Test Bank for Strategic Market Management 9 th Edition



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Test Bank

for Strategic Market Management 9th Edition

David A. Aaker
ESSAY QUESTIONS
1. What is the objective of external analysis? How would you distinguish between an effective and an ineffective external analysis? What would you say would be the most useful way to conduct an external analysis? Why?

-Chapter 1 & 2-
2. Describe and give examples of a well-developed business strategy including the four characteristics.

-Chapter 1-
3. Discuss the advantages of a customizing rather than a standardizing marketing program in the context of a global strategy. When would customizing make sense?

-Chapter 13-
4. Consider the implementation problems of merging Sears and Walt Disney. What synergy would you expect? How could you make sure that it materialized?

-Chapter 7 & 15-
5. Describe scenario analysis using one of the cases discussed in the course as a vehicle to illustrate. What implementation problems would you expect if scenario analysis were to be adopted at Apple Computer?

-Chapter 5-
6. American business have been accused of being short-sighted, looking at short-term financial performance instead of taking a longer-term view. What can a manager do to make sure that he or she is managing for the long term? How would you go about advising a department store to generate indicators of long-term success? Be specific.
7. What are assumptions underlying the growth-share matrix? When are these assumptions likely to hold? What is the historical contribution of the growth-share matrix?

-Chapter 14-
8. Discuss the considerations involved in making the decision to expand or broaden the product line.

-Chapter 12-
9. Describe the distinctions between strategic commitment, strategic opportunism, and strategic adaptability.

-Chapter 7-

10. Describe and illustrate the following terms:

-Scenario analysis - chapter 5

-Strategic uncertainties – chapter 2

-Synergy – chapter 7&15

-Strategic opportunism – chapter 7

-Strategic drift – chapter 7

-Key success factors – chapter 4&7

-Experience curve – chapter 8

-Silo barriers – chapter 15


11. You have been given the task to evaluate a market opportunity for a firm. Give specific examples of the dimensions you would use to determine the attractiveness of a given market.

-Chapter 14-
12. Discuss Competitor Analysis. In your discussion include the following: the objectives of competitor analysis and the elements of competitor analysis. You should use information from the course including articles, cases, and textbook material to support your answer.

-Chapter 3-
13. Discuss Environmental Analysis. In your discussion include the following: the objectives of environmental analysis; the dimensions of environmental analysis; and how to deal with strategic uncertainty. Use information from the course including articles, cases, and textbook material to support your answer.

-Chapter 5-
14. What at the payoffs to creating a new business? What are the risks?

-Chapter 12-
15. Discuss Internal Analysis. In your discussion include the following: the objectives of internal analysis; the benefits of conducting an internal analysis; and the elements of internal analysis. Use information from the course including articles, cases, and textbook material to support your answer.

-Chapter 6-
16. Discuss the concept of customer value proposition and give examples.

-Chapter 8-
17. How could you energize a business? Illustrate your answer.

-Chapter 10-

19. What role does innovation have in strategy making? Give examples of firms who have a history of doing well with innovation and discuss the impact that has had on them.



-Chapter 1, 5, 10, & 12-
20. What is the innovator’s advantage? How can a firm enhance the chances that the innovator advantage will materialize?

-Chapter 12-
OBJECTIVE QUESTIONS
Note – These objective questions cover the material from the book. In general, a false answer is markedly at odds with material in the book. However, it may not be at odds with other written material. Therefore, it is important to position these questions as a test of a student’s competence with the book material.

Chapter 1 – Strategic Market Management: An Overview


.

1.1


Five management tasks used to develop strategic competencies do not include the following:

a. Strategic analysis

b. Manage multiple business units

c. Identify competitors

d. Develop a sustainable advantage

e. Develop a growth platform



Answer: c. Identifying competitors is valuable but not one of the 5 management tasks.
1.2

The book suggests that many markets are dynamic and require new strategic models.



Answer: False—the book asserts that all markets are dynamic.
1.3

To develop a sustainable competitive advantage (SCA) in dynamic markets, a company must create multiple business units.


Answer: False. There are two routes to creating SCA’s, developing assets and competencies and creating and leveraging organizational synergies between multiple business units.
1.4

A business is generally an organizational unit that has a distinct business strategy and a manager with sales and profit responsibility.


