Chapter 4 (Multiple Choice)

A cost leadership strategy provides goods or services with features that are a. acceptable. b. unique. c. substandard. d. mediocre.

A

A cost leadership strategy targets the industry's (BLANK) customers. a. most typical b. poorest c. least educated d. most frugal

A

A nationwide chain of pet stores wishes to identify the tradeoffs that its customers are willing to make between low-cost products such as generic pet foods and differentiated features such as pick-up and delivery of pets for grooming. The best technique for this firm to learn this information would be to use a. information networks. b. a flexible manufacturing system. c. differentiation development planning. d. Enterprise Resource Planning.

A

All of the following are considered generic business-level strategies EXCEPT a. product diversification. b. cost leadership. c. focused differentiation. d. integrated cost leadership/differentiation

A

An interior decorator has moved his business from Los Angeles to St. Paul, Minnesota, because his spouse's company transferred her to St. Paul. The decorator is distressed because the customers in his target market have, in his words, "banal and bourgeois taste." What is the decorator's problem? a. The decorator does not understand that customer needs are neither right nor wrong, good nor bad. b. The decorator has no core competencies that will transfer to his new geographic market. c. The decorator should choose a strategy of cost leadership in this environment. d. The decorator is highly affiliated with the new target market and understands how he can create value for it.

A

Blind taste-tests have shown that the taste of premium-priced vodkas and inexpensive vodkas are indistinguishable even to regular drinkers of vodka. But the sales of premium vodkas are thriving. This is an example of a. the perception of perceived prestige and status as a means of differentiating a product. b. the importance of high-quality raw materials when using the differentiation strategy. c. the risk of product imitation by competitors. d. the danger counterfeiting holds for firms pursuing the differentiation strategy.

A

Business-level strategies are concerned specifically with a. creating differences between the firm's position and its competitors. b. selecting the industries in which the firm will compete. c. how functional areas will be organized within the firm. d. how a business with multiple physical locations will operate one of those locations.

A

By examining the (BLANK) of Southwest Airlines, one can identify the strategic themes around which it has developed its business strategy. These themes include limited passenger service, high aircraft utilization, highly productive ground and gate crews, and so forth. a. activity map b. profit pool c. value diagram d. five forces model

A

Chico's is a clothing retailer that targets middle-aged women who want stylish and appealing clothes that are suitable for the mature figure. Chico's has an extensive customer list, a frequent-buyer discount card, and frequent sales promotions to Chico's customers based on their spending levels. Chico's uses a (BLANK) strategy. a. focused differentiation based on a buyer group b. focused differentiation based on a product line segment c. generic differentiation d. integrated cost leadership/differentiation

A

Ever-improving levels of efficiency enhance profit margins for a cost-leader. This effects which of the five forces of industry structure most directly? a. potential entrants b. substitutes c. buyer power d. supplier power

A

Historically, women have paid more for dry cleaning than men. Signature Cleaners advertises "equal price" for all customers. Signature Cleaners appeals to women, which is market segmentation by (BLANK) factors. a. demographic b. socioeconomic c. geographic d. consumption pattern

A

In the animal food products business, food-product needs of owners of companion animals pets (e.g., dogs and cats) differ from the needs for food and health-related products of those owning production animals (e.g., livestock). Which of the following aspects of managing customer relationships does this choice refer to? a. Who: Determining the Customers to Serve b. What: Determining Which Customer Needs to Satisfy c. How: Determining Core Competencies Necessary to satisfy Customer Needs d. When: Determining When to Satisfy Customer Needs

A

J.C. Penney attempted the strategy (BLANK). But it couldn't out (BLANK) Walmart, nor could it (BLANK) Macy's and Target. a. of integrated cost leadership; price; compete with b. of focused differentiation; cost; differentiate between c. of cost leadership; cost; differentiate between d. of focused cost leadership; price; differentiate between

A

Mercedes mass produces luxury vehicles at a premium price. It uses a(n) (BLANK) strategy. a. differentiation b. focused differentiation c. integrated cost leadership/differentiation d. focused cost leadership

A

More choices and easily accessible information about the functionality of firms' products are creating increasingly (BLANK) customers. a. sophisticated and knowledgeable b. loyal c. dissatisfied d. content

A

Reach is an especially critical dimension for which firm? a. Google b. J.C. Penney c. Blockbuster d. Colgate-Palmolive

A

Starbuck's determined that all of the following customer needs were important EXCEPT a. low price. b. the experience associated with drinking coffee, not just the coffee. c. the actual product of service (e.g., a cup of coffee), not the experience. d. allowing customer to design their own drinks.

