11．Mary Smith, a Level 2 CFA candidate, was recently hired for an analyst position at The Bank of Ireland. Her first assignment is to examine the competitive strategies employed by various French wineries. Smith is eager to impress her boss, Ron VanDreisen, and has taken care to make sure she is following the CFA Institute Standards of Practice when writing her research report.
Smith’s report identifies four wineries that are the major players in the French wine industry. Key characteristics of each are cited below in Figure 1.
Figure 1: Characteristics of Four Major French Wineries
| South | North | East | West |
Founding Date | 1750 | 1903 | 1812 | 1947 |
Generic Competitive Strategy | ? | Cost | Cost | Cost |
Major Customer Market | France | France | England | USA |
Production Site | France | France | France | France |
In the body of Smith’s report, she includes a discussion of the competitive structure of the French wine industry. She notes that over the past five years, the French wine industry has not responded to changing consumer tastes. Profit margins have declined steadily and the number of firms representing the industry has decreased from 10 to 4. It appears that participants in the French wine industry must consolidate in order to survive.
Smith’s report notes that French consumers have strong bargaining power over the industry. She supports this conclusion with five key points.
Bargaining Power of Buyers
§ Many consumers are drinking more beer than wine with meals and at social occasions.
§ Increasing sales over the internet have allowed consumers to better research the wines, read opinions from other customers, and identify which producers have the best prices.
§ The French wine industry is consolidating and consists of only 4 wineries today compared to 10 wineries five years ago.
§ Over 65 percent of the business for the French wine industry consists of purchases from restaurants. Restaurants typically make purchases in bulk, buying 4 to 5 cases of wine at a time.
§ Land where the soil is fertile enough to grow grapes necessary for the wine production process is scarce in France.
After completing the first draft of her report, Smith takes it to VanDriesen to review. VanDriesen tells her that he is a wine connoisseur himself, and often makes purchases from the South Winery. Smith tells VanDriesen, “In my report I have classified the South Winery as a stuck-in-the-middle firm. It tries to be a cost leader by selling its wine at a price that is slightly below the other firms, but it also tries to differentiate itself from its competitors by producing wine in bottles with curved necks, which increases its cost structure. The end result is that the South Winery’s profit margin gets squeezed from both sides. VanDriesen replies, “I have met members of the management team from the South Winery at a couple of the wine conventions I have attended. I believe that the South Winery could succeed at being at both a cost leadership and a differentiation strategy if they separated its operations into distinct operating units, with each unit pursuing a different competitive strategy.” Smith makes a note to do more research on generic competitive strategies to verify VanDriesen’s assertions before publishing the final draft of her report.
If the French home currency were to greatly appreciate in value compared to the English currency, what is the likely impact on the East Winery?
A) Make the firm more competitive in the English market.
B) No impact since the base of operations for East Winery is France, not England.
C) Make the firm less competitive in the English market.
D) No impact since the major market for East Winery is England, not France.
12．Smith would categorize the French wine industry into which of the following life cycle phases?
A) Decline Phase.
B) Pioneer Phase.
C) Mature Phase.
D) Growth Phase.
13．VanDriesen tells Smith that he likes the fact that the conclusions in her report are backed up with facts, but tells her that he is concerned about the section concerning the Bargaining Power of Buyers. He says that while all of the points she listed may be factual, they do not all support her conclusion. Which of Smith’s points support the conclusion that consumers have strong bargaining power over the industry?
A) Points 2, 3, and 4.
B) Points 1, 2, and 5.
C) Points 2 and 4.
D) Points 1, 2, and 4.
14．Smith notes in her report that the West Winery might differentiate its wine product on attributes that buyers perceive to be important. Which of the following attributes would be the most likely area of focus for the West Winery to create a differentiated product?
A) The price of the product.
B) The method of delivery for the product.
C) The production costs of the product.
D) A focus on customers aged 30 to 45.
15．Regarding the statements made about the competitive strategy of the South Winery:
A) Smith’s statement is incorrect, VanDriesen’s statement is incorrect.
