An integrated and coordinated set of commitments and actions designed to exploit core competencies

Chapter 4 – Business-level strategy

TRUE/FALSE

1.A business-level strategy is an integrated and coordinated set of commitments and actions

the firm uses to gain a competitive advantage by exploiting core competencies in specific product

markets.

ANS:TPTS:1DIF:EasyREF:Introduction

2. A business-level strategy reflects a firm’s beliefs about what products and services it

should offer to customers.

ANS:FPTS:1DIF:ModerateREF:Introduction

3.A firm competing in a single-product market area in a single geographic location needs a

corporate-level strategy to deal with product diversity and an international strategy to deal with

geographic diversity.

ANS:FPTS:1DIF:ModerateREF:Introduction

4.The most successful companies tend to find new ways to meet the needs of new customers

in addition to finding ways to satisfy current customers.

ANS:TPTS:1DIF:ModerateREF: Customers: their

relationship with business-level strategies

5.The probability of successful competition increases when a firm carefully integrates

internet technology with its strategy, rather than using internet technology on a ‘stand-alone basis’.

ANS:TPTS:1DIF:ModerateREF:Effectively managing

relationships with customers

6. The reach dimension of relationships with customers is concerned with their buying power.

ANS:FPTS:1DIF:ModerateREF:Reach, richness and

affiliation

7.The richness dimension of relationships with customers is concerned with the depth and

detail of the one-way flow of information between the firm and the customer.

ANS: FPTS:1DIF:ModerateREF:Reach, richness and

affiliation

8.The affiliation dimension of relationships with customers is concerned with developing

relationships with third-party affiliates who can best serve customers.

ANS:FPTS:1DIF:ModerateREF:Reach, richness and

affiliation

9.Dividing customers into groups based on their needs is called market segmentation, which

is a process that clusters people with similar needs into individual and identifiable groups.

ANS:TPTS:1DIF:ModerateREF:Who: determining the

customers to serve

10.Competitive scope and competitive positioning are the two dimensions that help define the

five business-level strategies.

Glossary Chapter 1 Above-average returns Above-average returns are returns in excess of what an investor expects to earn from other investments with a similar amount of risk. Average returns Average returns are returns equal to those an investor expects to earn from other investments with a similar amount of risk. Capability A capability is the capacity for a set of resources to perform a task or an activity in an integrative manner. Competitive advantage A firm has a competitive advantage when it implements a strategy competitors are unable to duplicate or find too costly to try to imitate. Core competencies Core competencies are capabilities that serve as a source of competitive advantage for a firm over its rivals. Disruptive technologies Disruptive technologies can destroy the value of an existing technology and create new markets. Global economy A global economy is one in which goods, services, people, skills and ideas move freely across geographic borders. Globalization Globalization is the increasing economic interdependence among countries and their organizations as reflected in the flow of goods and services, financial capital and knowledge across country borders. Knowledge Knowledge (information, intelligence, and expertise) is gained through experience, observation and inference. Mission A mission specifies the business or businesses in which the firm intends to compete and the customers it intends to serve. Organizational culture Organizational culture refers to the complex set of ideologies, symbols and core values that are shared throughout the firm and that influence how the firm conducts business. Perpetual innovation Perpetual innovation describes how rapidly and consistently new information-intensive technologies replace older ones. Profit pool A profit pool entails the total profits earned in an industry at all points along the value chain. Resources Resources are inputs into a firm’s production process, such as capital equipment, the skills of individual employees, patents, finances, and talented managers. Risk Risk is an investor’s uncertainty about the economic gains or losses that will result from a particular investment. Stakeholders Stakeholders are the individuals and groups who can affect the firm’s vision and mission, are affected by the strategic outcomes the firm achieves through its operations, and who have enforceable claims on the firm’s performance. Strategic competitiveness Strategic competitiveness is achieved when a firm successfully formulates and implements a value-creating strategy. Strategic flexibility Strategic flexibility is a set of capabilities used to respond to various demands and opportunities existing in a dynamic and uncertain competitive environment. Strategic leaders Strategic leaders are people located in different parts of the firm using the strategic management process to help the firm reach its vision and mission. Strategic management process The strategic management process is the full set of commitments, decisions and actions required for a firm to achieve strategic competitiveness and earn above-average returns. Strategy A strategy is an integrated and coordinated set of commitments and actions designed to exploit core competencies and gain a competitive advantage. Technology diffusion Technology diffusion is the rate at which new technologies become available and are used. Vision Vision is a picture of what the firm wants to be and, in broad terms, what it wants to ultimately achieve.

Why would an integrated and coordinated set of commitments and actions lead to a sustainable competitive advantage?

What is an integrated set of actions taken to produce goods or services with features that are acceptable to customers at the lowest cost relative to that of competitors?

What is core competency in strategic management?

When a company successfully formulates and implements a value