Business Strategy Midterm (5)
A broad differentiation strategy enhances company profitability whenever
a company's product can command a sufficiently higher price to more than cover the added costs of achieving the differentiation
A low-cost leader's basis for competitive advantage is
lower overall costs than rivals -- buy not necessarily the absolutely lowest possible cost because a product offering that is too frills-free can undermine its attractiveness to buyers despite being cheaper priced.
A broad differentiation strategy works best in situations where
technological change is fast-paced and competition revolves around rapidly evolving product features.
A company's competitive strategy is unlikely to result in a good performance or sustainable competitive advantage unless
the company has a competitively valuable collection of resource strengths, competencies, and capabilities and unless its strategy is predicated on leveraging use of these resources
Which of the following statements about a best-cost provider strategy is false?
A best-cost provider strategy aims at attracting buyers on the basis of having the industry's overall best-performing product at a price that is slightly below the industry's average price
Which of the following is not one of the give generic types of competitive strategy?
A best-value strategy
Which of the following is not one of the five generic types of competitive strategy?
A superior customer service strategy
Which of the following is not one of the pitfalls of a low-cost provider strategy?
Being greedy and trying to charge too high a price
Which one of the following does not qualify as a "uniqueness driver" that can function as a pathway to differentiating a company's product/service?
Charging a sufficiently low price to gain strong customer loyalty to the company's brand
Which of the following is not a cost-saving approach that demonstrates effective management use of a company's cost drivers?
Conserving on marketing costs by cutting back on advertising expenditures
In which one of the following instances is a focused strategy keyed either to low-cost or differentiation not likely to work well?
Most buyers use the product in the same ways, the product of rival sellers are essentially identical and readily available from many eager sellers, and price competition among rival sellers is vigorous
Which of the following is not one of the ways that a company can achieve a cost advantage by revamping its value chain?
Moving the performance of most all value chain activities to low-wage countries
Which of the following is not one of the pitfalls of a low-cost provider strategy?
Not cutting prices far enough below what rivals are charging to achieve dramatically large gains in sales volumes and market share
Which of the following is not an action that a company can take to do a better job than rivals of performing value chain activities more cost-effectively?
Outsourcing all production-related activities
Which of the following statements about a best-cost provider strategy is false?
The big appeal of a best-cost provider strategy is being able to offer buyers the industry's best-performing product at the best cost and best (lowest) price in the industry
Which of the following is not an action that a company can take to do a better job than rivals of performing value chain activities more cost-effectively?
Shifting to the use of technologies and/or information systems that bypass the need to perform certain value chain activities
The risks of a focused strategy do not include which one of the following?
The potential for buyer needs and uses of the product to become even more diverse
Which of the following is not one of the pitfalls or mistakes associated with pursuing a differentiation strategy?
Trying to strongly differentiate the company's product from those of rivals rather than to be content with weak product differentiation
Which one of the following does not represent market circumstances that make a focused low-cost or focused differentiation strategy attractive?
When buyers are not strongly brand loyal and have low costs in switching brands and when many buyers are looking for an upscale, multi-featured product at an attractively low price
In which one of the following market circumstances is a broad differentiation strategy generally not well-suited?
When the products of rivals are weakly differentiated and most competitors are resorting to clever advertising to try to set their product offerings apart
The most appealing approaches to differentiation are those that
are hard or expensive for rivals to duplicate -- east-to-copy differentiating features cannot product sustainable competitive advantage
For all types of competitive strategies, success in sustaining the intended competitive edge over rivals depends on having
at least some unique and valuable resources/capabilities that are either (1) hard for rivals to duplicate or (2) hard for rivals to develop offsetting close substitute resources/capabilities
Broad differentiation strategies generally work best in market circumstances where
buyer needs and uses of the product are divers, few rival firms are following a similar differentiation approach, technological change is fast-paced, and competition revolves around rapidly evolving product features
A company's broad differentiation strategy fails (in the sense of not significantly boosting profitability or resulting in a competitive advantage) whenever
buyers don't value the brand's uniqueness and/or whenever a company's approach to differentiation is easily copied or matched by its rivals
A strategy to be the industry's overall low-cost provider tends to be more appealing than a differentiation or best-cost or focused (or market niche) strategy when
buyers incur low costs in switching their purchases from one seller to another and the products of rival sellers are essentially identical and in abundant supply from a number of eager sellers
One way a company can translate a low-cost advantage over rivals into attractive profit performance is by
charging a price comparable to other low-priced rivals, being content with the resulting sales volume and market share, and relying upon the low-cost edge over rivals to earn a bigger profit margin per unit sold, thereby boosting the firm's total profits and return on investment
Successful differentiation allows a firm to
command a premium price for its product and/or increase unit sales (because additional buyers are won over by the differentiating features) and/or gain buyers loyalty to its brand (because some buyers really like the differentiating features and bond with the company and its products
A company's competitive strategy
deals with the specifics of management's game plan for competing successfully -- specific initiatives that will be employed to strengthen the company's market position and achieve a particular kind of competitive advantage, what offensive and defensive moves management plans to use to counter the maneuvers of rivals, how management intends to respond to shifting market conditions, and what the company intends to do to please customers.
A low-cost leader can translate its low-cost advantage over rivals into superior profit performance by
either using its low-cost edge to underprice competitors and attract price sensitive buyers in large enough numbers to increase total profits or else by refraining from price-cutting and using the low-cost advantage to earn a bigger profit margin on each unit sold, thereby boosting the firm's total profits and return on investment
a best-cost provider strategy
is a middle ground competitive approach aimed squarely at the sometimes great mass of value-conscious buyers looking for a good-to-very-good product or service at an economical price
A competitive strategy aimed at being the industry's low-cost provider tends to work best when
most buyers use the product in the same ways, industry newcomers use introductory low prices to attract buyers and build a customer base, and buyers incur low costs in switching their purchases from one seller to another
The two major avenues for achieving a cost advantage over rivals are
revamping the firm's value chain to eliminate or bypass some cost-producing activities and/or performing value chain activities more cost-effectively than rivals
For a company to perform its value chain activities more cost-efficiently than its rivals, its managers must
search out cost-saving opportunities in every part of the value chain and pay particular attention to a set of factors known as cost drivers that have a strong effect on a company's costs and can be used as levers to lower costs
A focused low-cost strategy seeks to achieve competitive advantage by
serving buyers in the target market niche at a lower cost and lower price than rival competitors -- this requires performing value chain activities more cost effectively than rivals and/or finding innovative ways to bypass non-essential value chain activities.
A company achieves best-cost provider status by
using its resources and capabilities to incorporate attractive upscale attributes at a lower cost than those rivals with comparable upscale product offerings
The two biggest factors that distinguish one competitive strategy from another concern
whether a company's market target is broad or narrow and whether the company is pursuing a competitive advantage linked to low costs or differentiation