Competitive Strategy - I hate this stuff

Good luck. I NEVER get these questions right. Medley International, Inc. (Medley) is a conglomerate business who has seen its profit margins deteriorate in the last several years. To help increase profitability, it has decided to abandon its approach of cost leadership in all business lines and instead use the most appropriate competitive strategy for each business line. Listed below is a brief description of Medley’s six business divisions. Restaurant Services Medley is a recycler of food processing by-products. It collects and recycles animal processing by-products, and used cooking oil from food service establishments. It processes materials, at 5 facilities located along the east coast of the United States, into finished products such as tallow, protein, and yellow grease. Rendering consists of the collection and processing of animal by-products from butcher shops, grocery stores, independent meat and poultry processors, converting these wastes into similar products such as useable oils and proteins, soaps, pet foods, and livestock feed that it sells to large distributors servicing agricultural and oleo-chemical industries. This segment represented 66.4 percent of net external sales for the restaurant services division during the most recent fiscal year. The collection of used cooking oils from food service establishments and recycling them into similar products such as high-energy animal feed ingredients and industrial oils accounted for the remaining net external sales in the most recent fiscal year for the restaurant services division. Technology Equipment Medley also is a manufacturer of high-performance engineered materials serving the global telecommunications and computer, optical media, automotive electronics, industrial components, aerospace and defense, and appliance markets. Alloy Products, comprises the largest unit within the technology equipment division. It manufactures and sells copper and nickel-based alloy systems, the majority of which also contains beryllium. These products are metallurgically tailored to meet specific customer performance requirements. They are used in plastic tooling and heavy equipment product applications. Medley has recently gone on-line with its fourth production facility following the opening of its third major factory only two years earlier and the refurbishing of its other two production facilities over a five-year period. The new factory is best described as a state of the art plant able to deal equally well with long production runs and with short runs due to its flexible set up that significantly reduces retooling time. Medley now maintains operations in North America, South America, Europe, and East Asia. Financial Services Medley’s financial services division has operations in two business segments: Commercial Banking and Trust and Asset Management. The Commercial Banking segment provides lending, business checking and deposits, cash management, merchant card services, and other traditional and e-commerce commercial banking services to large customers. Medley conducts business in 30 locations throughout northern Indiana and south-central Missouri. Medley provides commercial banking and related financial services at attractive prices to a limited range of large customers. In recent years it has developed a loyal customer base by demonstrating its willingness to go the extra mile to ensure customer satisfaction. TheTrust and Asset Management segment provides trust, investment management, and employee benefit recordkeeping and administration, and brokerage services. Many commercial banking clients also subscribe to the Medley’s Trust and Asset Management services. Customers can get real-time stock market quotes and investment account information and place trades 24 hours a day, 7 days a week. Prices are among the most competitive in the industry. Aerospace and Defense Medley is a specialized manufacturer serving aerospace and defense customers. It operates this division in three segments: Avionics and Controls, Sensors and Systems, and Advanced Materials. The Avionics and Controls segment designs and manufactures technology interface systems for military and commercial aircraft and land- and sea-based military vehicles, secure communications systems, specialized medical equipment, and other industrial applications. The Sensors and Systems segment produces high-precision temperature and pressure sensors, fluid control components, micro-motors, motion control sensors, and other related systems, principally for aerospace and defense customers. The Advanced Materials segment develops and manufactures high-performance elastomer products used in a range of commercial aerospace and military applications and combustible ordnance components and electronic warfare countermeasure devices for military customers. Medley’s proprietary products meet critical operational requirements and provide customers with technological advantages in such areas as night vision compatibility and backlighting for active-matrix liquid-crystal displays. It has sales offices in 32 countries around the world and deals with the who’s who of the aerospace and defense industry. Retail Services Medley is engaged in the business of providing general merchandise and retail health services, through two main business segments. One segment consists of a multi-department retailer located primarily in mid-size and larger communities. The retail stores are committed to offering merchandise, services, and value to meet customers’ needs for home, family basics, casual apparel, and seasonal products, along with a special emphasis on retail health through its in-store pharmacies and optical centers. As of the most recent fiscal year, Medley had 98 retail stores operating in 11 Midwest, Pacific Northwest, and Western Mountain states. Its other retail segment is a general merchandise retailer, which serves smaller and more rural communities, offering a convenient, one-stop shopping format. Stores are designed for simplicity, speed and ease of the shopping experience. This segment operates at 10 locations in 9 Midwest, North Central and Rocky Mountain states. Computer Networking Medley’s computer networking division has been operating since 1974 and provides multi-capable storage network solutions that enable end customers worldwide to better consolidate and utilize their storage infrastructure, manage the storage network and implement business continuance solutions. Its solutions include hardware and software products, professional services, and education that enable businesses to scale their operations globally. In August, 2003, Medley acquired a provider of native Internet protocol (IP) storage switching solutions that builds open storage networking products based on IP and Ethernet, both international networking standards. Later in 2003, Medley acquired a producer of intelligent director class switching platform technologies. It provides customers with solutions that solve customer problems such as consolidation and data protection allowing the customers to focus on their business mission with the assurance of high availability and functionality. Medley does business with the leaders in the industry who recognize that higher quality comes with higher prices. The competitive strategy that best applies to Medley’s restaurant services division is: A) cost leadership. B) differentiation. C) cost focus. D) differentiation focus The competitive strategy that best applies to Medley’s technology equipment business is: A) cost leadership. B) differentiation. C) cost focus. D) differentiation focus. The competitive strategy that best applies to Medley’s financial services division is: A) cost leadership. B) differentiation. C) cost focus. D) differentiation focus. The competitive strategy that best applies to Medley’s aerospace and defense division is: A) differentiation. B) cost leadership. C) cost focus. D) differentiation focus. The competitive strategy that best applies to Medley’s retail services business is: A) cost leadership. B) cost focus. C) differentiation. D) differentiation focus. The competitive strategy that best applies to Medley computer networking division is: A) differentiation. B) cost leadership. C) cost focus. D) differentiation focus

