Which of the following is true of firms that compete in the global marketplace?

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Abstract

This article describes the development of an analytical framework of strategic behavior in globalizing markets, based on different strands of literature (internationalization process, strategic groups, intra-industry trade, and global management). The framework consists of a three-by-three matrix with the following dimensions: the global structure of the industry (industry globality) and the firm's preparedness for internationalization. In each of the nine resulting cells ("The Nine Strategic Windows") the author discusses consequences for strategic behavior of the firm. The author makes concrete suggestions on company strategy, varying from "stay at home" to "strengthen your global position." In order to illustrate the framework, the study of a Norwegian ship equipment manufacturer is briefly discussed.

Journal Information

Journal of International Marketing is an international, peer-reviewed journal that is dedicated to advancing international marketing practice, research, and theory. Contributions addressing any aspect of international marketing are welcome. The journal presents scholarly and managerially relevant articles on international marketing. Aimed at both international marketing/business scholars and practitioners at senior- and mid-level international marketing positions, the journal's prime objective is to bridge the gap between theory and practice in international marketing.

Publisher Information

Sara Miller McCune founded SAGE Publishing in 1965 to support the dissemination of usable knowledge and educate a global community. SAGE is a leading international provider of innovative, high-quality content publishing more than 900 journals and over 800 new books each year, spanning a wide range of subject areas. A growing selection of library products includes archives, data, case studies and video. SAGE remains majority owned by our founder and after her lifetime will become owned by a charitable trust that secures the company’s continued independence. Principal offices are located in Los Angeles, London, New Delhi, Singapore, Washington DC and Melbourne. www.sagepublishing.com

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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. a. True

b. False

_ANSWER:  _ True

1. Every firm uses all levels of strategy: corporate-level, merger and acquisition, international, and cooperative. a. True

b. False

_ANSWER:  _ False

1. When selecting a business-level strategy, the firm determines who will be served, what needs those target customers have that it will satisfy, and how those needs will be satisfied. a. True

b. False

_ANSWER:  _ True

1. Global competition has increased the options for consumers and has made it more imperative for firms to identify the needs of customers to earn above-average returns. a. True

b. False

_ANSWER:  _ True

1. Effective use of the generic business strategies allows a firm to favorably position itself relative to the five competitive forces in the industry. a. True

b. False

_ANSWER:  _ True

1. Almost any identifiable human or organizational characteristic can be used to subdivide a market into segments that differ from one another on a given characteristic. a. True

b. False

_ANSWER:  _ True

1. The generalized forms of value that goods and services provide are either low cost with acceptable features or highly differentiated features with acceptable cost. a. True

b. False

_ANSWER:  _ True

1. Changing consumer needs are illustrated by Starbucks' enabling consumers to have an experience and design their own drinks rather than just a cup of coffee. a. True

Chapter 04: Business-Level Strategy

b. False

_ANSWER:  _ True

1. Companies without core competencies in their value-chain activities and support functions are still able to successfully implement either a cost leadership or a differentiation strategy, although they cannot implement an integrated cost leadership/differentiation strategy. a. True

b. False

_ANSWER:  _ False

1. To position itself differently from competitors, a firm must decide whether it intends to perform activities differently or to perform different activities. a. True

b. False

_ANSWER:  _ True

1. Southwest Airlines' tightly integrated activities make its cost leadership strategy more vulnerable to imitation than if its activities were loosely integrated. a. True

b. False

_ANSWER:  _ False

1. The key to Southwest Airlines' success has been its ability to continuously reduce costs while providing customers with superior levels of differentiation, such as an engaging culture. a. True

b. False

_ANSWER:  _ False

1. Strategic fit among the many activities in the value chain is critical for competitive advantage because it is more difficult for a competitor to match a configuration of integrated activities than to imitate a particular activity, such as sales promotion or a process technology. a. True

b. False

_ANSWER:  _ True

1. The difference between the cost leadership and differentiation business-level strategies on the one hand, and the focused cost leadership and focused differentiation strategies on the other, are their basis for customer value. a. True

b. False

_ANSWER:  _ False

1. A business model should be selected with great care because it cannot be changed, or even adjusted, once a firm begins to use the model to implement its business-level strategy. a. True