A

The (BLANK) dimension of relationships with customers is particularly important for social networking sites such as Facebook and MySpace. a. reach b. richness c. affiliation d. social

A

The benefit of a flexible manufacturing system is that a. the lot size needed to manufacture a firm's product efficiently is reduced. b. the necessary skill levels of workers are reduced, allowing the firm to reduce costs. c. it lends itself to empowerment of employees. d. it captures the cost savings of economies of scale.

A

The integration of a cost leadership and a differentiation strategy a. is challenging because it increases the number of value-chain activities and support functions in which the firm must become competent. b. forces a firm to adapt more slowly to changes in its environment. c. allows the firm to avoid being "stuck in the middle." d. requires such a large customer base that it is most practical for firms in the global marketplace.

A

The products or services that are differentiated from others have qualities that are a. perceived by the customer to add value for which they will pay a premium. b. valued by the typical industry customer. c. perceived as standardized by the customer. d. seen as classic attributes rather than passing fads

A

The risks of a focus strategy include a. a competitor's ability to use its core competencies to outfocus the focuser by serving an even more narrowly defined segment. b. a competitor's ability to use its core competencies to outfocus the focuser by serving an even more broadly defined segment. c. decisions by industry-wide competitors to use their resources to serve a wider range of customers' needs than the focuser has been serving. d. decisions by focused competitors to use their resources to serve a wider range of customers' needs.

A

The three dimensions of a firm's relationships with customers include all the following EXCEPT a. exclusiveness. b. affiliation. c. richness. d. reach.

A

The use of a differentiation strategy would be expected to be LEAST effective in which of the following markets? a. commodity goods b. motion pictures c. popular music d. writing instruments

A

When a firm is able to produce nonstandardized (that is, distinctive) products for customers who value differentiated features more than they value low cost, the firm is successfully implementing a. a differentiation strategy. b. a cost leadership strategy. c. an integrated cost leadership/differentiation strategy. d. a single-product strategy.

A

Which of the following is NOT a value-creating activity associated with the differentiation strategy? a. Developing policies to ensure efficient hiring and retention to keep costs low and implement training to ensure high employee efficiency. b. Providing accurate and timely delivery of goods to customers. c. Ensuring receipt of high quality supplies (raw materials and other goods). d. Developing flexible systems that allow rapid response to customers' changing needs.

A

Wholesome Pet Food has successfully specialized for 20 years in high-quality pet food made from all-natural ingredients and organically raised lamb. This brand has a strong following and is recommended by veterinarians who practice in affluent neighborhoods. Wholesome's main supplier of lamb has announced that the price for lamb will be 15 percent higher next year. a. Wholesome will probably be able to pass the cost on to its customers because they are less sensitive to price increases than the average buyer. b. Companies pursuing Wholesome's business strategy are especially vulnerable to this risk. c. If Wholesome raises its pet food prices, customers will turn to less expensive brands such as Purina. d. Wholesome probably operates on very thin margins, and a cost increase will threaten its ability to earn average returns.

A

A firm successfully implementing a differentiation strategy would expect a. customers to be sensitive to price increases. b. to charge premium prices. c. customers to perceive the product as standard. d. to have high levels of power over suppliers.

B

A firm's core strategy is its (BLANK) strategy. a. corporate b. business c. pricing d. international

B

A flexible manufacturing system is a. based on the use of temporary and part-time employees as well as outsourcing. b. a computer-controlled process that is used to produce a variety of products in moderate, flexible quantities with minimal human intervention. c. based on a 360-degree view of the company's relationships with customers. d. a system that identifies "the one best way" to produce each product in the company's line.

