Chapter 6

Which two of the following variables can managers primarily manipulate in order to answer the question, "How should we compete?" Multiple select question. A. size B. price C. cost D. style E. value

C. and E.

The cube-square rule makes it _______ for smaller stores to compete with larger retailers. Multiple choice question. A. harder B. easier C. useless D. just as difficult

A. harder

In addition to having the lowest cost, a low-cost leader is likely to have ______.

a large market share

Which of the following are questions that managers must answer when pursuing value innovation? (Check all that apply.)

-which product factors to eliminate -which product factors to reduce below the industry standard -which new product factors to create -which product factors to raise above the industry standard

Which type of strategy is being used if a company offers a product at a lower cost than its competitors? Multiple choice question. A. cost-leadership strategy B. blue ocean strategy C. focused differentiation strategy D. differentiation strategy

A. cost-leadership strategy

An auto manufacturer that has access to cheaper labor and raw materials than its rivals will have a competitive advantage regarding lower cost of ______ factors. Multiple choice question. A. input B. scaling C. experience-curve D. learning-curve

A. input

Which of the following are input factors? (Check all that apply.) Multiple select question. A. marketing and sales B. capital C. distribution D. labor E. information technology services F. raw materials

B. D. E. and F.

Which of the following determine a firm's competitive advantage? (Check all that apply.) Multiple select question. A. number of products produced by the firm B. cost position relative to competitors C. value position relative to competitors D. size of the company

B. and C.

Value drivers known as ______ add value to a product or service when they are consumed in tandem with the focal product. Multiple choice question. A. customizations B. complements C. constructs D. citations

B. complements

A firm that hopes to achieve a competitive advantage by maintaining an efficient supply chain and taking advantage of economies of scale and a well-trained staff is focusing on ______. Multiple choice question. A. value drivers B. cost drivers C. customer service D. product features

B. cost drivers

Cost of input factors and economies of scale are ______ that managers can manipulate to keep costs in check. Multiple choice question. A. product features B. cost drivers C. complements D. differentiation strategies

B. cost drivers

A firm that increases its output of a given product and experiences a simultaneous decrease in per unit costs is taking advantage of ______. Multiple choice question. A. complements B. economies of scale C. competitive parity D. diseconomies of scale

B. economies of scale

Positive adjustments in product features, customer service, and complements may enable managers to ______. Multiple choice question. A. attract new employees B. improve the firm's strategic position C. make themselves look good D. weaken the firm's strategic position

B. improve the firm's strategic position

What drives the learning curve effect? Multiple choice question. A. regular training sessions for employees to teach them how to perform new processes B. increases in cumulative output within the existing technology C. a reduction in the cost of supplies and other inputs D. the introduction of new technology to increase output

B. increases in cumulative output within the existing technology

Unique features and attributes that differentiate a product from competitors' offerings allow the firm to ______. Multiple choice question. A. hire employees away from competitor B. reduce the cost of raw materials C. charge premium pricing D. charge only as much as the competition charges for its product

C. charge premium pricing

What is the relationship between fixed costs and economies of scale? Multiple choice question. A. Larger output results in lower labor costs. B. Larger outputs result in a maximum efficient scale. C. Larger output illustrates the benefits of a differentiation strategy. D. The amount of fixed costs allocated to each unit of output decreases as output increases.

D. The amount of fixed costs allocated to each unit of output decreases as output increases.

If two firms produce very similar products at the same rate of output, and firm A is able to achieve lower per-unit costs than firm B by taking advantage of a new manufacturing technology, firm A is benefiting from Multiple choice question. A. creative destruction. B. value driver advantages based on product features. C. a learning curve effect based on output differential. D. an experience-curve effect based on process innovation.