b. False

_ANSWER:  _ False

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_ANSWER:  _ False

1. In general, firms can be MOST effective if they develop business-level strategies that will serve the needs of the "typical customer" in the industry. a. True

b. False

_ANSWER:  _ False

1. The differentiation strategy is ineffective for products that are expensive, luxury consumer goods. It is best used for common, inexpensive products such as donuts. a. True

b. False

_ANSWER:  _ False

1. A risk of the differentiation strategy is that a firm's means of differentiation may cease to provide value for which customers are willing to pay. a. True

b. False

_ANSWER:  _ True

1. A business model is developed first. Then the firm takes steps to understand customers in terms of who, what, and how in order to develop a business-level strategy. a. True

b. False

_ANSWER:  _ False

1. The activities in the value chains of companies using focus strategies are quite different than the activities in the value chains of companies using industry-wide business strategies. a. True

b. False

_ANSWER:  _ False

1. A new generation of lunch trucks in cities such as New York, San Francisco, and Los Angeles is serving high-end fare such as hamburgers made from grass-fed cattle, escargot, and crème brulee, at less expensive prices than sit-down restaurants. This illustrates a focused differentiation strategy. a. True

b. False

_ANSWER:  _ True

1. A risk of a focus strategy is that the needs of customers within a narrow competitive segment may become more similar to those of industry-wide customers as a whole over time. a. True

b. False

_ANSWER:  _ True

1. Although it is a cost leader, IKEA also offers some differentiated features that appeal to its target customers, including

Chapter 04: Business-Level Strategy

its unique furniture designs, in-store playrooms for children, wheelchairs for customer use, and extended hours. a. True

b. False

_ANSWER:  _ True

1. Flexible manufacturing systems, information networks, and total quality management are three techniques that make it possible for firms to implement the focused differentiation strategy. a. True

b. False

_ANSWER:  _ False

1. A flexible manufacturing system is a computer-controlled process used to produce a variety of products in moderate, flexible quantities with a minimum of manual intervention. a. True

b. False

_ANSWER:  _ True

1. Because of its focus on innovation and quality manufacturing, total quality management is not useful for firms that follow a cost leadership strategy. a. True

b. False

_ANSWER:  _ False

1. One of the benefits of the integrated cost leadership/differentiation strategy is that it is less risky than either the cost leadership or differentiation strategies. a. True

b. False

_ANSWER:  _ False

1. The hazard of getting "stuck in the middle" applies to firms using any business strategy. a. True

b. False

_ANSWER:  _ False

1. Steak and Shake just announced that it is selling some of its stores to individuals who will then pay a fee and royalties back to the company in exchange for use of the company name and products. Steak and Shake is transitioning into a franchise business model. a. True

b. False

_ANSWER:  _ True

Multiple Choice

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: a. the selection of industries in which the firm will

Chapter 04: Business-Level Strategy

customers in a cost-effective manner. This represents which of the following service dimension? a. Reach

b. Richness

c. Affiliation

d. None of the these is correct.

_ANSWER:  _ b

1. Viewing the world through the customer's eyes and constantly seeking ways to create more value for the company enhances: a. the reach of the company toward the customer.

b. the ability to identify the customer.

c. the richness of the relationship with the customer.

d. affiliation with the customer.

_ANSWER:  _ d

1. Before a firm decides what products to offer and what benefits and features they will have, it must determine all of the following EXCEPT: a. who the firm should serve.

b. when the customers' needs should be satisfied.

c. what needs the firm should satisfy.

d. how to use core competencies to satisfy customer needs.

_ANSWER:  _ b

1. In the animal food products business, food-product needs of owners of companion animal pets (e., dogs and cats) differ from the needs for food and health-related products of those owning production animals (e., livestock). To which of the following aspects of managing customer relationships does this choice refer? a. Who: Determining the Customers to Serve

b. What: Determining Which Customer Needs to Satisfy

c. How: Determining Core Competencies Necessary to Satisfy Customer Needs

d. When: Determining When to Satisfy Customer Needs

_ANSWER:  _ a

1. Starbucks determined that all of the following customer needs were important EXCEPT: a. low price.

b. the experience associated with drinking coffee, not just the coffee.

c. the actual product of service (e., a cup of coffee), not the experience.

d. allowing customers to design their own drinks.

