Quiz 10: Cost leadership and differentation strategies

According to the five forces model, which of the following is viewed as a major risk to a business pursuing a cost-leadership strategy?

Innovation that allows competitors to emerge with more economical replacements

_____ is best described as the output range needed to bring down the cost per unit as much as possible, allowing a firm to stake out the lowest-cost position that is achievable through economies of scale.

Minimum efficient scale

Which of the following sources of differential appeal is least effective in helping a firm sustain its advantage?

Observable product features

Body Sync Inc. is a chain of gyms. It offers a fitness package that allows its members to use the gym facilities for 12 months by paying only for 10 months. Included in the package are two health check-ups and a gym kit. These add-ons by themselves are not very valuable, but as a package they can enhance the perceived value of the service offerings. In this case, Body Sync's primary value driver is:

availability of complements.

Diseconomies of scale refer to:

increases in cost as output increases.

When a firm makes choices between a cost or value position to achieve competitive advantage, it is primarily involved in _____.

strategic trade-offs

GlamorRace is a cosmetic brand that pursues a cost-leadership strategy. Which of the following statements is true of the cosmetic brand?

It appeals to the price-conscious buyers.

Home Smart Inc. is a chain of supermarkets that sells its products at higher prices than its competitors. Yet, the supermarket chain has a large customer base due to its wide product portfolio and superior customer service. Which of the following generic business strategies has Home Smart adopted in this scenario?

Differentiation

A firm pursuing a differentiation strategy as opposed to a low-cost strategy will:

focus its research and development on product technologies to add uniqueness.

Value drivers contribute to a firm's competitive advantage only if:

the increase in value creation exceeds the increase in costs.