateg( re3uires the business to be more efficient than its competitors. Thus6 the business must establish the ground"ork for such a strateg( earl( in the gro"th stage of the industr(. !chie%ing and maintaining the lo"est per-unit cost usuall( means that the business has to seek large %olume from the beginningBthrough some combination of lo" prices and promotional effortsBto gain economies of scale and e$perience. !t the same time6 such businesses must also in%est in more plant capacit( in anticipation of future gro"th and in state-of-the-art e3uipment to minimi1e production costs. The lo"-cost defender8s need for efficienc( also forces the standardi1ation of product offerings and marketing programs across customer segments to achie%e scale effects. Thus6 such a strateg( is usuall( not so effecti%e in fragmented markets desiring customi1ed offerings as it is in commodit( industries such as basic chemicals6 steel6 or flour or in industries producing lo"-technolog( components such as electric motors or %al%es. !lthough lo"-cost defenders emphasi1e efficienc( and lo" price as the primar( focus of their competiti%e strateg(6 it is important to keep in mind that businesses pursuing other strategies should also operate as efficientl( as possible gi%en the functional acti%ities necessar( to implement those strategies. Some of the most effecti%e businesses are those that "ork simultaneousl( to lo"er costs and impro%e 3ualit( and ser%ice. )e%el of #ifficult( Medium +age @,

-4. Briefl( discuss pricing and distribution policies. !ns"er +ricing +olicies Success in offering lo" prices relati%e to those of competitors should be positi%el( related to the performance of lo"-cost defender businessesBfor lo"
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Chapter 03 - Business Strategies and Their Marketing Implications

price is the primar( competiti%e "eapon of such a strateg(. ;o"e%er6 such a polic( is inconsistent "ith both differentiated defender and prospector strategies. The higher costs in%ol%ed in differentiating a business8s products on either a 3ualit( or ser%ice basis re3uire higher prices to maintain profitabilit(. #ifferentiation also pro%ides customers "ith additional %alue for "hich higher prices can be charged. Similarl(6 the costs and benefits of ne" product and market de%elopment b( prospector businesses re3uire and 5ustif( relati%el( high prices. Thus6 differentiated defenders and prospectors seldom adhere to a polic( of lo" competiti%e prices.

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Chapter 03 - Business Strategies and Their Marketing Implications

#istribution +olicies !ttempting to maintain tight control o%er the beha%ior of channel members is a more appropriate polic( for defenders "ho are tr(ing to maintain strong positions in established markets. This is particularl( true for defenders "ho rel( on good customer ser%ice to differentiate themsel%es from competitors. Thus6 it seems more likel( that a relati%el( high degree of for"ard %ertical integration is found among defender businesses6 particularl( differentiated defenders6 "hereas prospectors rel( more hea%il( on independent channel membersBsuch as manufacturer8s representati%es or "holesale distributorsBto distribute their products. Because prospectors focus on ne" products "here success is uncertain and sales %olumes are small in the short run6 the( are likel( to de%ote a larger percentage of sales to trade promotions than are defender businesses. +rospectors rel( on trade promotion tools such as slotting allo"ances6 3uantit( discounts6 liberal credit terms6 and other incenti%es to induce cooperation and support from their independent channel members. )e%el of #ifficult( Medium +age @C

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