_ANSWER:  _ a

1. Hyundai allows customers to return their cars if they lose their job within 12 months of purchase. Hyundai is engaged in which of the following aspects of managing customer relationships? a. Who: Determining the Customers to Serve

Chapter 04: Business-Level Strategy

b. What: Determining Which Customer Needs to Satisfy

c. How: Determining Core Competencies Necessary to Satisfy Customer Needs

d. When: Determining When to Satisfy Customer Needs

_ANSWER:  _ b

1. An interior decorator has moved his business from Los Angeles to St. Paul, Minnesota because his spouse's company transferred her to St. Paul. The decorator is distressed because the customers in his target market have, in his words, "banal and bourgeois taste." Which of the following is the decorator's problem? a. The decorator does not understand that customer needs are neither right nor wrong, and neither good nor bad. b. The decorator has no core competencies that will transfer to his new geographic market.

c. The decorator has not been able to choose a strategy of cost leadership in this environment.

d. The decorator is highly affiliated with the new target market and understands how he can create value for it.

_ANSWER:  _ a

1. In order to meet and exceed customers' expectations over time, firms must: a. constantly manipulate customers' perceptions of their needs.

b. answer the questions: who, what, when, where, how, and why as they apply to customers.

c. continuously improve, innovate, and upgrade their core competencies.

d. successfully defend their established core competencies from imitation by competitors.

_ANSWER:  _ c

1. Business-level strategies are concerned specifically with: a. creating differences between the firm's position and its competitors.

b. selecting the industries in which the firm will compete.

c. how functional areas will be organized within the firm.

d. how a business with multiple physical locations will operate one of those locations.

_ANSWER:  _ a

1. An entrepreneur is investigating starting a company that provides tax advice to small companies. In order to position his company differently from the existing competitors, the entrepreneur must: a. analyze the reach, richness, and affiliation the company must have with its customers.

b. provide tax advice either in a different manner or provide a different kind of tax service than competitors. c. offer tax advice at a price lower than the cheapest competitor.

d. offer tax advice at a higher quality than the best competitor.

_ANSWER:  _ b

1. Which of the following are central to implementing value-creating strategies and thereby satisfying customers' needs? a. Firm resources

b. Capabilities

c. Core competencies

d. None of these is correct.

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1. A company using a narrow target market in its business strategy is: a. following a cost leadership business strategy.

b. focusing on a broad array of geographic markets.

c. limiting the group of customer segments served.

d. decreasing the number of activities on its value chain.

_ANSWER:  _ c

1. As the television industry has changed in the last few decades from just three major networks to a multiplicity of networks, one of the major aspects of business strategy for the newer networks is a(n) __________ than the traditional networks. a. broader target market

b. narrower target market

c. increased use of primary activities to capture value

d. increased use of support activities to capture value

_ANSWER:  _ b

1. The effectiveness of any of the generic business-level strategies is contingent on both: a. customer needs and competitors' strategies.

b. the opportunities and threats in a firm’s external environment and the strengths and weaknesses derived from the firm’s resource portfolio.

c. the trends in the general consumer base and the robustness of the global and industry economy.

d. the firm's competitive scope and its competitive advantage.

_ANSWER:  _ b

1. How does a firm capture value when using a franchise business model? a. By receiving fees and royalty payments

b. By selling a premium version of its product or service

c. By giving advertisers access to target customers

d. By matching those who want a service with those who are providing it

_ANSWER:  _ a

1. A cost leadership strategy targets the industry's __________ customers. a. most typical

b. poorest

c. least educated

d. most frugal

_ANSWER:  _ a

1. Durable Ceramics, Inc., provides inexpensive ceramic tile to builders of institutional buildings such as schools, prisons, and public administration buildings. It has always competed on a cost leadership basis. Most of its products are purchased by a few commercial construction firms, so it is fairly dependent on these construction firms for selling its product. Durable Ceramics' next-most-efficient competitor, Cost-Less Ceramics, Inc., earns average returns, whereas

Chapter 04: Business-Level Strategy

Durable earns above-average returns. The commercial construction firms are putting pressure on Durable to reduce its prices. If Durable reduces its prices below those of Cost-Less's prices, it is likely that: a. both Durable and Cost-Less will devise additional ways to become more efficient in their production processes.

b. Durable will be unable to absorb the lower cost and will go out of business.

c. both Cost-Less and Durable will go out of business, leaving the customers with fewer alternative sources of low-cost tile.

d. Cost-Less will go out of business, and Durable will gain higher power over its customers.