D. an experience-curve effect based on process innovation.

Diseconomies of scale often appear when a firm ______. Multiple choice question. A. places too much emphasis on the minimum efficient scale B. decides to use specialized production equipment C. reduces its output D. becomes too large and complex to manage efficiently

D. becomes too large and complex to manage efficiently

Managers can increase the perceived value of their firms' product or service offerings by focusing on ______. Multiple choice question. A. supply chains B. salient costs C. strategic contributions D. customer service

D. customer service

A cost leader can achieve a competitive advantage by ______. Multiple choice question. A. ignoring diseconomies of scale B. allowing people to customize their products C. focusing on reducing cost without considering the effect on value D. reducing costs below those of competitors while maintaining a similar value E. choosing a differentiation strategy

D. reducing costs below those of competitors while maintaining a similar value

True or false: A company that achieves differentiation parity at a lower cost has implemented a successful cost-leadership strategy.

True

Furniture retailer IKEA has used the value innovation framework of ______ to successfully implement a blue ocean strategy.

eliminate-reduce-raise-create

The concept of a(n) ______ attempts to combine both learning effects and process improvements. Multiple choice question. strategic implementation experience curve minimum efficient scale technological innovation

experience curve

True or false: Tesla's high stock market valuation is partly justified by the company's learning curve. True false question.

True

A struggling retailer seeking to implement a blue ocean strategy is likely to experience difficulty with ______.

cutting costs and increasing value at the same time

A graphical depiction of a firm's relative performance across its industry's factors of competition is known as a(n) ______.

value curve

A firm that manages to avoid competition entirely by offering a product or service that creates an uncontested market space is engaging in ______. Multiple choice question.

value innovation

Implementing a blue ocean strategy requires making competition irrelevant and creating a new market space, otherwise known as ______. Multiple choice question. market definition asset attainment economies of scope value innovation

value innovation

Which of the following are pricing options offered by a blue ocean strategy?

-The firm can charge a lower price than differentiators. -The firm can charge a higher price than the cost leader.

The two factors upon which the success of strategy of either cost leadership or differentiation is built are ______. (Check all that apply.)

-external opportunities in the market -the firm's internal strengths

In order for a firm to successfully implement a business-level strategy, it must limit the impact of ______. (Check all that apply.) Multiple select question. external threats consumer demand its own internal weaknesses technological advancements

-external threats -its own internal weaknesses

A producer of consumer headphones that successfully differentiates its products with a patented noise-canceling technology and celebrity endorsements will enjoy which of the following benefits? (Check all that apply.) Multiple select question.

-the ability to charge a premium price -less intense competition from imitators

Which competitive forces can result in erosion of margins for both differentiation and cost-leadership business strategies? Multiple select question. A. power of buyers B. threat of substitutes C. threat of entry D. power of suppliers

A. C. and D.

Which capability is required to create superior product features? Multiple choice question. A. R&D B. marketing C. accounting D. sales

A. R&D

To formulate an appropriate business-level strategy, managers must answer the ______ questions of competition. Multiple choice question. A. who, what, why, and how B. who, what, when, and where C. what, when, why, and how much D. who, what, why, and where

A. Who, what, why, and how

An important requirement for increasing economic value creation under a differentiation strategy is to ______. Multiple choice question. A. stimulate demand through celebrity endorsements B. control costs C. increase prices D. eliminate unnecessary product features

B. control costs

Which of the following situations would justify the use of manufacturing robots by a producer of packaged foods? Multiple choice question. A. a decline in consumer demand B. several new competitors entering the market C. an increase in demand from the market D. an increase in the cost of raw materials

C. an increase in demand from the market

In a focused cost-leadership strategy, a firm provides ______. Multiple choice question. A. low-cost products to a wide market B. differentiated products to a niche market C. low-cost products to a niche market D. differentiated products to a wide market

C. low-cost products to a niche market

High-end pen manufacturer Mont Blanc pursues a differentiation strategy pursuing only those who need or want an expensive writing instrument. What scope of competition does this represent? Multiple choice question. A. broad B. even C. narrow D. differentiation

C. narrow

True or false: Formulating a business strategy is a relatively easy task because only a few strategic options are available. True false question.