Angry with the explanations I am. I am sure to feck these questons up. Is this even finance? Why does the CFA love these questions. They were on the exam the last two years.

sometimes these q’s are easy if they’re glaringly obvious, but yeah, i’m with you here- these suck and are making me go back and forth. here goes (i bet i go 3 for 6)- A- says many products, can’t imagine there would be that much differentiation or higher quality in recycled byproducts, no? B- you make tailored stuff so diff but lots of diff things so no focus? each seems focused though, so maybe this is diff focus. C- attractive px makes me lean cost and limited customers makes me think focus D- specialized, customized makes me think focus A- lots of locations, low cost A- higher quality/higher px’s so diff but then has enough divisions i’d go general not focus.

This gotta be the post of the day mate!!! This stuff is soooo dammm difficult, I read the vignette twice, still no luck with the answers. If this is a past-CFAI-question, then I am sure the messup a 6-part vignette Anyways, if the guess have to be made… they have to be made. Here they go! 1. A 2. D 3. B 4. A 5. B 6. A

I agree with dinesh on the first three. I couldn’t go any further.

OK who wants to dive into each of these. Your input especially on the first two are welcome as this is VERY likely to rape us on the exam. The competitive strategy that best applies to Medley’s restaurant services division is: A) cost leadership. B) differentiation. C) cost focus. D) differentiation focus. Your answer: A was incorrect. The correct answer was D) differentiation focus. “Medley’s restaurant services division operates to a large degree in a limited geographical area along the eastern coast of the U.S. It attempts to differentiate itself through its choice of a limited range of products and through its target market comprised of large distributors who service several specific industrial sectors.” OK I was a little confused by the focus. If you opearate in the WHOLE east coast that doesn’t seem to be a focus. That’s a pretty large area. So what is a focus and what is not. Do you have to service the entire US or World to not be a focus strategy? Seriously I don’t know. And how is this differentiation. There is no mention of competitors. How am I supposed to know if they’re gaining competitve advantage through low cost or differentiation without any mention of others in their industry. Argh! -------------------------------------------------------------------------------- The competitive strategy that best applies to Medley’s technology equipment business is: A) cost leadership. B) differentiation. C) cost focus. D) differentiation focus. Your answer: B was incorrect. The correct answer was A) cost leadership. “Cost leadership seems to be the main strategy here as the Medley has extensive operations on 4 continents. Additionally, in an effort to become the industry’s cost leader, it has invested substantial sums of money in recent years to become more efficient by modernizing and upgrading its main production facilities.” OK the focus part is easy. Worldwide. Case closed. But couldn’t this be differentiation? It uses this line “These products are metallurgically tailored to meet specific customer performance requirements.” If a product is made to specific customer needs is this not differentiation? -------------------------------------------------------------------------------- The competitive strategy that best applies to Medley’s financial services division is: A) cost leadership. B) differentiation. C) cost focus. D) differentiation focus. Your answer: C was correct! “Medley’s financial services business operates in a narrow geographic region and seeks a competitive advantage by locating its facilities in order to be close to most of its customers. Medley has also made a conscious decision to specialize in several key areas of the financial services sector while avoiding sectors that have strong price competition such as mortgage lending.” Got this one. Specific