Answer: True.

1.5


Synergy occurs when two businesses can reduce costs by sharing some asset such as a sales force or logistics system.

Answer: True.
1.6

A strategy should only involve one value proposition – otherwise chaos will occur.



Answer: False. Most successful strategies involve more than one – for example, a customer value proposition that involves innovation and customer intimacy such as Virgin Atlantic Airways.
1.7

A strategic market management system will have more value for an organization that is not engaged in complex markets with multiple channels and regional variation in channels and products.



Answer: False. A strategic market management system is designed to help a company (complex or not) to deal with the rapid changes that can occur in a firm’s external environment.
1.8

The elements of strategy can be capsulated into four core elements--the product-market investment decision, functional area strategies, the customer value proposition, and the sustainable competitive advantage.



Answer: False the four elements are: 1) the product-market investment strategy 2) the customer value proposition, 3) assets and competencies and synergies, and 4) functional area strategies. So while a sustainable competitive advantage is the goal of a business strategy it is not one of the elements that make up a good business strategy.
1.9

A strategic competency is what a business unit does exceptionally well, such a manufacturing, promotion, distribution, etc. which has strategic importance to the business.



Answer: True. This is the definition of a strategic competency. .
1.10

According to the book, strategic marketing management has six objectives which include all except one of the following:

(a) Precipitate the consideration of strategic choices.

(b) Contribute to the bottom line success of the firm.

(c) Force a long-range view.

(d) Make visible the resource allocation decision.

(e) Provide methods to aid in strategic analysis and decision-making.

Answer: B. There is nothing that will guarantee the success of a business. In fact, it is interesting to discuss that a strategy is evaluated after implementation; that is when it is known whether a strategy is successful or not. .
1.11

The four elements of a business strategy for a firm are the product-market investment decision, the functional strategies and program, the customer value proposition, and the __________ and _________.



Answer: assets and competencies. .
1.12

The scope of a business is defined by the products it offers and chooses not to offer, by the markets it does and does not seek to serve, by the competitors it chooses to compete with or to avoid, and by its level of vertical integration.



Answer: True. This is the definition of a business scope.
1.13

Strategic marketing is involved in making decisions, some of which include investment decisions. Of the following which is not an investment decision:

(a) Invest for growth

(b) Milk


(c) Maintain

(d) Liquidate

(e) Innovation

Answer: E. Innovation is a strategic option. .
1.14

An external analysis includes the analysis of the customers, the competitors, the markets/submarkets and the environment.



Answer: True.
1.15

According to the book, customer analysis involves identifying the organization’s customer segments and each segment’s motivations and priority needs.



Answer: False. See Figure 1.3.
1.16

Strategic market management is a system designed to help management both precipitate and make strategic decisions, as well as create strategic visions.



Answer: True. This is the definition of strategic market management.
1.17

Marketing’s role in strategy includes being the primary driver of strategic analysis.



Answer: True.
1.18

The strategic plan should be developed annually.



False. It should be continuously refined.

Chapter 2 – External and Customer Analysis
2.1

A strategic uncertainty identifies the most important strategic options.



Answer: False. Strategic uncertainties focus on specific unknown elements that will affect the outcome of strategic decisions.
2.2

An external analysis process should be able to affect strategy and to generate or evaluate strategic decisions.



Answer: True. The external analysis process should not be an end in itself. It should be motivated throughout by a desire to affect strategy, to generate or evaluate strategic decisions.

2.3


The benefits sought from a product is a very useful segmentation variable, because the selection of benefits can determine a total business strategy.

Answer: True.
2.4

A scenario is an alternative view of the future environment that is usually prompted by an alternative possible answer to a strategic uncertainty or by a prospective future event or trend.



Answer: True. This is the definition of a scenario.
2.5

In a strategic context, segmentation means the identification of customer groups that respond differently from other groups to competitive offerings.



Answer: True. This is the definition of segmentation.
2.6

One of the tasks in customer motivation analysis is to determine the relative importance of the motivations.



Answer: True. The importance of the motivation will help determine the strategic role that motivation will play in the business strategy.
2.7

A customer analysis consists of three components; segmentation, customer motivation, and ________________.



