Policy Ch.6

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

experience curve

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

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

Why do many firms fail to successfully implement a blue ocean strategy? because too many other companies already try to implement a blue ocean strategy, making it hard to compete that way because they become involved in situations involving ethical dilemmas because they merge with international competitors for value creation because they end up being "stuck in the middle," unable to increase value and lower costs at the same time

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

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

business-level strategy`

Which type of strategy is being used if a company offers a product at a lower cost than its competitors? blue ocean strategy cost-leadership strategy focused differentiation strategy differentiation strategy

cost-leadership 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). minimum efficient maximum effective cube square superstore

cube square

How to compete on a business level is defined by the variables value and cost. Together they define the ______. perceived economic value potential economic value the strategic fit economic value created

economic value created

How to compete on a business level is defined by the variables value and cost. Together they define the ______. potential economic value perceived economic value economic value created the strategic fit

economic value created

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

value creation and cost

Which capability is required to create superior product features? accounting sales marketing R&D

R&D

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

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

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

cost-leadership

Which of the following are considered the two generic business-level strategies? value gap cost-leadership oligopoly differentiation monopolistic competition

cost-leadership differentiation

Business-level strategy addresses which overarching question? What should we sell? What should we produce? How should we compete? How should we treat our employees?

How should we compete?

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. A firm invests a significant amount of money into a new customer service call center, resulting in a minimal increase in perceived value. A firm releases a new complementary product that decreases the perceived value of the original product. A firm invests in a range of new product features that result in an equal increase in costs and value creation.

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

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

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

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

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

What is one of the benefits of pursuing a differentiation strategy when it comes to the power of suppliers? Differentiation provides protection against substitute products by lowering prices. Differentiation provides protection against an increase in input prices. Differentiation results in costs that increase above acceptable thresholds. Differentiation results in the erosion of margins.

Differentiation provides protection against an increase in input prices.

Which of the following competitive forces can result in the erosion of margins for both differentiation and cost-leadership business strategies? Power of suppliers Threat of entry Power of buyers Threat of substitutes

Power of suppliers Threat of entry Power of buyers

In terms of productivity, which of the following is true of learning curves? They go down. They go up. They are volatile. They remain level.

They go down.

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 business strategy will only work if it already has superior performance. Although understanding their firm is crucial, understanding the industry is optional. They must work within existing areas of competition rather than trying to open new ones.

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

In addition to having the lowest cost, a low-cost leader is likely to have ______. high overhead a small but loyal customer base a large market share unique product offerings

a large market share

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

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

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 Blank______. value driver advantages based on product features creative destruction an experience-curve effect based on process innovation a learning curve effect based on output differential

an experience-curve effect based on process innovation

Which of the following situations would justify the use of manufacturing robots by a producer of packaged foods? an increase in demand from the market an increase in the cost of raw materials a decline in consumer demand several new competitors entering the market

an increase in demand from the market

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

an increase in value creation must exceed the increase in costs

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

charge premium pricing

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

charge premium pricing

Bundling of products and services that are consumed in tandem to create value is an example of ______. strategic trade-offs economies of scope complements premium pricing

complements

Value drivers known as ______ add value to a product or service when they are consumed in tandem with the focal product. citations constructs complements customizations

complements

The Ritz-Carlton provides a personalized customer experience based on sophisticated analysis of data gathered about each guest. This focus on ______ allows the hotel to increase its perceived value. customer service product features good value

customer service

The Ritz-Carlton provides a personalized customer experience based on sophisticated analysis of data gathered about each guest. This focus on ______ allows the hotel to increase its perceived value. good value marketing product features customer service

customer service

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? profits product features customer service complements

customer service

What are the three most important value drivers that managers can use to create a competitive advantage? customer service availability complements product features cost savings

customer service complements product features

A struggling retailer seeking to implement a blue ocean strategy is likely to experience difficulty with ______. communicating the plan to lower-level employees cutting costs and increasing value at the same time locating products that satisfy customer needs maintaining high quality customer service