False

What must strategic leaders keep in mind if they are going to achieve successful strategic positioning?

To achieve strategic positioning, firms must make important trade-offs.

A ______ strategy requires achieving the lowest costs in the industry while maintaining a level of value that is acceptable to customers. Multiple choice question. minimally efficient cost-leadership proposition differentiation

cost-leadership

The horizontal connection of the points of each value on the strategy canvas is known as ______.

the value curve

In terms of business strategy, blue oceans represent which of the following? (Check all that apply.)

-untapped market space -increased demand

What are the three most important value drivers that managers can use to create a competitive advantage? Multiple select question. A. complements B. customer service C. product features D. cost savings E. availability

A. B. and C.

Larger output allows firms to invest in more specialized systems such as ______. (Check all that apply.) Multiple select question. A. manufacturing robots B. big box retail stores C. a general accountant D. enterprise resource planning software

A. and D.

n terms of productivity, which of the following is true of learning curves? Multiple choice question. A. They remain level. B. They go down. C. They go up. D. They are volatile.

B. They go down.

A ______ outlines the steps a manager will take to achieve competitive advantage in a single product market. Multiple choice question. A. corporate-level strategy B. competitive position C. business-level strategy D. financial analysis

C. business-level strategy

A firm that offers a liberal return policy and free shipping on goods ordered online hopes to increase its perceived value by focusing on ______. Multiple choice question. A. advertising B. complements C. production costs D. customer service

D. customer service

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 ______. Multiple choice question. A. focus instead on a different product B. hold firm on keeping the prices low and see what happens C. make sure the economic value created is low D. make strategic trade-offs

D. make strategic trade-offs

The ______ is the range of output needed to minimize the cost per unit as much as possible. Multiple choice question. A. diseconomies of scale B. cube square rule C. economies of scale D. minimum efficient scale

D. minimum efficient scale

Products in the affordable "business-casual" clothing market have largely become commoditized, and most retailers have begun to compete mainly on price rather than product features. In this environment, it is impossible for one retailer to gain market share without another losing it. This is an example of a ______ ocean. Multiple choice question. blue black red green

red

Bundling of products and services that are consumed in tandem to create value is an example of ______. Multiple choice question. A. complements B. strategic trade-offs C. premium pricing D. economies of scope

A. complements

A(n) ______ strategy may fail when the focus of the competition shifts to price rather than unique product features. Multiple choice question. experience curve differentiation cost-leadership economies of scale

differentiation

A successful blue ocean strategy requires strategists to reconcile the trade-offs between ______.

differentiation and cost-leadership

A company with a cost-leadership strategy faces significant difficulties when ______. Multiple choice question. no valuable substitutes exist the focus of competition shifts from non-price to price attributes suppliers agree to charge less for their supplies the focus of competition shifts from price to non-price attributes

the focus of competition shifts from price to non-price attributes

Which of the following are significant threats to a firm pursuing a cost-leadership strategy? Multiple select question. value falling below the acceptable threshold replacement by innovative substitutes competitors adopting similar business strategies suppliers increasing input prices

-value falling below the acceptable threshold -replacement by innovative substitutes -competitors adopting similar business strategies

The most significant challenge JetBlue faced in implementing its business strategy was _____. Multiple choice question. A. overwhelming consumer demand B. keeping up with new technological developments C. justifying its higher-than-average prices to budget-conscious consumers D. reconciling the trade-offs between cutting costs and providing superior service

D. reconciling the trade-offs between cutting costs and providing superior service

Choosing a business-level strategy helps to define a firm's ______ in a given product market. Multiple choice question. A. mission statement B. ethical climate C. industry structure D. strategic position

D. strategic position

A differentiation strategy can be threatened when ______.

a product becomes commoditized, and the focus of the competition shifts to price

Why do many firms fail to successfully implement a blue ocean strategy? Multiple choice question.

because they end up being "stuck in the middle," unable to increase value and lower costs at the same time

