Chapter 4 Strategic

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

Developing exclusive contracts and long term trust with suppliers

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

Economies of scale; learning curve

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

Learning-curve economies

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

The only person in a functional organization to have a multi-functional perspective is the

CEO.

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

business-level strategies

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

chief executive officer.

Firms pursuing a cost leadership strategy are typically characterized by

close supervision of labor, raw materials and inventory.

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.

Which one of the following is a possible substitute for obtaining the cost advantage?

forming alliances

Firms implementing cost leadership strategies will generally adopt a

functional organizational structure.

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

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

Cost advantages based on learning curve economies are

rare, but they are usually not costly to duplicate.

If the potential responses of competing firms are likely to be very detrimental to the costs advantages of a 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 and the release of less information.

Which one of the following is a best means to deal with a powerful supplier and its compelling negotiation position?

Building a larger scale for your company

Economies of scale 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). One of the reasons this factor exists

High volume of production can spread its overhead over more units

___________ levels of production are associated with ___________ levels of employee specialization.

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.

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 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.