STR 581 Wk 4 – Practice: Knowledge Check

Relative market share as a measure of competitive strength is calculated by

Multiple Choice

• subtracting the industry-average market share (based on dollar volume) from a company’s market share to determine how much a company’s market share is above/below the industry average—this amount is a better indicator of a business’s competitive strength than is just looking at the firm’s market share percentage.
• dividing the business’s percentage share of total industry sales volume by the percentage share held by its largest rival—it is a better indicator of a business’s competitive strength than is a simple percentage measure of market share.
• subtracting the company’s market share (based on dollar volume) from the industry-average market share and comparing it to the main competitors.
• dividing the total market volume by the company’s sales to determine its relative market share.
• dividing the business’s percentage share of total industry sales volume by the percentage share held by its five largest rivals.

Related diversification strategies are strong when built upon sharing

Multiple Choice

• competitively valuable resources.
• generalized resources and capabilities.
• general management capabilities.
• human resource management capabilities.
• resources that have a broad utility and application outside a diversified company’s core industry.

Unrelated diversification requires that company managers spend much time and effort screening acquisition candidates using all of the following criteria except

Multiple Choice

• whether the business can meet corporate targets for profitability.
• whether the business is in an industry with attractive growth potential.
• whether the business is big enough to contribute significantly to the parent firm’s bottom line.
• whether the business can meet corporate targets for return on investment.
• whether the business has a cross-business strategic fit.

Corporate strategic options for diversified companies would not normally entail

Multiple Choice

• sticking closely with the existing business line when the current business line offers attractive growth opportunities.
• divesting weak-performing businesses and retrenching to a narrower base of business operations.
• broadening the diversification base by adding and acquiring more businesses.
• repurchasing shares of the company’s common stock and building cash reserves by investing in short-term securities.
• restructuring the company’s business lineup through a mix of divestitures and new acquisitions.

The major benefit of a related diversification strategy is

Multiple Choice

• that it can propel the company’s business forward and help it gain ground over its market rivals.
• that this strategy is less capital intensive and usually less risky than unrelated diversification.
• that it offers potential 1 + 1 = 3 or “synergy” benefits because of valuable cross-business relationships among the value chains of the corporation’s different businesses.
• that this strategy leads to competitive advantage and increased profitability.
• that this strategy passes not only the industry attractiveness test but also offers the best route to 2 + 2 = 4 benefits.

A company expands outside its home market to

Multiple Choice

• strengthen its capability to employ vertical integration strategies.
• gain economic incentives offered by governments of developing countries.
• increase the bargaining power of alliance members over suppliers or buyers.
• gain access to new customers for the company’s products/services.
• take advantage of potential shifts in currency exchange rates.

Using domestic plants as a production base for exporting goods to selected foreign country markets

Multiple Choice

• can be an excellent initial strategy to pursue international sales.
• can be a successful strategy when a company is focusing on vacant market niches in each market.
• works well when exchange rate fluctuations prevent the adoption of a transnational strategy.
• is usually a weak strategy when competitors are pursuing multi-domestic strategies.
• can be a powerful strategy because the company is not vulnerable to fluctuating exchange rates.

Which of the following is an example of a multidomestic strategy?

Multiple Choice

• Mattel’s black Barbie is popular in Africa.
• Microsoft offers the same software programs around the world.
• Red Bull products are packaged differently for the Chinese market.
• BMW designed its 3 Series cars for multiple markets.
• Heinz ketchup in India does not have garlic and onion.

Dispersing activities to many locations is competitively advantageous when

Multiple Choice

• technical after-sale services are unimportant to buyers.
• a multidomestic strategy is better than a global strategy.
• host governments offer less restrictive trade barriers and regulatory requirements to companies that conform to local business practices.
• economies of scale and scope in materials procurement, parts manufacture, finished-goods assembly, technology research, and new product development can frequently be decoupled from buyer locations and performed wherever advantage lies.
• high transportation costs, diseconomies of large size, and trade barriers combine to make it too expensive to operate from a central location.

The primary reason that Facebook Inc. decided to expand outside its United States home market was to

Multiple Choice

• identify new and stronger resources and capabilities in its home market
• increase its business risk by competing with local social media providers such as WeChat.
• match its core competencies and capabilities with rival social media companies such as Snapchat and Instagram.
• achieve differentiation through economies of scale, experience, and increased purchasing power.
• gain access to new customers for the company’s products/services.