B

All of the following describe strategies EXCEPT a. they are purposeful. b. they cannibalize the old strategy. c. they precede the taking of actions to which they apply. d. they demonstrate a shared understanding of the firm's vision and mission.

B

Amazon has built capabilities around Internet technology and e-commerce to facilitate information exchanges with its customers in a cost effective manner. This represents which of the three service dimension? a. reach b. richness c. affiliation d. None of the these options are correct

B

An entrepreneur is investigating starting a company that provides tax advice to small companies. In order to position his company differently from the existing competitors, the entrepreneur must a. analyze the reach, richness, and affiliation the company must have with its customers. b. provide tax advice either in a different manner or provide a different kind of tax service than competitors. c. offer tax advice at a price lower than the cheapest competitor. d. offer tax advice at a higher quality than the best competitor.

B

As the television industry has changed in the last few decades from just three major networks to a multiplicity of networks, one of the major aspects of business strategy for the newer networks is (BLANK) than the traditional networks. a. broader target market b. narrower target market c. increased use of primary activities to capture value d. increased use of support activities to capture value

B

Before the firm decides what products to offer and what benefits and features they will have, the firm must decide all the following questions EXCEPT a. who the firm should serve. b. when the customer's needs should be satisfied. c. what needs the firm should satisfy. d. what core competencies are needed to satisfy customer needs.

B

Business-level strategies detail commitments and actions taken to provide value to customers and gain competitive advantage by exploiting core competencies in a. the selection of industries in which the firm will compete. b. specific product markets. c. primary value chain activities. d. particular geographic locations.

B

By linking companies with their suppliers, distributors, and customers, (BLANK) provide a company with flexibility. a. flexible manufacturing systems b. information networks c. total quality management systems d. capabilities

B

Consumers in the United States are known for their a. low income. b. impatience. c. loyalty. d. group think.

B

Hyundai allows customers to return their cars if they lose their job within 12 months of purchase. Which of the following aspects of managing customer relationships is Hyundai engaged in? a. Who: Determining the Customers to Serve b. What: Determining Which Customer Needs to Satisfy c. How: Determining Core Competencies Necessary to satisfy Customer Needs d. When: Determining When to Satisfy Customer Needs

B

Ikea offers young customers a selection of home furnishings featuring good design, function, and acceptable quality at low prices. Ikea is using which business-level strategy? a. cost leadership b. focused cost leadership c. differentiation d. focused differentiation

B

New Balance Athletic Shoes target Baby Boomers' needs for well-fitting shoes. The company is unique in that it offers a very broad range of shoe widths. A realistic potential risk New Balance runs in this focused differentiation strategy includes the possibility that: a. Baby Boomers may find that they do not need well-fitting shoes, since they will become increasingly sedentary as they age. b. a competitor may be able to better use flexible manufacturing systems to make shoes with an individualized fit. c. athletic shoes may go out of style. d. New Balance shoes may begin to appeal to a wider market, thus losing New Balance's focus advantage.

B

Stage in the family life cycle is a (BLANK) factor. a. demographic b. socioeconomic c. psychological d. perceptual

B

Suppose another firm found a way to offer IKEA's customers (young buyers interested in stylish furniture at low cost) additional sources of differentiation while charging the same price or to provide the same service with the same sources of differentiation at a lower price. What category of competitive risk to a focus strategy would this be? a. An industry-wide competitor decides that the market segment served by IKEA is worth entering. b. Focusing on a more narrowly defined segment and "outfocusing" the focuser. c. The needs of the customers in this narrow segment have become more similar to those of industry-wide competitors. d. Experience can narrow customer's perceptions of value of the firm's differentiated features.

B

TQM is most helpful to firms following the (BLANK) business strategy. a. cost leadership b. integrated cost leadership/differentiation c. focused cost leadership d. focused differentiation

B

The (BLANK) dimension of relationships with customers is concerned with the firm's access and connection to customers. a. loyalty b. reach c. richness d. affiliation

B

The Monteleone Company pays large fees to a highly recognizable, prestigious individual to be the spokesperson for the company's products, luxury private jets. Monteleone is probably following the a. focused cost leadership strategy. b. focused differentiation strategy. c. integrated cost leadership/differentiation strategy. d. total quality strategy.