Answer: Unmet needs. This is the definition of customer analysis. Customer analysis can be usefully partitioned into an understanding of how the market segments, an analysis of customer motivations, and an exploration of unmet needs.
2.8

Uncertainty can be handled by precipitating a strategic decision, by obtaining information to reduce the uncertainty, and by ___________.



Answer: Scenario analysis. The three ways of handling uncertainty are: 1) a strategic decision can be precipitated because the logic for a decision is compelling and/or because a delay would be costly or risky. Second, it may be worthwhile to attempt to reduce the uncertainty by information acquisition and analysis of an information-need area. Third, the uncertainty could be modeled by a scenario analysis.
2.9

To gain customers as active partners, managers should do all of the following except:

a. Co-create personalized experiences

b. Encourage active dialogue

c. Ignore the complainers

d. Mobilize customer communities

e. Manage customer diversity

Answer: c) ignore the complainers. Customers are increasing becoming active partners in the buying process, rather than being seen as passive targets of product development and advertising.
2.10

Toyota Scion is aimed at generation Y, the echo boomers.



Answer: True
2.11

The retro-sexual is an affluent urban sophisticate aged 20 to 40.



Answer: False. See The Male Shopper page 29.
2.12

In obtaining a list of motivations, a set of 10 individual interviews will generate 90 to 95% of the list.



Answer: False. See page 32.
2.13

Ethnographic research is used in B-to-B companies like Intel.



Answer: True
2.14

Dell’s Ideastorm is an external program designed to get input from customers.



Answer: True
Chapter 3 – Competitor Analysis
3.1

One way to identify competitors is to group competitors according to the degree they compete for a buyer’s choice.



Answer: True. There are two ways to group competitors; one based on the customer’s perspective and the other is based on competitor’s strategies.
3.2

A strategic group is a customer segment that is strategically important to the business.



Answer: False. A strategic group is a group of firms that over time pursue similar competitive strategies, have similar characteristics, and have similar assets and competencies.

3.3


One of the benefits of competitor analysis is that an understanding of the current strategy and the strengths and weaknesses of a competitor can suggest opportunities and threats that will merit a response.

Answer: True.
3.4

According to the book, mobility barriers are barriers inhibiting the movement of a person from one social class to another.



Answer: False. Each strategic group has mobility barriers that inhibit or prevent businesses from moving from one strategic group to another.
3.5

The competitive strength grid lists the product-markets served by each competitor and identifies for each product market the strengths of each competitor.



Answer: False. The competitive strength grid is a scale of the major competitors based on assets and competencies. It serves to summarize the position of the competition with respect to assets and competencies.
3.6

The value chain analysis is based upon the cost-benefit of the product as perceived by the customer.



Answer: False. The value chain is a tool to identify the value-add components of competitor. A business’s value chain consists of two types of value-creating activities that should be considered in assessing a competitor – support activities and primary activities.
3.7

The eight dimensions of competitor analysis include: current and past strategies; cost structure; exit barriers; objectives and commitment; size, growth and profitability; ______ and ______, ________, and ________; and _____ and _________.



Answer: Image and positioning, organization and culture, strengths and weaknesses. See page 65-68 for a discussion on understanding competitor analysis.
3.8

In conducting a competitor analysis, which of the following is not relevant:

a. Accounting methodologies

b. Market share

c. Image

d. Positioning strategy

e. Objectives and commitments

Answer: Accounting methodologies. Competitor analysis consists of an analysis of a competitor’s: image and positioning; objectives and commitment; current and past strategies; organization and culture; exit barriers; strengths and weaknesses; size, growth and profitability,
3.9

Exit barriers are crucial to a firm’s ability to exercise an exit alternative. Which of the following is not an exit barrier?

a. Managerial pride

b. Government or social barriers

c. Specialized assets

d. High market growth rate

e. Fixed costs

Answer: d is the answer. High growth markets in most cases would not be an exit barrier. Exit barriers include: specialized assets, fixed costs, relationships with other business units, government or social barriers, and managerial pride. See page 49 for a discussion on exit barriers.
3.10