_ANSWER:  _ d

1. Research suggests that having a competitive advantage in __________ creates more value with a cost leadership strategy than with a differentiation strategy. a. marketing and sales

b. technology development

c. logistics

d. human resource management

_ANSWER:  _ c

1. A river barge company can offer cheaper, although slower, per-pound transportation of products to companies when compared with transportation by air, truck, or rail. The river barge company should first target customers whose companies use: a. the integrated cost leadership/differentiation strategy.

b. either of the focus strategies.

c. the cost leadership strategy.

d. any of the strategies except the focused differentiation strategy.

_ANSWER:  _ c

1. Netflix offers products to customers on demand. What type of business model does Netflix use? a. Freemium

b. Subscription

c. Franchise

d. Advertising

_ANSWER:  _ b

1. Airbnb matches people wanting to rent out their properties with individuals seeking properties to rent. What type of business model does Airbnb use? a. Franchise

b. Subscription

c. Advertising

d. Peer-to-peer

_ANSWER:  _ d

1. A company pursuing the differentiation or focused differentiation strategy would tend to: a. build economies of scale and efficient operations.

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_ANSWER:  _ b

1. The products or services that are differentiated from others have qualities that are: a. perceived by the customer to add value that they will pay a premium to purchase.

b. valued by the typical industry customer.

c. perceived as standardized by the customer.

d. seen as classic attributes rather than passing fads.

_ANSWER:  _ a

1. Blind taste-tests have shown that the taste of premium-priced vodkas and inexpensive vodkas are indistinguishable even to regular drinkers of vodka. But the sales of premium vodkas are thriving. This is an example of the: a. perception of perceived prestige and status as a means of differentiating a product. b. importance of high-quality raw materials when using the differentiation strategy.

c. risk of product imitation by competitors.

d. danger counterfeiting holds for firms pursuing the differentiation strategy.

_ANSWER:  _ a

1. Duolingo is a free app that includes in-app advertising. There is also an upgraded version that consumers can purchase. What type of business model does Duolingo use? a. Both franchise and advertising

b. Both freemium and differentiation

c. Both freemium and advertising

d. Peer-to-peer

_ANSWER:  _ c

1. The use of a differentiation strategy would likely be LEAST effective in which of the following markets? a. Commodity goods

b. Motion pictures

c. Popular music

d. Writing instruments

_ANSWER:  _ a

1. All of the following are ways that a good or service can be differentiated EXCEPT: a. responsive customer service.

b. perceived prestige and status.

c. economies of scale and efficient operations.

d. engineering design and performance.

_ANSWER:  _ c

1. The differentiation strategy can be effective in controlling the power of rivalry with existing competitors in an industry because: a. customers will seek out the lowest-cost product.

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b. customers of nondifferentiated products are sensitive to price increases.

c. customers are loyal to brands that are differentiated in meaningful ways.

d. the differentiation strategy benefits from rivalry because it forces the firm to innovate.

_ANSWER:  _ c

1. Wholesome Pet Food has successfully specialized for 20 years in high-quality pet food made from all-natural ingredients and organically raised lamb. This brand has a strong following and is recommended by veterinarians who practice in affluent neighborhoods. If Wholesome's main supplier of lamb announces that the price for lamb will be 15 percent higher next year, which of the following is most likely? a. Wholesome will probably be able to pass the cost on to its customers because they are less sensitive to price increases than the average buyer.

b. Companies pursuing Wholesome's business strategy are especially vulnerable to this risk.

c. If Wholesome raises its pet food prices, customers will turn to less expensive brands such as Purina.

d. Wholesome probably operates on very thin margins, and a cost increase will threaten its ability to earn average returns.