B

The effectiveness of any of the generic business-level strategies is contingent upon a. customer needs and competitors' strategies. b. the match between the opportunities and threats in its external market and the strengths of its internal environment. c. the trends in the general consumer base and the robustness of the global and industry economy. d. the firm's competitive scope and its competitive advantage.

B

The new generation of lunch trucks serving high-end fare in cities such as New York, San Francisco, and Los Angeles share which of the following a business strategies? a. cost leadership b. focused differentiation c. integrated cost leadership/differentiation d. differentiation

B

The typical risks of a cost leadership strategy include a. the inability to balance high differentiation and low price. b. production and distribution processes becoming obsolete. c. excessive differentiation to the point where the customer base is too small. d. loss of customer loyalty.

B

Walmart went against business-level strategy and made changes to attract upscale customers. These changes had which of the following results? a. It strengthened Walmart's position against rivals such as Dollar Stores and Amazon. b. It made Walmart vulnerable to Dollar Store and Amazon. c. It attracted significant numbers of new customers. d. Family Dollar, Dollar Tree, and Dollar General all experienced losses in sales as many of their customers went to Walmart.

B

Which of the following is TRUE? a. As customer loyalty increases, customers are more sensitive to price increases. b. Customer loyalty has a positive relationship with firm profitability. c. Customer loyalty is fragile and cannot reliably be considered a factor in firm success. d. Customer loyalty is of importance only to firms using the differentiation strategy.

B

A company pursuing the differentiation or focused differentiation strategy would tend to a. build economies of scale and efficient operations. b. develop and maintain cost-effective MIS operations. c. develop flexible systems that allow rapid response to customers' changing needs. d. have relationships with suppliers to maintain efficient flow of supplies for operations.

C

A company using a narrow target market in its business strategy is a. following a cost leadership business strategy. b. focusing on a broad array of geographic markets. c. limiting the group of customer segments served. d. decreasing the number of activities on its value chain.

C

A firm using a(n) (BLANK) strategy generally needs to operate "below the radar" of larger and more resource rich firms that serve the broader market. a. cost leadership b. differentiation c. focused d. integrated cost leadership/differentiation

C

A river barge company can offer cheaper, although slower, per pound transportation of products to companies when compared with transportation by air, truck, or rail. The river barge company should first target customers whose companies use a. the integrated cost leadership/differentiation strategy. b. either of the focus strategies. c. the cost leadership strategy. d. any of the strategies except the focused differentiation strategy.

C

All of the following are examples of differentiated products EXCEPT a. Mont Blanc pens. b. Caterpillar's heavy-duty earth-moving equipment. c. Great Value brand at Walmart. d. Prada fashion.

C

All of the following are ways that a good or service can be differentiated EXCEPT a. responsive customer service. b. perceived prestige and status. c. economies of scale and efficient operations. d. engineering design and performance.

C

Customer ratings of products they bought online is an example of a. loyalty. b. reach. c. richness. d. affiliation

C

Firms use the integrated cost leadership/differentiation strategy because a. other firms have established unassailable market dominance with the other four strategies. b. global markets allow for much broader competitive scope. c. most consumers want to pay a low price for products with somewhat highly differentiated features. d. one strategy is not enough for most large firms.

C

Focus strategies are a. sheltered from the risks associated with industry-wide strategies because of their niche focus. b. able to avoid global risk by focusing on niches in national or regional markets. c. faced with additional types of risks than are industry-wide strategies. d. more subject to failure than industry-wide strategies.

C

In order to meet and exceed customer's expectations, firms must a. constantly manipulate customers' perceptions of their needs. b. answer the questions: who, what, when, where, how, and why as they apply to customers. c. continuously improve, innovate, and upgrade their core competencies. d. successfully defend their established core competencies from imitation by competitors.