In completing a checklist on competitor assets and competencies, some of the areas to be considered include all but one of the following:

a. Company culture

b. Innovation

c. Manufacturing

d. Management

e. Strategic programming

Answer: e) Strategic programming. Analysis of a competitor’s strengths and weaknesses include: innovation, manufacturing, finance-access to capital, management, marketing, and customer base.
3.11

In addition to current competitors, it is important to consider potential market entrants such as firms that might engage in all but one of the following:

a. Retaliatory or defensive strategies

b. Market expansion

c. Forward integration

d. Low-cost strategies

e. Backward integration

Answer: d. Potential market entrants might engage in the following: market expansion, product expansion, backward integration, forward integration, the export of assets, and competencies or retaliatory or defensive strategies.
3.12

The competitor analysis in almost all cases will benefit from considering both direct and indirect competitors.



Answer: True. By explicitly considering indirect competitors, the strategic horizon is expanded, and the analysis more realistically mirrors what the customer sees.
3.13

Potential market entrants might use all but one of the following to enter a market:

a. Market expansion

b. Market penetration

c. Product expansion

d. Backward/forward integration

e. Export assets or competencies

Answer: Market penetration. A company practicing market penetration is already in the market (market penetration involves increasing customer usage in an existing market).
3.14

Nintendo did not try to compete with Sony’s in terms of high tech digital graphics.



Answer: True
3.15

Some of the benefits of strategic groups include all but one of the following:

a. Makes the process of competitor analysis more manageable.

b. Refines the strategic investment decision.

c. Includes a set of mobility barriers.

d. They will be affected by and react to industry developments in similar ways.

e. They produce strategic options.

Answer: e) they produce strategic options. Strategic groups do not themselves produce strategic options because strategic groups are tools used by the strategist to group similar competitors for analysis purposes.


Chapter 4 – Market/Submarket Analysis
4.1

A user gap is caused when one segment uses more of a product than another segment.



Answer: False. A new use, new user group, or more frequent usage could dramatically change the size and prospects for the market. It is not an evaluation of one segment versus another.
4.2

One goal of market and submarket analysis is to understand the dynamics of the market.



Answer: True.
4.3

Porter’s five factor model provides insight into the present and future profitability of an industry.



Answer: True.
4.4

Key success factors are assets and/or competencies that provide the basis for any competitor to be successful in an industry.



Answer: True.

4.5


One of the most serious risks of high growth markets is the fact that the number of competitors attracted is likely to be high.

Answer: True.
4.6

Avoiding the small market can mean that a firm must later overcome the first-mover advantage of others.



Answer: True.
4.7

Porter’s five factor model involves--the intensity of competition, competition among existing firms, _________, _________, and __________.



Answer: Threat of substitute products, bargaining power of suppliers and bargaining power of customers. .
4.8

Ghost potential occurs when competitors get scared from competitive intensity and abandon a market.


False. Ghost potential occurs when a market seems so topical that the need is so apparent that growth seems assured but in fact the potential has ghost-like qualities caused by factors inhibiting or preventing its realization.
4.9

Which of the following is not an indicator of market maturity or decline?

a. Customer disinterest

b. Price Pressure

c. Saturation

d. Predictions for high growth

e. Buyer sophistication and knowledge

Answer: d) predictions for high growth. The fact that the market is in the maturity stage would suggest that growth trends have diminished.
4.10

Which of the following is not a risk of a high growth market?

a. Overcrowding

b. Superior competitive entry

c. Projected high growth

d. Changing KSFs

e. Resource constraints

Answer: c) projected high growth. High growth isn’t a risk; it is a positive force that should drive the market.

4.11


Niche businesses can be economically unviable when choices are too abundant making marketing costs crippling.

Answer: True.
4/12

The Long Tail refers to the long sales flow obtained from a loyal customer.



Answer: False
4.13

Wal-Mart has a high level of customer power.



Answer: True
4.14

In forecasting market growth, the potential of technologies tend to be undervalued.



Answer: False

Chapter 5 – Environmental Analysis and Strategic Uncertainty
5.1

One of the three components of environmental analysis is internal analysis.



Answer: False. The components of environmental analysis are: technological, government/ economic, and consumer trends.

