MGT 3121 Chapter 1

a firm that is pareto dominated by its competitors is

inefficient

Pareto Dominated

means that a firm's product or service is inferior to one or multiple competitors on all dimensions of the customer utility function.

price

meant to include the total cost of owning the product or receiving the service.

consumption utility measures

measure how much you like a product or service ignoring the effects of price and inconvenience.

Consumption Utility

measures how much you like a product or service ignoring the effects of price and the inconvenience of obtaining the product or service.

Timing

makes the difference between convenience and inconvenience

Determining customers wants and preferences is the primary function of ______.

marketing

operations

matching supply with demand is the goal

Fit attributes

are those where customer tastes may vary.

Supply

products or services

It is common for an organization to be able to improve on all three dimensions of customer utility.

False Reason: The three dimensions are typically trade-offs: improving one makes it harder to achieve another.

McDonald's and Subway have the same capabilities.

False Subway charges more to provide custom sandwiches, whereas McDonald's sells essentially premade food for less.

How far you have to drive to the store to buy an item impacts the consumption utility you associate with it.

False because consumption utility is irrespective of convenience.

If John's Pizza can deliver better-tasting, less-expensive pizza in less time than Maria's Pizza then John's Pizza _________________ dominates Maria's Pizza.

Pareto

Utility

measures your desire for a product or service. - composed of three components consumption utility, price and inconvenience.

inefficiency

can be visualized as the gap between a firm's current position and the efficient frontier.

Demand is driven by the ___________ utility of the product or service, its price, and the associated inconvenience for customers.

consumption

Inconvenience

contribute to transaction costs. Makes up two subcomponents which are location and timing.

Firm's capabilities are defined as the dimensions of the ____________ utility function it is able to satisfy.

customer

When organizations make a trade-off they focus on meeting one dimension of ______________ utility in favor of another.

customer

Capabilities

defined as the dimensions of the customer's utility function it is able to satisfy. allow companies to do well on some but not all of the subcomponents making up the customer utility function.

How far you have to drive to the store to buy an item impacts the consumption utility you associate with it.

false

The price of an item impacts the consumption utility you associate with it.

false

Performance

features of the product or service that most people agree are more desirable.

Consumption utility

measures how much you like a product or service.

Organizations can improve their business by reducing _______________ so that they do not have to sacrifice one performance dimension versus another.

inefficiency

Consumption Utility

is irrespective of convenience.

Location

makes the difference between convenience and inconvenience

Demand

is simply the set of products and services our customers want. Driven by the consumption utility of our product or service its price, and the associated inconvenience for our customers.

The more you have to wait the ______ the inconvenience component.

more

the further the location the _________ the inconvenience component.

more

There is ___________ one market in the auto industry.

more than

Organizations can improve their business by making trade-offs among the dimensions of

performance

organizations can improve their business by making trade-offs among the dimensions of

performance.

When choosing a shipping option when ordering online, customers trade off speed and ______

price

Matching supply with demand means

providing customers with what they want while also making a profit. - also the goal of operations management

customers buy products that maximize their

utility

Trade-offs between responsiveness and costs is referred to as a ____________ trade-off.

strategic

heterogeneous preferences

the fact that not all consumers have the same utility function

Economists often refer to the inconvenience component as

transaction

A pizza delivery chain offering a 30-minutes or less guarantee on their pizza orders impacts the inconvenience component of utility.

true

If price and convenience of two products are equal, the product customers associate with the highest consumption utility is likely to have the highest demand.

true

Marketing

understanding how customers derive utility from products and services

Economic theory suggests that a consumer's choice of a good or service is based on where he or she expects to achieve the highest

utility

according to economic theory, a consumer buys an SUB-instead of a passenger car because she or he expects to achieve the highest ________ from buying.

utility

demand is driven by the consumption utility for a product, its __________________, and the inconvenience for customers.

utility

one of the components of utility is consumption

utility

Strategic trade off

when selecting inputs and resources, the firm must choose between a set that excels in one direction of customer utility or another, but no single set of inputs and resources can excel in all dimensions