CHAPTER 5

Most turnarounds require a firm to carefully analyze its relevant environments. The _______ analysis leads to identification of market segments or customer groups that may still find the product attractive. A. external B. internal C. global D. environmental

A

Tesco is saving 3 million USD a year alone in landfill taxes by simply sending its used cooking oil and chicken fat to be used to generate bioenergy rather than putting it in a landfill. This is an example of an overall cost leadership strategy because it A. gives them competitive advantage by reducing energy costs. B. gives them competitive advantage by decreasing productivity. C. eliminates the need to compete based on its products. D. requires the customer to recognize its efforts.

A

Which of the following is not a potential pitfall of an integrated overall low cost and differentiation strategy? A. Firms that target too large a market that causes unit costs to increase. B. Firms that underestimate the expenses associated with coordinating value-creating activities in the extended value chain. C. Firms that fail to attain both strategies may end up with neither and become stuck-in-the-middle. D. Firms that miscalculate sources of revenue and profit pools in the company industry.

A

Which of the following is FALSE regarding how a differentiation strategy can help a firm to improve its competitive position relative to the Porter five forces model? A. Firms will enjoy high customer loyalty. B. By increasing firm margins, it avoids the need for a low cost position. C. It reduces buyer power because buyers lack comparable alternatives. D. Supplier power is increased, because suppliers will be able to charge higher prices for their inputs.

D

Which of the following is not a potential pitfall of a focus strategy? A. Erosion of cost advantages can arise within the narrow segment. B. Product/service offerings that are highly focused are subject to competition from new entrants. C. Focusers can become too focused to satisfy buyer needs. D. All rivals share a common input or raw material.

D

Most turnarounds require a firm to carefully analyze its relevant environments. ________ analysis results in actions aimed at reduced costs and higher efficiency. A. External B. Internal C. Global D. Environmental

B

Outside the flight experience itself, airlines are generating revenue by charging fees for credit cards, frequent-flyer programs, and access to airport lounges. This serves to A. increase competition. B. expand the profit pool. C. provide better customer service. D. satisfy regulators.

B

Proctor and Gamble announced that it would sell off or close down up to 100 of its brands. This is an example of which turnaround strategy used by successful companies? A. asset and cost surgery B. selective product and market pruning C. piecemeal productivity improvements D. global expansion

B

Research has consistently shown that firms that achieve both cost leadership and differentiation advantages tend to perform A. at about the same level as firms that achieve either cost or differentiation advantages. B. higher than firms that achieve either a cost or a differentiation advantage. C. about the same as firms that are stuck-in-the-middle. D. lower than firms that achieve differentiation advantages but higher than firms that achieve cost advantages.

B

The Pepsi algorithm that permits it to lower out of stock inventory is a result of using A. purchasing patterns. B. data analytics. C. physical plant. D. flooding the market with ads.

B

The text discusses three approaches to combining overall cost leadership and differentiation competitive advantages. Which of the following is not one of these three approaches? A. automated and flexible manufacturing systems B. deriving benefits from highly focused and high technology markets C. exploiting the profit pool concept for competitive advantage D. coordinating the extended value chain by way of information technology

B

Underestimating expenses associated with coordinating value-creating activities in the extended value chain can be a result of ______ integration of cost leadership and differentiation. A. good B. poor C. intentional D. structured

B

A differentiation strategy enables a business to address the five competitive forces by A. having brand-loyal customers become more sensitive to prices. B. increasing economies of scale. C. providing protection against rivalry. D. serving a broader market segment.

C

A firm can achieve differentiation through all of the following means except A. improving brand image. B. better customer service. C. offering lower prices to frequent customers. D. adding additional product features.

C

A low-cost position provides _______ flexibility to cope with demands from powerful suppliers for input cost increases. A. less B. decreasing C. more D. no

C

A manufacturing business pursuing cost leadership is likely to A. focus on a narrow market segment. B. use advertising to build brand image. C. rely on experience effects to raise efficiency. D. put heavy emphasis on product engineering.