_ANSWER:  _ a

1. Which of the following is NOT a value-creating activity associated with the differentiation strategy? a. Developing policies to ensure efficient hiring and retention to keep costs low and implement training to ensure high employee efficiency

b. Providing accurate and timely delivery of goods to customers

c. Ensuring the receipt of high-quality supplies (raw materials and other goods)

d. Developing flexible systems that allow rapid response to customers' changing needs

_ANSWER:  _ a

1. A differentiation strategy can be effective in controlling the power of substitutes in an industry because: a. customers have low switching costs.

b. substitute products are lower quality.

c. a differentiating firm can always lower prices.

d. customers develop brand loyalty.

_ANSWER:  _ d

1. Recently, the only type of car available for Anthony to rent on a business trip was a compact, fuel-efficient Japanese import. Anthony was surprised at the comfort and performance of the car. He is in the market for a new car and had previously considered only buying another luxury SUV. Now, he is thinking about the significant cost savings he would have if he bought the compact vehicle rather than a new SUV. This is an example of the competitive risk that: a. a competitor's products can convey a product's differentiated features to a customer at a significantly reduced price.

b. a product imitation can cause customers to perceive that competitors offer essentially the same goods.

c. experience can narrow a customer's perceptions of the value of a product's differentiated features.

d. brand loyalty insulates a company from rivalry with competitors.

_ANSWER:  _ c

1. A manufacturer of jewelry imitates the style of a popular and expensive brand using manufactured stones rather than

Chapter 04: Business-Level Strategy

1. The new generation of lunch trucks serving high-end fare in cities such as New York, San Francisco, and Los Angeles share which of the following business strategies? a. Cost leadership

b. Focused differentiation

c. Integrated cost leadership/differentiation d. Differentiation

_ANSWER:  _ b

1. Monteleone Company pays large fees to a highly recognizable, prestigious individual to be the spokesperson for the company's luxury private jets. Monteleone is probably following the: a. focused cost leadership strategy.

b. focused differentiation strategy.

c. integrated cost leadership/differentiation strategy.

d. total quality strategy.

_ANSWER:  _ b

1. The risks of a focus strategy include: a. a competitor's ability to use its core competencies to out-focus the focuser by serving an even more narrowly defined segment.

b. a competitor's ability to use its core competencies to out-focus the focuser by serving an even more broadly defined segment.

c. decisions by industry-wide competitors to use their resources to serve a wider range of customers' needs than the focuser has been serving. d. decisions by focused competitors to use their resources to serve a wider range of customers' needs.

_ANSWER:  _ a

1. Focus strategies are: a. sheltered from the risks associated with industry-wide strategies because of their niche focus.

b. able to avoid global risk by focusing on niches in national or regional markets.

c. faced with more types of risks than are industry-wide strategies.

d. more subject to failure than industry-wide strategies.

_ANSWER:  _ c

1. New Balance Athletic Shoes target baby boomers' needs for well-fitting shoes. The company is unique in that it offers a very broad range of shoe widths. A realistic potential risk New Balance runs in this focused differentiation strategy includes the possibility that: a. baby boomers may find that they do not need well-fitting shoes, because they will become increasingly sedentary as they age.

b. a competitor may be able to better use flexible manufacturing systems to make shoes with an individualized fit.

c. athletic shoes may go out of style.

d. New Balance shoes may begin to appeal to a wider market, thus losing New Balance's focus advantage.

Chapter 04: Business-Level Strategy

_ANSWER:  _ b

1. Suppose another firm found a way to offer IKEA's customers (young buyers interested in stylish furniture at low cost) additional sources of differentiation while charging the same price or to provide the same service with the same sources of differentiation at a lower price. Which of the following categories of competitive risk to a focus strategy would this be? a. An industry-wide competitor decides that the market segment served by IKEA is worth entering.

b. A competitor may focus on a more narrowly defined segment and thereby "out-focus" the focuser.

c. The needs of the customers in this narrow segment have become more similar to those of industry-wide competitors.

d. Experience can narrow customer's perceptions of value of the firm's differentiated features.

