Fred r david – strategic management, 13th edition ch06

Forward integration strategy is especially effective when the availability of quality distributors is so limited as to offer a competitive advantage to those firms that integrate forward

Forward integration strategy is especially effective when the availability of quality distributors is so limited

as to offer a competitive advantage to those firms that integrate forward

If a firm's present suppliers are expensive and unreliable in meeting the firm's need for parts, components

or raw materials, the firm should pursue a horizontal integration strategy

22)

23)

Orascom Telecom and Etisalat both seek to dominate the international market while searching for

opportunities in other regions, especially in Africa and Asia

Innovative strategy requires investing a small amount of capital in R&D and changing the company culture

to one that supports creativity and talent

Most companies favor related diversification strategies in order to exploit the common use of a well-known brand name

The Libyan Investment Authority's involvement in industries such as oil, travel, banking, and

telecommunication is a good example of related diversification

Although bankruptcy can be an effective type of retrenchment strategy, it does not allow firms to avoid major debt obligations and to void union contracts

Liquidation is often appropriate when retrenchment and divestiture have failed

A differentiation strategy can only be achieved with a large target market

Joint ventures tend to fail when the managers who are required to collaborate daily in operating the venture are not involved in forming or shaping the venture

In the Arab world, hostile takeovers are common due to the current nature of social and business

networking, which appears to favour hostile attitudes

First mover advantages refers to the benefits a firm may achieve by entering a new market or developing

a new product or service prior to rival firms

Strategists in governmental organizations operate with far more strategic autonomy than their

counterparts in private firms

Research shows strategic management in small firms is more formal than in large firms, but large firms that engage in strategic management outperform those that do not

All of the following situations are conducive to market development except

What term refers to selling a division of an organization?

When few, if any, other rivals are attempting to specialize in the same target segment

D)

When the industry has many different niches and segments, thereby allowing a company to pick a

competitively attractive niche suited to its own resources

Which strategy would be most appropriate when the distinctive competencies of two or more firms

complement each other especially well?

A lack of strategic-management knowledge

ESSAY Write your answer in the space provided or on a separate sheet of paper

13) FALSE 14) FALSE 15) TRUE 16) TRUE 17) FALSE 18) FALSE 19) FALSE 20) FALSE 21) TRUE 22) TRUE 23) FALSE 24) TRUE 25) TRUE 26) TRUE 27) FALSE 28) FALSE 29) TRUE 30) FALSE 31) TRUE 32) TRUE

33) FALSE 34) FALSE 35) TRUE 36) FALSE 37) TRUE 38) TRUE 39) TRUE 40) FALSE 41) FALSE 42) FALSE 43) TRUE 44) FALSE 45) TRUE 46) TRUE 47) TRUE 48) TRUE 49) TRUE 50) FALSE 51) FALSE 52) TRUE

53) FALSE 54) FALSE 55) TRUE 56) TRUE 57) TRUE 58) FALSE 59) TRUE 60) TRUE 61) FALSE 62) FALSE 63) TRUE 64) TRUE 65) FALSE 66) FALSE 67) TRUE 68) FALSE 69) TRUE 70) TRUE 71) FALSE 72)

D

73)

C 74)

D 75)

C 76)

D 77)

B 78)

E 79)

E 80)

C 81)

E 82)

B 83)

E 84)

B 85)

A 86)

D 87)

C 88)

E 89)

A 90)

C 91)

C 92)

D

93)

E 94)

B 95)

D 96)

E 97)

E 98)

E 99)

A 100)

A 101)

E 102)

B 103)

E 104)

B 105)

C 106)

C 107)

B 108)

C 109)

D 110)

B 111)

B 112)

B

Some guidelines for when forward integration would be an especially effective strategy are 1) when an organization's present distributors are especially expensive, unreliable, or incapable of meeting the firm's distribution needs; 2) when the availability of quality distributors is so limited as to offer a competitive advantage to those firms that integrate forward; 3) when an organization competes in an industry that is growing and is expected to continue to grow markedly; 4) when an organization has both the capital and human resources needed to manage the new business of distributing its own products; 5) when the advantages of stable production are particularly high; and (6) when present distributors or retailers have high profit margins

124)