C

A market that mainly competes on the basis of price and has stagnant growth is characteristic of what life cycle stage? A. introduction B. growth C. maturity D. decline

C

An overall low-cost position protects a firm against rivalry from competitors, because _________ allow a firm to earn returns even if its competitors eroded their profits through intense rivalry. A. higher costs B. higher prices C. lower costs D. lower prices

C

Anderson Windows lowered costs, enhanced quality and variety, and improved its response time to customers by A. creating a new paper-based catalog. B. creating an interactive computer version of its paper catalogs. C. creating an integrated computer system of catalogs, products, orders, and manufacturing. D. creating a manufacturing system for ordering parts.

C

Barnes and Noble lost its market share in book retailing to Amazon. It tried to regain market share by offering a similar electronic reader, the Nook, to the Amazon Kindle series. This demonstrates that Barnes and Noble lacked A. a short term strategy. B. a company-wide strategy. C. sustainable competitive advantage. D. good suppliers.

C

Support value chain activities that involve excellent applications engineering support (technology development) and facilities that promote a positive firm image (firm infrastructure) characterize which generic strategy? A. overall cost leadership B. differentiation focus C. differentiation D. stuck-in-the middle

C

Atlas Door created competitive advantages in overall low cost and differentiation by creating ___________ among value-chain activities. A. substitutes B. advantages C. disadvantages D. linkages

D

By separating the value of the actual flight from the services associated with flying, airlines have greatly expanded the __________ associated with flying. A. costs B. services C. profit pool D. difficulties

C

Convincing rivals not to enter a price war, protection from customer pressure to lower prices, and the ability to better withstand cost increases from suppliers characterize which type of competitive strategy? A. differentiation B. overall low-cost leadership C. differentiation focus D. cost leadership focus

B

Many firms have achieved success by integrating activities throughout the extended value chain by using _______ to link their own value chain with the value chains of their customers and suppliers. A. customization B. information technology C. human resources D. competitive advantage

B

Renault has found a way to generate high profits on low-priced cards by using simple designs that incorporate components from older car designs and a no-discount retail policy. They are using a(n) ______________ strategy. A. differentiation B. overall cost leadership C. focus D. broad differentiation

B

Rivals would find it difficult to challenge Atlas Door in the short run because of A. weak customer loyalty. B. high barriers to entry. C. high threat of substitution. D. low buyer switching costs.

B

As markets mature, A. costs continue to increase. B. application for patents increase. C. differentiation opportunities increase. D. there is increasing emphasis on efficiency.

D

Atlas Door could lose competitive advantage for all of the following reasons except A. Its technologies are non-proprietary. B. A rival could hire away its talents easily. C. A new rival with a strong resource base could undercut its prices. D. It has strong power over its distributors.

D

In the __________ stage of the industry life cycle, there are many segments, competition is very intense, and the emphasis on process design is high. A. growth B. introduction C. decline D. maturity

D

Which of the following is not a reason for the successful turnaround HSN experienced by 2014 under CEO Mindy Grossman? A. engaging stakeholders in the discussion B. redesigning the employee lineup C. redesigning the company offerings D. making all best efforts to offer something for everyone

D

With experience, unit costs of production decline as _________ increases in most industries. A. costs B. volume C. price D. output

D

A risk for a firm that tries to attain both cost and differentiation advantages is that it can be stuck in the middle. An example of this is supermarkets because their _____ structure is _____ than discount retailers and customers do not value their products and services as being high-end such as those offered by Whole Foods. A. cost; higher B. price; higher C. price; lower D. cost; lower

A

A firm following a focus strategy must focus on A. governmental regulations. B. a market segment or group of segments. C. rising cost of inputs. D. avoiding entering international markets.

B

A low-cost position permits buyers to exert power to drive ____ prices only to the level of the next most efficient producer. A. up B. down C. increasing D. decreasing

B

An overall ______ position enables a firm to achieve above-average returns because it protects firms against powerful buyers. A. differentiation B. low-cost C. focused D. high-cost

B

Corporations increasingly collect and analyze data on their customers. This is known as A. profit analysis. B. big data. C. cost reduction. D. automated analysis.

B

The primary aim of strategic management at the business level is A. maximizing risk-return tradeoffs through diversification. B. achieving competitive advantage. C. maximizing differentiation of products and/or services. D. achieving a low cost position.