B) Smith’s statement is correct, VanDriesen’s statement is correct.
C) Smith’s statement is correct, VanDriesen’s statement is incorrect.
D) Smith’s statement is incorrect, VanDriesen’s statement is correct.
16．Smith knows that a firm’s generic strategy should be the centerpiece of a firm’s strategic plan. Based on a compilation of research and documents, Smith makes four observations about the North Winery and their strategic planning process.
1. North Winery’s price and cost forecasts account for future changes in the structure of the French wine industry.
2. North Winery places each of its business units into one of three categories: build, hold, or harvest.
3. North Winery uses market share as the key measure of their competitive position.
Which observation(s) do NOT support the conclusion that the North Winery’s strategic planning process is guided and informed by their generic competitive strategy?
A) Observation 2.
B) Observations 2 and 3.
C) Observations 1 and 3.
D) Observations 1 and 2.
答案和详解如下：
11．Mary Smith, a Level 2 CFA candidate, was recently hired for an analyst position at The Bank of Ireland. Her first assignment is to examine the competitive strategies employed by various French wineries. Smith is eager to impress her boss, Ron VanDreisen, and has taken care to make sure she is following the CFA Institute Standards of Practice when writing her research report.
Smith’s report identifies four wineries that are the major players in the French wine industry. Key characteristics of each are cited below in Figure 1.
Figure 1: Characteristics of Four Major French Wineries
| South | North | East | West |
Founding Date | 1750 | 1903 | 1812 | 1947 |
Generic Competitive Strategy | ? | Cost | Cost | Cost |
Major Customer Market | France | France | England | USA |
Production Site | France | France | France | France |
In the body of Smith’s report, she includes a discussion of the competitive structure of the French wine industry. She notes that over the past five years, the French wine industry has not responded to changing consumer tastes. Profit margins have declined steadily and the number of firms representing the industry has decreased from 10 to 4. It appears that participants in the French wine industry must consolidate in order to survive.
Smith’s report notes that French consumers have strong bargaining power over the industry. She supports this conclusion with five key points.
Bargaining Power of Buyers
§ Many consumers are drinking more beer than wine with meals and at social occasions.
§ Increasing sales over the internet have allowed consumers to better research the wines, read opinions from other customers, and identify which producers have the best prices.
§ The French wine industry is consolidating and consists of only 4 wineries today compared to 10 wineries five years ago.
§ Over 65 percent of the business for the French wine industry consists of purchases from restaurants. Restaurants typically make purchases in bulk, buying 4 to 5 cases of wine at a time.
§ Land where the soil is fertile enough to grow grapes necessary for the wine production process is scarce in France.
After completing the first draft of her report, Smith takes it to VanDriesen to review. VanDriesen tells her that he is a wine connoisseur himself, and often makes purchases from the South Winery. Smith tells VanDriesen, “In my report I have classified the South Winery as a stuck-in-the-middle firm. It tries to be a cost leader by selling its wine at a price that is slightly below the other firms, but it also tries to differentiate itself from its competitors by producing wine in bottles with curved necks, which increases its cost structure. The end result is that the South Winery’s profit margin gets squeezed from both sides. VanDriesen replies, “I have met members of the management team from the South Winery at a couple of the wine conventions I have attended. I believe that the South Winery could succeed at being at both a cost leadership and a differentiation strategy if they separated its operations into distinct operating units, with each unit pursuing a different competitive strategy.” Smith makes a note to do more research on generic competitive strategies to verify VanDriesen’s assertions before publishing the final draft of her report.
If the French home currency were to greatly appreciate in value compared to the English currency, what is the likely impact on the East Winery?
A) Make the firm more competitive in the English market.
B) No impact since the base of operations for East Winery is France, not England.
C) Make the firm less competitive in the English market.
D) No impact since the major market for East Winery is England, not France.
The correct answer was C)
Foreign exchange rates can significantly affect the competitiveness and profitability for a given industry. For industries that derive a significant proportion of sales via exports, an appreciating currency is usually bad news because it makes the industry less competitive in the overseas market. In this case, the appreciating French currency makes French imports more expensive in England.