Market penetration, market development and product development are the three types of intensive strategies Seeking increased market share for present products or services in present markets through greater marketing efforts is called market penetration An example of this is when Almarai penetrated the GCC market by securing agreements with large retailers such as Carrefour, Panda, and Al Othaim allowing

it to reach a wider customer base Market development is introducing present products or services into new geographic areas For example, Gandour products are available in more than 55 countries worldwide and are supplied from the Gandour network of factories It uses distributors to market its products to countries like China, the United States, Philippines, and Malaysia An example of product development is when Juhayna introduced two new varieties, half-cream and light milk, alongside its full-milk category In addition, it launched various fruit-related products in its existing category of juice and flavored milk Pure (100 percent natural juice) and Taza (fresh milk)

Market development would be an effective strategy in all of the following situations 1) when new channels

of distribution are available that are reliable, inexpensive and of good quality; 2) when an organization is very successful at what it does; 3) when new untapped or unsaturated markets exist; 4) when an

organization has the needed capital and human resources to manage expanded operations; 5) when an organization has excess production capacity; and 6) when an organization's basic industry is becoming rapidly global in scope

126)

The two types of diversification strategies are known as related and unrelated Businesses are said to be

related when their value chains possess competitively valuable cross-business strategic fits; businesses are said to be unrelated when their value chains are so dissimilar that no competitively valuable cross-business relationships exist An example of related diversification is Almarai’s takeover of companies that are not part of their primary dairy business Western Bakery in 2007 and Modern Food Industries in 2009 This move allowed the company to offer bakery products using existing channels of distribution and

capabilities Firms that have successfully pursued unrelated diversification include Kingdom Holding (www.kingdom.com.sa ), the Al-Futtaim Group (www.futtaim.com), the Kharafi Group (www.makharafi.net), Group Ona, Orascom Industries (www.orascomci.com), and the Saud Bahwan Group

(www.saudbahwangroup.com)

127)

Six guidelines for when related diversification may be an effective strategy are 1) when an organization competes in a no-growth or a slow-growth industry; 2) when adding new, but related, products would significantly enhance the sales of current products; 3) when new, but related, products could be offered at highly competitive prices; 4) when new, but related, products have seasonal sales levels that

counterbalance an organization's existing peaks and valleys; 5) when an organization's products are currently in the declining stage of the product's life cycle; and 6) when an organization has a strong

management team

128)

Chapter 7 bankruptcy is a liquidation procedure used only when a corporation sees no hope of being able

to operate successfully or to obtain the necessary creditor agreement Chapter 9 bankruptcy applies to municipalities Chapter 11 bankruptcy allows organizations to reorganize and come back after filing a petition for protection Chapter 12 bankruptcy provides special relief to family farmers with debt equal to

or less than $1.5 million Chapter 13 bankruptcy is a reorganization plan similar to Chapter 11, but it is available only to small businesses owned by individuals with unsecured debts of less than $100,000 and secured debts of less than $350,000

129)

According to Porter, strategies allow organizations to gain competitive advantage from three different

bases cost leadership, differentiation and focus Porter calls these bases generic strategies Cost

leadership emphasizes producing standardized products at a very low per-unit cost for consumers who are

price-sensitive, of which there are two alternative types type 1 is a low-cost strategy that offers products

or services to a wide range of customers at the lowest price available on the market, whereas type 2 is a best-value strategy that offers products or services to a wide range of customers at the best price-value available on the market The best value strategy aims to offer customers a range of products or services at

the lowest price available compared to a rival's products with similar attributes Differentiation is a

strategy aimed at producing products and services considered unique industrywide and directed at

consumers who are relatively price-insensitive There are two focus strategies a low-cost focus strategy

offers products or services to a small range of customers at the lowest price available on the market, whereas a best-value focus strategy offers products or services to a small range of customers at the best price-value available on the market

130)

A successful cost leadership strategy usually permeates the entire firm, as evidenced by high efficiency, low overhead, limited perks, intolerance of waste, intensive screening of budget requests, wide spans of control, rewards linked to cost containment and broad employee participation in cost control efforts 131)

One problem that causes joint ventures to fail is that managers who should collaborate daily in operating the venture are not involved in forming or shaping the venture A second problem is if the venture benefitsthe partnering companies but may not benefit customers who then complain about poorer service or criticize the companies in other ways A third problem occurs if the venture is not supported equally by both partners A final problem is that the venture may begin to compete more with one of the partners than the other

132)

Reasons include 1) to provide improved capacity utilization; 2) to make better use of the existing sales force; 3) to reduce managerial staff; 4) to gain economies of scale; 5) to smooth out seasonal trends in sales; 6) to gain access to new suppliers, distributors, customers, products and creditors; 7) to gain new technology; and 8) to reduce tax obligations