Ohio University, Athens

MKT 4630

Chapter 9-Managing Through the Life Cycle

True/Questions

1)The net financial position of the majority of products at the introduction stage of the product life cycle is positive.

2. According to the text, the most common government-imposed barrier is a patent.

3. Low prices during introduction are typically termed skimming strategies. The strategies require significant effort to reduce costs continually, and management must resolve to accept low margins for an extended period despite large R&D expenditures.

4. The experience curve describes the theory in which unit costs are reduced in a predictable manner as accumulated volume increases.

5. If entry barriers are low and the market is price sensitive, penetration pricing would be most appropriate.

6. In the maturity stage of the product life cycle, advertising emphasis shifts to brand differentiation and selective demand creation.

7. According to the text, the two broad options that are available to follower firms pursuing a leadership objective in the early-growth stage of the product life cycle are imitation and innovation.

8. Harvesting means emphasizing increases in short-term cash flow at the expense of maintaining market share or sales volume.

9. The dominant option for a follower firm in the early-growth stage of the product life cycle seeking growth is segmentation and differentiation through imitation.

10. The concept that a follower firm may acquire several unprofitable or marginally profitable low market share products from other firms and develop a strong competitor is called kenneling.

11. For follower firms in mature markets, the two status quo options are maintain position or rationalize.

12. To harvest or maintain are the two broad options of a follower firm that chooses to exit an industry.

13. The two major options for firms competing in mature fragmented markets are acquisition and standardization and branding.

14. According to the text, harvesting is an especially favored strategy when the basis of fragmentation is geographic.

15. Poor business strengths, even in hospitable markets, suggest that the firm implement a maintain strategy.

Multiple Choice Questions

16. Which of the following stages of the product life cycle often follows many years of research and development by one or more firms?

a.) Introduction

b.) Early growth c.) Late growth d.) Maturity

17. The net financial position of the majority of products at the introduction stage of the product life cycle is .

a.) positive

b.) negative

c.) predictable d.) constant

18. Which of the following is NOT one of the three types of barriers considered critical in forestalling competition from entering a newly developing market?

a.) Government-imposed b.) Product/market-specific

c.) Culture-specific

d.) Firm-driven

19. According to the text, the most common government-imposed barrier is                               . a.) a sanction

b.) an embargo c.) a quota

d.) a patent

20. Product-specific barriers are related to the product form and include all of the following EXCEPT: a.) Access to capital

b.) Access to human resources

c.) Patents

d.) Access to raw materials

21. Which of the following barriers consists of a drive for low costs that allows low prices and may deter competitor entry, as well as the development and exploitation of first-mover advantage? a.) Government-imposed

b.) Product/market-specific c.) Culture-specific

d.) Firm-driven

22. Low prices during introduction are typically termed                                     and the firm must accept low profit margins for a substantial time period.

a.) skimming pricing

b.) penetration pricing

c.) modified pricing

d.) mainstream pricing

23. Which of the following describes the theory where as accumulated volume in making, promoting, and distributing a product increases, cost can be made to decline in a predictable manner ?

a.) Experience curve

b.) Market domination c.) Absolute advantage

d.) Comparative advantage

24. According to the text, presence of the experience curve leads to two broad pricing options that include                                                   and                                     .

a.) structured pricing and skim pricing

b.) regulated pricing and penetration pricing

c.) penetration pricing and skim pricing

d.) skim pricing and regulated pricing

25. In                                      , prices stay high as costs are reduced, and the firm earns high margins for limited fixed investment.

a.) price penetration

b.) price skimming  c.) price structuring

d.) price regulations

26. Which of the following pricing strategies is viable if government and/or product-specific entry barriers are high, customer willingness to try is strong, and customers are relatively price insensitive?

e.) price penetration

f.) price skimming  g.) price structuring

h.) price regulations

27. If government and/or product-specific barriers are low and the market is price sensitive, which of the following pricing strategies would be most appropriate?

a.) Penetration pricing

b.) Skim pricing

c.) Structured pricing d.) Regulated pricing

28. Which of the following is not one of the four strategic options viable for a leader in the early growth stage of the product life cycle?

a.) Enhance position.

b.) All are viable strategic options.

c.) Maintain position.

d.) Retreat to a market segment.