B

A __________ can be defined as the total profits in an industry at all points along the industry value chain. A. profit maximizer B. revenue enhancer C. profit pool D. profit outsourcing

C

A business that strives for a low-cost advantage must attain a(n) _______ cost advantage over rivals. A. relative B. evolutionary C. absolute D. potential

C

Which of the following is most often true of mature markets? A. Some competitors enjoy a significant operating advantage due to increasing experience effects. B. The market supports premium pricing, which attracts additional competitors. C. Advantages that cannot be duplicated by other competitors are difficult to achieve. D. The magnitude of pricing differences and product differentiation is larger than in the growth stage.

C

Which of the following is not a potential pitfall of a differentiation strategy? A. Uniqueness that is not valuable. B. The price premium is too high. C. All rivals share a common input or raw material. D. Perceptions of differentiation may vary between buyers and sellers.

C

An overall low-cost position enables a firm to achieve ______ returns despite strong competition. A. below average B. average C. no D. above average

D

Which of the following statements about the introduction stage of the market life cycle is true? A. It produces relatively large, positive cash flows. B. Strong brand recognition seldom serves as an important switching cost. C. Market share gains by pioneers are usually easily sustained for many years. D. Products offered by pioneers may be perceived as differentiated because they are new.

D

Which of these statements regarding the industry life cycle is true? A. Partial power of the market life cycle is its ability to serve as a short-run forecasting device. B. Trends suggested by the market life cycle model are generally not reversible or repeatable. C. It points out the need to maintain a differentiation advantage and a low cost advantage. D. It has important implications for company generic strategies, functional areas, value-creating activities, and overall objectives.

D

In evaluating the sustainability of the Atlas Door competitive advantages over the long run, it is important to evaluate the ability of rivals to A. easily imitate its strategy. B. communicate with its customers. C. consistently overprice their products. D. find new suppliers.

A

Which statement regarding competitive advantages is true? A. With an overall cost leadership strategy, firms need not be concerned with parity on differentiation. B. In the long run, a business with one or more competitive advantages is probably destined to earn normal profits. C. If several competitors pursue similar differentiation tactics, they may all be perceived as equals in the mind of the consumer. D. Attaining multiple types of competitive advantage is a recipe for failure.

C

Company competitive advantages can be eroded by all of the following except A. rapid changes in technology. B. globalization. C. actions by rivals within the industry. D. actions by workers outside of the industry.

D

At one CVS drugstore, a four-pack of Energizer AA batteries was on sale at 2.99 USD compared with a Duracell four-pack at 4.59 USD. The Duracell market share dropped 2 percent in a recent two-year period, and its profits declined over 30 percent. Why did this happen? A. The price differential was too high. B. The market for batteries is saturated. C. The customer perceived the products to be different. D. There are valid alternatives for batteries.

A

Atlas Door created competitive advantage by reducing the time to receive and process an order and through installing a just-in-time logistics operation. Which of the following is not a reason for their favorable position relative to the five forces of industry competition? A. The service was easily imitable. B. It created high entry barriers for new entrants. C. The integration of many company value-chain activities provided causal ambiguity and path dependency. D. It exerted power over its customers.

A

Atlas Door relies on technologies that are rather well known and non-proprietary. This opens it up to the potential of A. imitation by rivals. B. customer abandonment. C. increased supplier power. D. government regulation.

A

Dell lost its competitive advantage starting in 2007 because it A. did not deliver innovations to respond to changing market demand. B. developed a highly performant just-in-time delivery system. C. did not reward its employees. D. let suppliers have dominant power.

A

Atlas Door tightly controlled logistics so that it always shipped only fully complete orders to construction sites. In regards to the five forces model, which of the following is a reason this might give them competitive advantage? A. It helps to reduce the threat of new entrants. B. It created low entry barriers for new entrants. C. It created a high threat of substitution. D. It gave more power to buyers.

A

Global logistics firms such as DHL Supply Chain and Global Forwarding or C. H. Robinson Worldwide compete using an overall cost leadership strategy in primary activities such as A. effective layout of receiving dock operations. B. effective use of automated technology to reduce scrappage rates. C. minimize costs associated with employee turnover through effective policies. D. standardized accounting practices to minimize personnel required.