_ANSWER:  _ b

1. Zara has pioneered "cheap chic" in clothing apparel. Zara offers current and desirable fashion goods at relatively low prices. To implement the strategy, Zara uses sophisticated designers and effective means of managing costs. These are all characteristics of which of the following business-level strategies? a. Cost leadership

b. Differentiation

c. Integrated cost leadership/differentiation

d. Stuck in the middle

_ANSWER:  _ c

1. Firms use the integrated cost leadership/differentiation strategy because: a. other firms have established unassailable market dominance with the other four strategies.

b. global markets allow for much broader competitive scope.

c. most consumers want to pay a low price for products with somewhat highly differentiated features.

d. one strategy is not enough for most large firms.

_ANSWER:  _ c

1. The integration of a cost leadership and a differentiation strategy: a. is challenging because it increases the number of value-chain activities and support functions in which the firm must become competent. b. forces a firm to adapt more slowly to changes in its environment.

c. allows the firm to avoid being "stuck in the middle."

d. requires such a large customer base that it is most practical for firms in the global marketplace.

_ANSWER:  _ a

1. Target's brand promise "Expect More. Pay Less" and appeal to higher-income, fashion-conscious discount shoppers illustrates the __________ strategy. a. cost leadership

b. differentiation

c. focused differentiation

d. integrated cost leadership/differentiation

_ANSWER:  _ d

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1. By linking companies with their suppliers, distributors, and customers, __________ provide a company with flexibility. a. flexible manufacturing systems

b. information networks

c. total quality management systems d. capabilities

_ANSWER:  _ b

1. TQM is most helpful to firms following the __________ business strategy. a. cost leadership

b. integrated cost leadership/differentiation

c. focused cost leadership

d. focused differentiation

_ANSWER:  _ b

1. The term "stuck in the middle": a. means adhering to a middle of the road strategy in the face of negative outcomes.

b. indicates that the customers of the firm are willing to pay only a mid-range price for the product.

c. reflects the fact that the customers of the firm have only moderate expectations regarding product quality.

d. means that the firm's cost structure is not low enough to allow it to attractively price its products and that its products are not sufficiently differentiated to create value for its target customer.

_ANSWER:  _ d

1. All of the following describe strategies EXCEPT that they: a. are purposeful.

b. cannibalize the old strategy.

c. precede the taking of actions to which they apply.

d. demonstrate a shared understanding of the firm's vision and mission.

_ANSWER:  _ b

1. More choices and easily accessible information about the functionality of firms' products are creating increasingly __________ customers. a. sophisticated and knowledgeable

b. loyal

c. dissatisfied

d. content

_ANSWER:  _ a

1. The __________ dimension of relationships with customers is concerned with the firm's access and connection to customers. a. loyalty

b. reach

c. richness

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d. affiliation

_ANSWER:  _ b

1. Reach is an especially critical dimension for which of the following firms? a. Twitter

b. JCPenney

c. Blockbuster

d. Colgate-Palmolive

_ANSWER:  _ a

1. Customer ratings of products they bought online is an example of: a. loyalty.

b. reach.

c. richness.

d. affiliation.

_ANSWER:  _ c

1. A company selling diapers knows the market is for people with infants and toddlers. However, within that segment, it can further divide the market by a demographic factor like: a. culture.

b. lifestyle.

c. consumption pattern.

d. income.

_ANSWER:  _ d

1. When firms use core competencies to implement value-creating strategies, they are answering the "__________" question. a. who

b. what

c. why

d. how

_ANSWER:  _ d

1. Stage in the family life cycle is a __________ factor. a. demographic

b. socioeconomic

c. psychological

d. perceptual

_ANSWER:  _ b

1. The book The Dyslexic Advantage appeals to a market of educators, people with dyslexia, their friends, family, and coworkers. This is customer segmentation by __________ factors. a. demographic

b. socioeconomic

Which statement is true of firms that compete in the global marketplace?

Which of the following is true of a firm that pursues a global standardization strategy?

What are the two types of competitive pressures that firms competing in the global marketplace face?

Which of the following is the two competing pressures that affect the ability of multinationals to compete in the global marketplace?