cutting costs and increasing value at the same time

Economies of scale are ______. increases in cost-leadership business level strategy increases in minimum efficiencies of scale decreases in cost per unit as output increases decreases in economic value due to competitive parity

decreases in cost per unit as output increases

A ______ strategy aims to create higher value for customers by offering products with unique features but a similar level of costs to those of competing products. cost-leadership differentiation focused trade-off competitive industry

differentiation

A ______ strategy attempts to create products with unique and attractive features in order to increase the price that consumers are willing to pay. monopolistic cost-leadership differentiation premium market

differentiation

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

differentiation

A successful blue ocean strategy requires strategists to reconcile the trade-offs between ______. differentiation and cost-leadership profit margins and sales volume private and public investment number of employees and high wages

differentiation and cost-leadership

Which of the following are business strategies JetBlue pursued in order to gain a competitive advantage? differentiation and cost-leadership cost-leadership and economies of scale differentiation, cost-leadership, and economies of scale economies of scale and differentiation

differentiation and cost-leadership

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

economies of scale

Patti's Potato Chips is a national potato-chip manufacturer. Calpurnia's Crisps is a small-batch gourmet potato-chip maker. Based on just this information, which of the following is the greatest advantage Patti's has over Calpurnia's? customer service economies of scale product features complements

economies of scale

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

ensuring that its economic value exceeds that of its competitors

Larger output allows firms to invest in more specialized systems such as which of the following? enterprise resource planning software big box retail stores a general accountant manufacturing robots

enterprise resource planning software manufacturing robots

Larger output allows firms to invest in more specialized systems such as which of the following? enterprise resource planning software manufacturing robots big box retail stores a general accountant

enterprise resource planning software manufacturing robots

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

false

The cube-square rule makes it _______ for smaller stores to compete with larger retailers. harder useless just as difficult easier

harder

In terms of business strategy, blue oceans represent which of the following? increased competition increased demand untapped market space a crowded market space

increased demand untapped market space

In terms of business strategy, blue oceans represent which of the following? increased demand increased competition a crowded market space untapped market space

increased demand untapped market space

Which of the following are input factors? distribution marketing and sales information technology services capital raw materials labor

information technology services capital raw materials labor

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. input scaling learning-curve experience-curve

input

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? reduced per unit costs less intense competition from imitators an increased exposure to the threat of price wars the ability to charge a premium price

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

Which of the following are components of a cost-leadership strategy? highest prices in the industry lowest costs in the industry acceptable value unique product features

lowest costs in the industry acceptable value

Tesla has an 80% learning curve, which means that ______. per-unit cost drops 20% whenever output doubles 20% of workers will never fully learn their jobs workers need to spend 80% of their time learning company efficiency has risen by 80%

per-unit cost drops 20% whenever output doubles

Two important features that managers can adjust in an effort to improve the firm's strategic position are ______. customer service and investment value planned emergence and product features investment value and planned emergence product features and customer service

product features and customer service

Which of the following are input factors? distribution raw materials information technology services labor marketing and sales capital

raw materials information technology services labor capital

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

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

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. red blue green black

red

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

reducing costs below those of competitors while maintaining a similar value

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

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

Economies of ______ are the savings that come from producing two or more different outputs at a lower cost than producing each output individually. scale regulation integration scope

scope

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

stay the same

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

stay the same

A firm's strategic profile based on value creation and cost is called its ______. strategic alliance strategic control strategic position strategic trade-offs

strategic position

The perceived value that a company creates for consumers less the company's costs to create the value equals ______. a strategic trade-off the economic value created a differentiation strategy industry attractiveness

the economic value created

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

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

Which two of the following variables can managers primarily manipulate in order to answer the question, "How should we compete?" cost price value size style

value cost

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

true

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

true

A firm that manages to avoid competition entirely by offering a product or service that creates an uncontested market space is engaging in ______. value innovation a red ocean strategy economies of scale cost leadership

value innovation