C

Recently, the only type of car available for Anthony to rent on a business trip was a compact, fuel-efficient Japanese import. Anthony was surprised at the comfort and performance of the car. He is in the market for a new car and had previously considered only buying another luxury SUV. Now, he is thinking about the significant cost savings he would have if he bought the compact vehicle rather than a new SUV. This is an example of the competitive risk that a. a competitor's products can convey a product's differentiated features to a customer at a significantly reduced price. b. a product imitation can cause customers to perceive that competitors offer essentially the same good. c. experience can narrow a customer's perceptions of the value of a product's differentiated features. d. brand loyalty insulates a company from rivalry with competitors.

C

Research suggests that having a competitive advantage in (BLANK) creates more value in the cost leadership strategy than it does in the differentiation strategy. a. marketing and sales b. technology development c. logistics d. human resource management

C

Strategic fit among many activities (in an activity map) is fundamental to a. the development of core competencies for a firm. b. the breadth of competitive scope for a firm. c. sustainability of a firm's competitive advantage. d. the integrity of the firm's value chain.

C

The analysis of the activity map of a successful company such as Southwest Airlines emphasizes how a. the organizational culture of Southwest Airlines is the key to the success of the organization. b. understanding of the profit pool in an industry indicates to companies where above-average returns can be earned. c. it is hard for rivals to match a configuration of integrated activities than to imitate a single activity. d. the primary and support activities of a successful company capture value all along the value chain.

C

The book The Dyslexic Advantage appeals to a market of educators, people with dyslexia, their friends, family, and coworkers. This is customer segmentation by (BLANK) factors. a. demographic b. socioeconomic c. psychological d. consumption

C

The differentiation strategy can be effective in controlling the power of rivalry with existing competitors in an industry because a. customers will seek out the lowest-cost product. b. customers of nondifferentiated products are sensitive to price increases. c. customers are loyal to brands that are differentiated in meaningful ways. d. the differentiation strategy benefits from rivalry because it forces the firm to innovate.

C

The focused differentiation strategy differs from the differentiation strategy in that a. the focused differentiators have a broader competitive scope. b. the value-creating activities of focused differentiators are more constrained. c. focused differentiators target a narrower customer market. d. there are fewer risks with the focused differentiation strategy.

C

Which of the following are central to implementing value-creating strategies and thereby satisfying customers' needs? a. firm resources b. capabilities c. core competencies d. None of the these options are correct

C

Zara has pioneered "cheap chic" in clothing apparel. Zara offers current and desirable fashion goods at relatively low prices. To implement the strategy, Zara uses sophisticated designers and effective means of managing costs. These are all characteristics of which business level strategy? a. cost leadership b. differentiation c. integrated cost leadership/differentiation d. stuck in the middle

C

A company selling diapers knows the market is for people with young children. However, within that segment they can further divide the market by a demographic factor like a. culture. b. lifestyle. c. consumption pattern. d. income.

D

A differentiation strategy can be effective in controlling the power of substitutes in an industry because a. customers have low switching costs. b. substitute products are lower quality. c. a differentiating firm can always lower prices. d. customers develop brand loyalty.

D

A manufacturer of jewelry imitates the style of a popular and expensive brand using manufactured stones rather than real gemstones and lesser grade metals rather than silver and gold. The manufacturer packages the jewelry in boxes of the same color imprinted with an almost identical logo. About 85 percent of the company's sales are through Internet sales. This example illustrates the competitive risk of (BLANK) that threatens companies that use the differentiation strategy. a. customer sensitive to price differentials b. threat by the cost leader c. customer experience d. counterfeiting

D

Chelsea Milling Company makes Jiffy packaged baking mixes. It was established in 1930. It has never spent one cent on advertising, which is one reason it is able to pursue a(n) strategy. a. differentiation b. focused differentiation c. integrated cost leadership/differentiation d. cost leadership