29. Which of the following is NOT mentioned in the text as a basic option for follower firms in the early growth stage?

a.) Seek market leadership. b.) Settle for second place.

c.) Change the market culture.

d.) Exit the market

30. According to the text, the two broad options that are available to firms pursuing the leadership objective are                                     and                                     .

a.) concentration and imitation

b.) imitation and leapfrog

c.) innovation and concentration d.) divestment and imitation

31. A(n)                                       strategy means that the firm copies the leader, but is more effective in execution.

a.) innovation

b.) imitation

c.) concentration d.) divestment

32. The key feature of the                                    stage of the product life cycle is the potential for market segmentation that makes market research skills critical.

a.) introductory b.) early growth

c.) late growth

d.) maturity

33. Which of the following is NOT mentioned in the text as a type of barrier to growth that must be analyzed to determine if the life cycle is in maturity?

a.) Technology b.) Economic

c.) Cultural

d.) Behavioral

34. According to the text, all of the following are alternative approaches to increasing product use EXCEPT:

a.) Developing new product uses

b.) Increasing quantity per use occasion

c.) Design the product for infinite life span  d.) Make the product easier to use

35. Which of the following is NOT a pressure for over investment in mature products to gain market share from entrenched competitors?

a.) few alternative opportunities

b.) internally focused funding criteria

c.) politcal power of mature product champions

d.) fear of cannibalization

36. Which of the following is NOT a reason that firms underinvest in mature products? a.) Limited view of the competition

b.) Fear of cannibalization c.) Inertia

d.) Political power of mature-product champions

37.                                       means emphasizing increases in short-term cash flow at the expense of maintaining market share or sales volume.

a.) Segmenting b.) Concentrating

c.) Harvesting

d.) Maintaining

38. Which of the following is NOT mentioned in the text as an area that requires attention when a firm is implementing a slow harvest strategy?

a.) Minimize investment

b.) Modify culture

c.) Cut cost

d.) Raise price

39. According to the text, the three primary ways a follower firm can pursue growth with the possible objective of ultimately dethroning the leader include all of the following EXCEPT:

a.) Market segmentation b.) Kenneling

c.) Harvesting

d.) Direct attack

40. The concept that a follower firm may acquire several unprofitable or marginally profitable low market share products from other firms and develop a strong competitor is called

                                     .

a.) market segmentation b.) kenneling    c.) harvesting

d.) direct attack

41. Which of the following strategies is especially viable if the leader has been lazy, over-milking the product via underinvestment, or arrogant in serving customers inadequately?

a.) Market segmentation b.) Kenneling

c.) Harvesting

d.) Direct attack

42. According to the text, the two “continue” options for competing firms in the mature stage of the product life cycle are                                                       or                                      .

a.) harvest or rationalize

b.) harvest or maintain position

c.) maintain position or rationalize

d.) maintain position or kenneling

43.                                       requires a careful examination of all aspects of the business as well as tough decision-making to cut costs wherever possible to turn a loss into at least a marginal profit.

a.) Harvesting

b.) Rationalizing

c.) Maintaining d.) Kenneling

44. Which of the following describes the two broad options for a follower firm that chooses to exit an industry?

a.) Harvest or maintain b.) Maintain or liquidate

c.) Divest or liquidate

d.) Liquidate or harvest

45. According to the text, to                                     means selling the business to another organization. a.) harvest

b.) maintain

c.) divest

d.) liquidate

46. Which of the following means closing down and selling the assets of a business? a.) Harvest

b.) Maintain c.) Divest

d.) Liquidate

47. The                                       choice to exiting an industry requires that the firm solve a marketing problem by identifying the right customer for the business.

a.) harvest b.) maintain

c.) divest

d.) liquidate

48. The two strategic options of firms restructuring offers in fragmented mature markets are

                                      and                                     . a.) maintaining and divesting

b.) divesting and acquisition

c.) acquisition and standardization

d.) standardization and harvesting

49. According to the text,                                      is an especially favored strategy when the basis of fragmentation is geographic.

a.) standardization b.) direct entry

c.) acquisition

d.) harvesting

50. Which of the following strategies for firms competing in fragmented markets is described as a way to reduce variation and improve consistency across various suppliers?

a.) Standardization

b.) Direct entry c.) Acquisition d.) Harvesting

51. A useful way to conceptualize decline businesses is with the twin concepts of                                     

and                                     .

a.) market growth and market share

b.) market share and market hospitality

c.) market hospitality and business strengths

d.) business strengths and market growth

52. According to the text, a market may be viewed as inhospitable to decline if any of the following exists EXCEPT:

a.) The decline is rapid or uncertain. b.) The market is commodity-based.

c.) Competitors are viable and credible.

d.) Customer switching costs are high.

53. Markets in the decline stage of the product life cycle are particularly inhospitable if any of the following exist EXCEPT:

a.) Competitor exit barriers are low.

b.) Competitors are emotionally committed to the product

c.) The product is a part of a vertically integrated supply chain d.) Government pressures competitors to stay in business.

54. Which of the following is NOT mentioned in the text as a characteristic of a firm with good business strengths?

a.) They have low costs

b.) All selections represent good business strengths  c.) They have good raw material contracts.