12．Smith would categorize the French wine industry into which of the following life cycle phases?
A) Decline Phase.
B) Pioneer Phase.
C) Mature Phase.
D) Growth Phase.
The correct answer was A)
The decline life cycle phase has the following characteristics:
§ shifting tastes or technologies have overtaken the industry
§ a decline in demand
§ lower profit margins
§ participants must either consolidate, reinvent themselves, or fail
13．VanDriesen tells Smith that he likes the fact that the conclusions in her report are backed up with facts, but tells her that he is concerned about the section concerning the Bargaining Power of Buyers. He says that while all of the points she listed may be factual, they do not all support her conclusion. Which of Smith’s points support the conclusion that consumers have strong bargaining power over the industry?
A) Points 2, 3, and 4.
B) Points 1, 2, and 5.
C) Points 2 and 4.
D) Points 1, 2, and 4.
The correct answer was D)
Determinants of buyer power include buyer concentration, buyer volume, buyer information, available substitutes, switching costs, brand identity, and product differences. Point 1 addresses available substitutes, Point 2 addresses buyer information, and Point 4 addresses buyer and buyer concentration. Point 3, which addresses the number of competitors in the industry and Point 5, which addresses barriers to entry, may be factual statements but do not support the conclusion that consumers have strong bargaining power.
14．Smith notes in her report that the West Winery might differentiate its wine product on attributes that buyers perceive to be important. Which of the following attributes would be the most likely area of focus for the West Winery to create a differentiated product?
A) The price of the product.
B) The method of delivery for the product.
C) The production costs of the product.
D) A focus on customers aged 30 to 45.
The correct answer was B)
Product differentiation can be based on the product itself, the method of delivery, or the marketing approach.
15．Regarding the statements made about the competitive strategy of the South Winery:
A) Smith’s statement is incorrect, VanDriesen’s statement is incorrect.
B) Smith’s statement is correct, VanDriesen’s statement is correct.
C) Smith’s statement is correct, VanDriesen’s statement is incorrect.
D) Smith’s statement is incorrect, VanDriesen’s statement is correct.
The correct answer was B)
A 'stuck in the middle' firm is one that tries to attain both cost leadership and product differentiation and fails. Such firms compete at a disadvantage to those that have achieved cost leadership or differentiation. Smith’s explanation correctly identifies a “stuck in the middle” firm and the issues such a firm faces. VanDriesen’s statement is also correct. A firm can achieve both cost leadership and product differentiation if it operates separate and distinct operating units with each pursuing a different strategy.
16．Smith knows that a firm’s generic strategy should be the centerpiece of a firm’s strategic plan. Based on a compilation of research and documents, Smith makes four observations about the North Winery and their strategic planning process.
1. North Winery’s price and cost forecasts account for future changes in the structure of the French wine industry.
2. North Winery places each of its business units into one of three categories: build, hold, or harvest.
3. North Winery uses market share as the key measure of their competitive position.
Which observation(s) do NOT support the conclusion that the North Winery’s strategic planning process is guided and informed by their generic competitive strategy?
A) Observation 2.
B) Observations 2 and 3.
C) Observations 1 and 3.
D) Observations 1 and 2.
The correct answer was B)
A firm that fails to allow their strategic planning process to be guided by their generic competitive strategy usually makes one or more of the following four mistakes:
1. The strategic plan is a list of unrelated action items that does not lead to a sustainable competitive advantage.
2. Price and cost forecasts are based on current market conditions and fail to take into account how industry structure will influence future long-term industry profitability.
3. Business units are placed into categories such as build, hold, and harvest, with the business failing to realize that these are not business strategies, but rather the means to achieve the strategy.
4. The firm focuses on market share as a measure of competitive position, failing to realize that market share is the result and not the cause of a sustainable competitive advantage.
Smith’s observations 2 and 3 describe two of these mistakes and therefore do not support the conclusion that the North Winery’s strategic planning process is guided and informed by their generic competitive strategy.
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