Strategic Management Chapter 4

________ are said to exist when the increase in firm size (measured in terms of volume of production) are associated with lower costs (measured in terms of average costs per unit of production).

Economies of scale

________ focus(es) on the relationship between the volume of production at a given point in time and average unit costs, the ________ focus(es) on the relationship between the cumulative volume of production and average unit costs.

Economies of scale; learning curve

The only person in a functional organization who has to have a multifunctional perspective is the

CEO.

________ are any supplies used by a firm in conducting its business activities.

Productive inputs

The best example of a firm following a cost-leadership business strategy is

Ryanair.

Which of the following statements regarding the learning curve and economies of scale is accurate?

Where diseconomies of scale are presumed to exist if a firm gets too large, there is no corresponding increase in costs in the learning-curve model as the cumulative volume of production grows.

Which of the following compensation policies is most likely to enhance a firm's ability to pursue a low-cost strategy?

awarding employees bonuses that are equal to 50% of the total cost savings achieved based on employee suggestions and initiatives

Actions that firms take to gain competitive advantage in a single market or industry are known as

business-level strategies.

Firms pursuing a cost-leadership strategy are typically characterized by

close supervision of labor, raw materials, inventory, and other costs.

Perhaps the only time economies of scale are not subject to low-cost duplication is when the ________ size of operations is a significant percentage of ________ in an industry.

efficient; total demand

When managers committed to an incorrect course of action increase their commitment to this action even as its limitations become manifest, this is known as

escalation of commitment.

A marketing manager leading the marketing department is an example of a(n) ________ manager.

functional

In a functional structure, each of the major business functions is managed by a

functional manager.

Firms implementing cost-leadership strategies will generally adopt a

functional organizational structure.

Cost-leadership and product-differentiation strategies are so widely recognized that they are often called

generic business strategies.

Which of the following is not a potential source of diseconomies of scale?

learning-curve economies

In order to create a cost advantage, the cost of acquiring low-cost productive inputs must be ________ the cost savings generated by these factors.

less than

In ________ structures, employees report to two or more people.

matrix

Learning-curve-cost advantages are

not restricted to manufacturing.

Which of the following is less likely to be a rare source of cost advantage?

policy choices

Choices which firms make about the kinds of products and services they will sell that impact their relative cost position are known as

policy choices.

Firms for whom the price of the products or services they sell is determined by market conditions and not by the individual decision of the firms are known as

price takers.

The link between volume of production and the cost of building manufacturing operations is particularly important in industries characterized by

process manufacturing.

Cost advantages based on learning-curve economies are

rare, but they usually are not costly to duplicate.

Firms implementing cost-leadership strategies will have ________ layers in their reporting structure.

relatively few

If the potential responses of competing firms are likely to be very detrimental to the costs advantages of cost leaders, firms pursuing a cost-leadership competitive strategy should

set their prices equal to competitors' prices, sacrificing some market share for increased profit margins.

Machines and robots are examples of

technological hardware.

Which of the following is likely to be a rare source of cost advantage?

technological software

The quality of relations among labor and management, an organization's culture, and the quality of management controls are all examples of

technological software.

Which of the following statements is accurate?

Firms with a low-cost position can reduce the threat of rivalry in an industry.

________ levels of production are associated with ________ levels of employee

High, high

Which of the following statements about cost leadership and the threat of buyers is accurate?

If buyers demand increased quality or service, cost leaders can absorb these costs and may still have a cost advantage over the competition.

Which of the following statements is accurate?

In general, both economies of scale and diseconomies of scale are relatively easy-to-duplicate bases of cost leadership.

Actions firms take to gain competitive advantages by operating in multiple markets or industries simultaneously are known as

corporate-level strategies.

A firm that chooses a ________ focuses on gaining advantages by reducing its cost below all of its competitors.

cost-leadership business strategy

As the volume of production in a firm increases, the average cost per unit decreases until some optimal volume of production is reached, after which the average costs of production begin to rise because of

diseconomies of scale.

If Temper Company, a manufacturer of mattresses, was considering moving its production facilities to China but decided against it because the additional costs of shipping the mattresses back to the U.S. would offset the cost savings associated with moving the production facilities, the increased costs associated with shipping would be an example of

diseconomies of scale.

Cost-leadership firms are typically characterized by very ________ cost-control systems.

tight

The U in U-form structure stands for

unitary