D

Durable Ceramics, Inc., provides inexpensive ceramic tile to builders of institutional buildings such as schools, prisons, and public administration buildings. It has always competed on a cost leadership basis. Most of its products are purchased by a few commercial construction firms, so it is fairly dependent on these construction firms for selling its product. Durable Ceramic's next most-efficient competitor, Cost-Less Ceramics, Inc., earns average returns, whereas Durable earns above-average returns. The commercial construction firms are putting pressure on Durable to reduce its prices. If Durable reduces its prices below those of Cost-Less's prices, it is likely that a. both Durable and Cost-Less will devise additional ways to become more efficient in their production processes. b. Durable will be unable to absorb the lower cost, and will go out of business. c. both Cost-Less and Durable will go out of business, leaving the customers with fewer alternative sources of low-cost tile. d. Cost-Less will go out of business, and Durable will gain higher power over its customers.

D

If Southwest Airlines employees lost their high enthusiasm and commitment to the company, a. the airline could continue without problems because its cost leadership strategy is dependent on its efficient internal procedures. b. replacement employees could be hired from rival airlines that are laying off employees easily merged into the Southwest culture. c. there would be no impact on Southwest's profitability because Southwest's customers value the low fares rather than being "entertained" by the employees. d. Southwest would have lost one of its competitive advantages and its performance would be threatened.

D

Religious beliefs are an example of customer segmentation by (BLANK) factors. a. demographic b. socioeconomic c. geographic d. psychological

D

Target's brand promise "Expect More. Pay Less" and appeal to higher-income, fashion-conscious discount shoppers illustrates the (BLANK) strategy. a. cost leadership b. differentiation c. focused differentiation d. integrated cost leadership/differentiation

D

The term "stuck in the middle" a. means adhering to a middle of the road strategy in the face of negative outcomes. b. indicates that the customers of the firm are willing to pay only a mid-range price for the product. c. reflects the fact that the customers of the firm have only moderate expectations regarding product quality. d. means that the firm's cost structure is not low enough to allow it to attractively price its products and that its products are not sufficiently differentiated to create value for its target customer.

D

The typical risks of a differentiation strategy do NOT include which of the following? a. Customers may find the price differential between the low-cost product and the differentiated product too large. b. Customers' experience with other products may narrow customers' perception of the value of a product's differentiated features. c. Counterfeit goods are widely available and acceptable to customers. d. Suppliers of raw materials erode the firm's profit margin with price increases.

D

Three sources of flexibility in completing primary and support activities are particularly useful for firms using the integrated strategy. These are a. Flexible Manufacturing Systems, Reengineering, and Total Quality Management. b. Outsourcing, Reengineering, and Flexible Manufacturing Systems. c. Outsourcing, Total Quality Management, and Information Networks. d. Flexible Manufacturing Systems, Total Quality Management, and Information Networks.

D

Viewing the world through the customer's eyes and constantly seeking ways to create more value for the company enhances a. the reach of the company toward the customer. b. the ability to identify the customer. c. the richness of the relationship with the customer. d. affiliation with the customer.

D

Walmart's same store sales have been declining and those of rivals Family Dollar and Amazon have been increasing. What could explain this recent change? a. Walmart was too aggressive with its low-cost position and lost customers who wanted more upscale products. b. Walmart changed its strategy to focused differentiation. c. Amazon and Family Dollar changed their strategies to attract more upscale customers. d. Walmart changed its strategy to attract more upscale customers.

D

When firms use core competencies to implement value-creating strategies they are answering the "(BLANK)" question. a. who b. what c. why d. how

D

When implementing a focus strategy, the firm seeks to a. offer products that are both differentiated and low cost. b. move into the global market. c. target the typical customer in an industry. d. serve the specialized needs of a market segment.

D

When selecting a business level strategy, the firm must determine all of the following EXCEPT a. how will the customer's needs be satisfied? b. who is the customer? c. what are the customers' needs? d. why should these customers' needs be satisfied?

D

When the costs of supplies increase in an industry, the low-cost leader a. may continue competing with rivals on the basis of product features. b. will lose customers as a result of price increases. c. will be unable to absorb higher costs because cost-leaders operate on very narrow profit margins. d. may be the only firm able to pay the higher prices and continue to earn average or above-average returns.

D