5.2


The goals of environmental analysis are to identify fads, trends and events that will only affect strategy in a direct way.

Answer: False. The goals are to identify and evaluate only trends and events that will affect strategy directly and indirectly.
5.3

The three forms of innovation are ___________, ___________ and ___________.



Answer: Three forms of innovations are incremental, substantial and transformational innovation.
5.4

Innovations that are transformational or substantial tend to be employed by new participants in an industry rather than established players.



Answer: True.
5.5

A company who wants to gain credit for “green” programs can effectively ensure the ability to do so with _______________.



Answer: Branding.
5.6

A reason to incorporate green programs into strategy or business models is cost savings.



Answer: True.
5.7

Demographic trends can be a strong indicator of the growth of a market and it can be predictable.



Answer: True.
5.8

It has been shown that, on average, increasing marketing budgets in recessions pays off during the recession and after as well.



Answer: True
5.9

The key to understanding trends is to interact with people of all types.

Answer: True
5.10

The ideal number of scenarios to work with is three to five.



Answer: False. Experience has shown that two or three scenarios are the ideal number to work with. Any more and the process becomes unwieldy and any value is largely lost.

5.11


A strategic uncertainty should be evaluated with respect to its impact and relevance to future strategy.

Answer: False. The extent to which a strategic uncertainty should be monitored and analyzed depends on its impact and immediacy.
5.12

Scenario analysis provides an alternative to investing in information to reduce uncertainty that is often an expensive and futile process.



Answer: True.
5.13

There are two types of scenario analyses: strategy-developing scenarios and decision-driven scenarios.



Answer: True.
5.14

In California, one-half of the state’s voters in a 2005 poll supported an aggressive attack on global warming.



Answer: False. The answer is two-thirds, not one-half.
5.15

A new generation of products such as the Boeing 747 would be considered a transformation innovation.



Answer: False. P. 80-81 shows that the Boeing 747 would be considered a substantial innovation.

Chapter 6- Internal Analysis
6.1

The goal of analysis is to develop strategies that either exploit a firm’s strengths or correcting / compensating for weaknesses.



Answer: True.
6.2

ROA is return on sales times asset turnover.



Answer: True. It can also be expressed by dividing profits by the assets.

6.3


________________ is comparing the performance of a business component such as warehouse operations with similar operations in other companies.

Answer: Benchmarking.
6.4

Performance measures reflecting long-term profitability include all but one of the following:

a. Outsourcing ability

b. Product/service quality

c. Customer satisfaction

d. New product activity

e. Relative cost

Answer: (a)
6.5

One of the more important assets of many firms is the size of the customer base.



Answer: False. See Figure 6.1
6.6

All the following are guidelines for measuring customer satisfaction except __________.

a. Identify causes of dissatisfaction that motivate customers to change brands

b. Evaluate the lifetime value of customer to the product

c. Track measures and compare to competitors

d. Differentiate between dissatisfaction and dislike of product


Answer: (d) Differentiate between absence of dissatisfaction and true affection or loyalty is not a guideline for measuring customer satisfaction.
6.7

According to the book, strategies should be driven by three factors—organizational strengths and weaknesses, market needs, and environmental trends.



Answer: False. A successful strategy occurs when an organization’s strengths are matched against market needs and competitor weaknesses.
6.8

All the following are ways to increase shareholder value except:

a. Invest in products that are low risk

b. Reduce the cost of capital by increasing debt to equity ratio

c. Earn more profit by reducing costs

d. Use less capital

e. Increase revenue without using more capital
Answer: (a) To increase shareholder value, an organization does all of the above choices, except invest in products that are low risk.
6.9

Shareholder value analysis holds that the flow of profits emanating from an investment should exceed the cost of capital.



Answer: True.
6.10

One strength of shareholder value analysis is that it encourages priority to be given to other stakeholders.



Answer: False. It is a danger, not strength.
6.11

Competences should be evaluated based on strength and revenue potential.



Answer: False. Competences should be evaluated based on strength and impact.
6.12

Kunz found that in their passbook business, small customers were profitable.



Answer: False

Chapter 7 – Creating Advantage, Synergy, and Strategic Philosophies
7.1

Among the critical determinants of an SCA is the choice of the product-market and the identity and nature of competitors.



