Chapter 6 - Differentiation Strategy and Cost Leadership Strategy

Which of the following scenarios would result in strengthening a firm's strategic position?

A firm adds a new product feature that greatly increases the perceived value of the product at a minimal cost to the firm.

Business-level strategy addresses which overarching question?

How should we compete?

Baby Buggy Baby sells high-end baby strollers. In an attempt to maintain its competitive advantage, the firm began adding additional features to its strollers. Customers liked these features and sales increased, but the company's profit margins shrank. Which of the following is the likely reason for this?

The firm neglected to control costs.

Which of the following best defines economies of scope?

They are the savings that come from producing two or more outputs at less cost than producing each output individually.

Which of the following accurately describes the relationship between value and cost that would suggest that firm A has created a competitive advantage over firm B?

V - C)A > (V - C)B

By using a differentiation strategy, a firm aims to ______.

add unique features that will increase the perceived value of a product

A ______ outlines the steps a manager will take to achieve competitive advantage in a single product market.

business-level strategy

A company's goal-directed plans regarding how to compete for advantage is known as the firm's ______.

business-level strategy

An important requirement for increasing economic value creation under a differentiation strategy is to ______.

control costs

A ______ strategy attempts to create products with unique and attractive features in order to increase the price that consumers are willing to pay.

differentiation

How to compete on a business level is defined by the variables value and cost. Together they define the ______.

economic value created

When pursuing a differentiation strategy, a firm can achieve a competitive advantage by ______.

ensuring that its economic value exceeds that of its competitors

Managers must make strategic trade-offs involving choices between cost and value because ______.

higher value tends to require higher costs

Marriott offers different hotels that cater to different types of travelers (e.g., Residence Inn, Marriott Courtyard, Marriott Fairfield Inn). What is this an example of?

how a firm can compete by offering more perceived value at a similar price

Positive adjustments in product features, customer service, and complements may enable managers to ______.

improve the firm's strategic position

A firm's competitive advantage is determined jointly by _____________ and firm effects.

industry effects

Raoul is starting a new cosmetics company. His focus is on what he believes is a game-changing lipstick. He wants the lipstick to be accessible to everyone, but the manufacturing costs are higher than he had anticipated. If Raoul wants to achieve his desired strategic position of value creation at an affordable cost, he will need to ______.

make strategic trade-offs

Rodney is making decisions about his newly formed business. He wants to focus on producing the highest-quality product in the market so he can maximize the product's value to customers. This will cause his product to have higher costs than others already in the market, but Rodney believes customers will pay more for the higher-quality product. Rodney's choice to use a differentiation business-level strategy is determining his company's strategic

position

A differentiation strategy is typically associated with ______ pricing.

premium

Two important features that managers can adjust in an effort to improve the firm's strategic position are ______.

product features and customer service

A firm's strategic profile based on value creation and cost is called its ______.

strategic position

Choosing a business-level strategy helps to define a firm's ______ in a given product market.

strategic position

A(n) ______ requires making a choice between a cost position and a value position.

strategic trade-off

The perceived value that a company creates for consumers less the company's costs to create the value equals ______.

the economic value created

A firm's strategic position is determined by the relationship of which two variables?

value creation and cost