A manufacturer of electronic components can use its manufacturing machines to produce many different components such as semiconductors, sensors, and capacitors. In this case, the firm benefits from an economy of ________________________, reducing overall production costs by finding multiple uses for its components and facilities.

scope

In the learning curve, the ______ the learning curve, the more learning has taken place. Multiple choice question. steeper flatter linear wider

steeper

Which of the following scenarios would result in strengthening a firm's strategic position? Multiple choice question. A. A firm adds a new product feature that greatly increases the perceived value of the product at a minimal cost to the firm. B. A firm releases a new complementary product that decreases the perceived value of the original product. C. A firm invests in a range of new product features that result in an equal increase in costs and value creation. D. A firm invests a significant amount of money into a new customer service call center, resulting in a minimal increase in perceived value.

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

By using a differentiation strategy, a firm aims to ______. Multiple choice question. A. add unique features that will increase the perceived value of a product B. provide a product that is similar to successful products already on the market C. minimize its opportunity cost D. pursue a broad segment of customers

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

A company's goal-directed plans regarding how to compete for advantage is known as the firm's ______. Multiple choice question. A. business-level strategy B. industry effects C. sustainable competitive advantage D. blue ocean strategy

A. business-level strategy

According to the ______ rule, increasing the surface area (size) of a storage unit or retail facility results in a disproportionate increase in volume (space). Multiple choice question. A. cube square B. maximum effective C. minimum efficient D. superstore

A. cube square

Which of the following are business strategies JetBlue pursued in order to gain a competitive advantage? Multiple choice question. A. differentiation and cost-leadership B. differentiation, cost-leadership, and economies of scale C. economies of scale and differentiation D. cost-leadership and economies of scale

A. differentiation and cost-leadership

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? Multiple choice question. A. how a firm can compete by offering more perceived value at a similar price B. how a differentiation strategy has to always be associated with premium pricing C. how a differentiation strategy does not work D. how a firm can be overwhelmed by too many assets

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

Which of the following are considered the two generic business-level strategies? (Check all that apply.) Multiple select question. A. monopolistic competition B. cost-leadership C. oligopoly D. differentiation E. value gap

B. and D.

Which value driver would be the focus of a company that sells products that are similar to competing products and that provides a 60-day guarantee with no questions asked? Multiple choice question. A. product features B. customer service C. profits D. complements

B. customer service

A firm experiences ______ when an increase in output results in an increase in costs. Multiple choice question. A. business leadership strategy B. diseconomies of scale C. minimum efficient scales D. economies of scale

B. diseconomies of scale

When pursuing a differentiation strategy, a firm can achieve a competitive advantage by ______. Multiple choice question. A. increasing perceived value regardless of cost increases B. ensuring that its economic value exceeds that of its competitors C. equipping customers with generic and lower priced products D. making sure the firm's costs are the lowest

B. ensuring that its economic value exceeds that of its competitors

In the relationship between per-unit cost and output, the minimum efficient scale ______. Multiple choice question. A. is where the per-unit cost is highest B. is where the per-unit cost is lowest C. is the same as economies of scale D. demonstrates that smaller is better

B. is where the per-unit cost is lowest

In a focused differentiation strategy, the competitive scope is _______ than in a traditional differentiation strategy. Multiple choice question. A. more value perceived B. narrower C. less cost-focused D. broader

B. narrower

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 ______. Multiple choice question. A. alliances B. position C. industry D. liabilities

B. position

Economies of scale present an opportunity to increase profits because as the number of units within the relevant range increases, fixed costs ______. Multiple choice question. A. increase only slightly B. stay the same C. decrease dramatically D. vary only depending on the number of units produced

B. stay the same

A firm's strategic profile based on value creation and cost is called its ______. Multiple choice question. A. strategic control B. strategic position C. strategic trade-offs D. strategic alliance

B. strategic position

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? Multiple choice question. A. (V - C)A > (V - C)C B. (V - C)A < (V - C)B C. (V - C)A > (V - C)B D. (V - C)A = (V - C)B

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

Why does the learning curve go down when productivity is considered? Multiple choice question. A. Learning cuts into the amount of time workers have, resulting in decreased productivity. B. The challenge of learning is an uphill battle, leading to decreases in worker morale. C. As workers repeatedly engage in an activity, they become more efficient, driving down costs. D. A large number of people can learn at the same time, leading to economies of scale.