region with “Prices are among the most competitive in the industry.” Not pissed. -------------------------------------------------------------------------------- The competitive strategy that best applies to Medley’s aerospace and defense division is: A) differentiation. B) cost leadership. C) cost focus. D) differentiation focus. Your answer: D was incorrect. The correct answer was A) differentiation. "Differentiation seems to be the predominant strategy here. The fact that this business operates in 32 countries worldwide coupled with their specialized range of products seems to make this strategy appear to be fairly obvious. " This makes sense. Honest error. Worldwide production. Specialized range of products. -------------------------------------------------------------------------------- The competitive strategy that best applies to Medley’s retail services business is: A) cost leadership. B) cost focus. C) differentiation. D) differentiation focus. Your answer: B was correct! “Medley sells its products in a limited area. Medley therefore has a narrow scope. It is attempting to be the cost leader in the industry by positioning its stores in convenient locations in a limited number of states so that it is readily accessible to its core customers.” Also makes sense. General product in specific region. -------------------------------------------------------------------------------- The competitive strategy that best applies to Medley computer networking division is: A) differentiation. B) cost leadership. C) cost focus. D) differentiation focus. Your answer: D was incorrect. The correct answer was A) differentiation. "Medley’s computer networking division is well-established and operates on a broad basis. It attempts to differentiate itself from competitors by offering higher quality products and services at higher prices. Medley has been successful in creating the impression that they offer value. " This also makes sense. It was a worldwide market.

2 for 6… sweet. i am officially helping bring the average down on this test for everyone. the last 4 I feel ok with their answers. the first 2… especially the 1st one, that literally is recycled garbage. how on earth can it be differentiation- it mentions nada about competitors, i took east coast and multiple locations to be the more broad one, seems schweser thinks if you’re anything less than at least all of the US or international, you’re focused. i don’t know where that line is supposed to be drawn. i was with you also on the 2nd one pink. i took tailored to specific client needs to be a dead giveaway for differentiation. you said these have been on past tests also- have they been this grey or is it pretty black and white? if they want to hammer home the concept, you’d think they’d ask one where there really is no room for interpretation. at least a few of these ones above are arguable.

I also got 2 out of 6…that really helps going into a full day of studying

2 out of 6 for me too!

2 out of 6 for me too! and i actually opened up the CFAI for this one :frowning:

YO STRAIGHT UP. IM ALWAYS WRONG IN THIS SECTION THANK GOD IM NOT THE ONLY 1 1LUV

LOL, 2 for 6 as well, and mine were completely different than most others answers… you realize 2 for 6 is the closest to 25% which is pure randomness. and yes, i hate these questions/section too.

Maybe we can all just screw these up and the CFAI will adjust the minimum passing score down…we can always dream.

BTW, is that schweser, CFA or other? i love schweser’s summaries, but the wording is starting to frustrate me. too many wrong answers when i understood the concept but their wording seemed really strange.

sorry jumping in a bit late…but i hate these too and I didn’t get a chance to work them out earlier… anyway…i got 4 out of 6…have no idea how!!! some lucky guesses for sure…haven’t even looked at the reasoning yet…am scared to see it! good question though…and having sat through L2 once I can say that these ARE the kind of questions the put on the exam…it sucks…

DOH! (in homers voice)