A

Outright sales or sale and leaseback free up considerable cash and improve returns. This is an example of which turnaround strategy used by successful companies? A. asset and cost surgery B. selective product and market pruning C. piecemeal productivity improvements D. global expansion

A

Rivals would find it difficult to challenge Atlas Door in the short run because of A. strong customer loyalty. B. low barriers to entry. C. high threat of substitution. D. low buyer switching costs.

A

Southwest Airlines uses an overall cost leadership strategy. This could fail if it A. cannot maintain parity on differentiation dimensions requested by customers. B. maintains parity with competitors on low cost. C. exceeds customer expectations. D. increases its sales prices while maintaining competitor parity.

A

The factors that lead to a low-cost position also provide a substantial ____ barriers position with respect to _______ products introduced by new and existing competitors. A. entry; substitute B. exit; primary C. product; substitute D. entry; primary

A

The growth stage of the industry life cycle is characterized by A. in-kind competition (from the same type of product). B. premium pricing. C. a growing trend to compete on the basis of price. D. retaliation by competitors whose customers are stolen.

A

Which of the following is a risk (or potential pitfall) of cost leadership? A. Cost cutting may lead to the loss of desirable features. B. Attempts to stay ahead of the competition may lead to gold plating. C. Cost differences increase as the market matures. D. Producers are more able to withstand increases in supplier costs.

A

Improving business processes by reengineering them, benchmarking specific activities against industry leaders, encouraging employee input to identify excess costs, increasing capacity utilization, and improving employee productivity lead to a significant overall gain. These are examples of which turnaround strategy used by successful companies? A. asset and cost surgery B. selective product and market pruning C. piecemeal productivity improvements D. global expansion

C

In a given market, key technology no longer has patent protection, experience is not an advantage, and there is a growing need to compete on price. What stage of its life cycle is the market in? A. introduction B. growth C. maturity D. decline

C

In the __________ stage of the industry life cycle, the emphasis on product design is very high, the intensity of competition is low, and the market growth rate is low. A. growth B. maturity C. introduction D. decline

C

In the __________ stage of the industry life cycle, there are few segments, the emphasis on process design is low, and the major functional areas of concern are general management and finance. A. introduction B. growth C. decline D. maturity

C

One aspect of using a cost leadership strategy is that experience effects may lead to lower costs. Experience effects are achieved by A. spreading out a given expense or investment over a greater volume. B. hiring more experienced personnel. C. repeating a process until a task becomes easier. D. competing in an industry for a long time.

C

Overhead costs associated with the number of layers of management in a firm are part of the _________ activities of the value chain. A. human resources management B. operations C. firm infrastructure D. marketing and sales

C

Porsche has enhanced power over buyers because its strong reputation makes buyers more willing to pay a premium price. This ______ rivalry, since buyers become _____ price-sensitive. A. increases; more B. lessens; more C. lessens; less D. increases; less

C

The size of pricing and differentiation advantages between competitors decreases in which stage of the market life cycle? A. introduction B. growth C. maturity D. decline

C

High product differentiation is generally accompanied by A. higher market share. B. higher profit margins and lower costs. C. significant economies of scale. D. decreased emphasis on competition based on price.

D

Mass customization permits companies to manufacture unique products in relatively _________ quantities at ______ costs. A. large; higher B. large; lower C. small; higher D. small; lower

D

Piecemeal productivity improvements during a turnaround typically do not involve A. business process reengineering. B. increased capacity utilization. C. benchmarking. D. expansion of company product market scope.

D

Primary value chain activities that involve the effective layout of receiving dock operations (inbound logistics) and support value chain activities that include expertise in process engineering (technology development) characterize which generic strategy? A. differentiation B. differentiation focus C. stuck-in-the-middle D. overall cost leadership

D

Research shows that which one of the following is not a strategy used by firms engaged in successful turnarounds? A. asset and cost surgery B. selective product and market pruning C. piecemeal productivity improvements D. global expansion

D

The most likely time to pursue a harvest strategy is in a situation of A. high growth. B. strong competitive advantage. C. mergers and acquisitions. D. decline.

D

Which of the following is not a reason for the possible erosion of company competitive advantage? A. rapid change in technology B. globalization C. actions by rivals from within and outside of the industry D. company commitment to innovation

D