Answer: True. The sustainable competitive advantage is determined by: the way a firm competes, the basis of competition, where a firm competes, and whom the firm competes against.
7.2

An effective sustainable competitive advantage needs to be both meaningful and sustainable. And it should be substantial to make a difference.



Answer: True.
7.3

In the survey of 248 West Coast business managers, the most frequently mentioned SCA was financial resources.



Answer: False. Quality reputation is the correct answer.
7.4

The assets and competencies of an organization represent the most sustainable element of a business strategy, because these are usually difficult to copy or counter.



Answer: True.
7.5

If two businesses have synergy, their profitability operating together will be higher than if they operated separately.



Answer: True.
7.6

Synergy will result in one or more of the following: decreased revenues, increased operating costs, or increased investment.



Answer: False. As a result of synergy, the combined SBUs will have one or more of the following: (1) increased sales; (2) lower operating costs; and (3) reduced investment requirements.
7.7

Synergy in practice is difficult because it can be difficult to predict whether synergy will actually emerge.



Answer: True.
7.8

Strategic commitment is superior to strategic opportunism.



Answer: False. Both may work but require different systems, people, and culture.
7.9

Strategic intent is a sustained obsession with winning which involves a stretch of the organization and real innovation.



Answer: True.
7.10

An organization implementing a strategic commitment should have an on-line information system and be capable of fast response.



Answer: False. The response time is long term and not fast. Strategic vision is based on forward thinking and a long term perspective.
7.11

Strategic drift is associated with an orientation toward the present.



Answer: True. Strategic drift results in investment decisions being made incrementally in response to opportunities (the present) versus being directed by a vision (long term).

7.12


To successfully manage a strategic commitment, a firm should have four characteristics--a clear future strategy, assets, competencies, and resources to implement the strategy, and _________, and _________.

Answer: Buy-in throughout the organization and patience.
7.13

To successfully manage a strategic commitment, a firm should have four characteristics. Which of the following is not one of the four?

a. Senior management with MBAs

b. Buy-in throughout the organization

c. Assets, competencies, and resources to implement it

d. Patience

e. A clear future strategy

Answer: a
7.14

A sustainable competitive advantage has several characteristics. Which of the following is not one of them?

a. Sustainability

b. They can be leveraged

c. They should be supported by assets and competencies

d. They cannot easily be neutralized by competitors

e. They are easily copied

Answer: (e) An SCA should not be easy to match or be neutralized by a competitor.
7.15

Synergy between firms can provide an SCA that is truly sustainable because it is based on the characteristics of a firm that are probably unique.



Answer: True.
7.16

Four factors are required for the creation of a sustainable competitive advantage. Which of the following is not one of those factors?

a. Whom you compete against

b. Basis of competition

c. Where you compete

d. Your strategic intent.

e. The way you compete

Answer: d.

7.17


The four strategic philosophies are strategic commitment, strategic opportunism, strategic vision and strategic intent.

Answer: False. The four strategic philosophies are strategic commitment, strategic opportunism, and strategic adaptability.

7.18


Key success factors (KSF’s) and sustainable competitive advantages (SCA’s) are different in that an SCA is necessary to compete and a KSF is the basis for a continuing advantage.

Answer: False. The KSF is actually necessary to compete and the SCA is the basis for a continuing advantage.
7.19

A key success factor can be a point of parity.



Answer: True.
7.20

Which of the following is not one of the three philosophies of developing strategy?



    1. Strategic Drift

    2. Strategic Opportunism

    3. Strategic Adaptability

    4. Strategic Commitment

Answer: A. Strategic drift is a flaw of the strategic opportunism philosophy.
7.21

Strategic commitment has a long term perspective, while strategic opportunism is short term and strategic adaptability is medium term.



Answer: True.
7.22

In an organization that subscribes to a strategically adaptable mentality, it is okay to fail.



Answer: True. These organizations are entrepreneurial and encourage experimentation.
7.23

Strategic intent recognizes the essence of winning, involves stretching an organization to continue to improve old SCA’s or develop new ones, and requires real innovation.



Answer: True.



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