C. As workers repeatedly engage in an activity, they become more efficient, driving down costs.

A firm pursuing a blue ocean strategy can increase its profit margins by implementing which of the following pricing options? (Check all that apply.)

Charge a higher price than the cost leader. Charge a lower price than the differentiator.

Which of the following best exemplifies a company that successfully uses a differentiation strategy? Multiple choice question. A. Company Z sells a product at a much higher price than similar products sold by its competitors. B. Company Y offers a product similar to the products of its competitors but at a much lower cost. C. Company W introduces a new product in a market that has no competitors. D. Company X strengthens its brand by marketing a product with an innovative feature.

D. Company X strengthens its brand by marketing a product with an innovative feature.

Which of the following best defines economies of scope? Multiple choice question. A. They are the choices between a cost or value position. B. They are the sizes of the markets in which a firm chooses to compete. C. They are the strategies that seek to create higher value for customers than the value that competitors create. D. They are the savings that come from producing two or more outputs at less cost than producing each output individually.

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

For a differentiation strategy to strengthen a company's strategic position and boost its competitive advantage, ______. Multiple choice question. A. an increase in costs must exceed the increase in value creation B. any increase in costs is unacceptable C. any increase in value creation must not be more than the increase in costs D. an increase in value creation must exceed the increase in costs

D. an increase in value creation must exceed the increase in costs

Economies of scale are ______. Multiple choice question. A. increases in cost-leadership business level strategy B. decreases in economic value due to competitive parity C. increases in minimum efficiencies of scale D. decreases in cost per unit as output increases

D. decreases in cost per unit as output increases

How to compete on a business level is defined by the variables value and cost. Together they define the ______. Multiple choice question. A. perceived economic value B. potential economic value C. the strategic fit D. economic value created

D. economic value created

A firm's competitive advantage is determined jointly by _____________ and firm effects. Multiple choice question. A. cost position B. strategic groups C. value position D. industry effects

D. industry effects

Determining the products the customer wants and needs answers the ______ question of competition. Multiple choice question. A. who B. how C. why D. what

D. what

What is one of the benefits of pursuing a differentiation strategy when it comes to the power of suppliers?

Differentiation provides protection against an increase in input prices.

A firm that pursues a differentiation strategy will often find that the added expense of offering new or unique product features offsets the increase in perceived value, and profit margins begin to erode. This underscores the importance of ____________________ control for firms pursuing a differentiation strategy.

cost

A(n) ______ strategy attempts to increase the perceived value of a product while controlling costs. Multiple choice question. A. cost-leadership B. competitive implementation C. differentiation D. integrated balanced approach

C. differentiation

Whereas the firm's strategic position can be considered either differentiated or cost-focused, the scope of competition is considered ______. Multiple choice question. A. comparative or contrasting B. active or inactive C. narrow or broad D. thin or wide

C. narrow or broad

A differentiation strategy is typically associated with ______ pricing. Multiple choice question. A. excessive B. disadvantaged C. premium D. virtual

C. premium

One way that a company can try to avoid problems resulting from diseconomies of scale is to ______. Multiple choice question. A. take a slower, more regimented approach to making decisions B. grow larger and more hierarchical C. structure the company into smaller units D. increase bureaucratic controls

C. structure the company into smaller units

A firm's strategic position is determined by the relationship of which two variables? Multiple choice question. A. number of different products in the firm's portfolio and countries in which they are sold B. number of products sold and price of the product C. value creation and cost D. supply and demand

C. value creation and cost