BCOR 460 Exam 1

Which of the following best explains why a blue ocean strategy is difficult to implement?

It requires the reconciliation of fundamentally different strategic positions—differentiation and low cost

Which of the following provides an example of a firm in a red ocean?

Walmart

AccuroDisk Inc. manufactures external hard disks for $32 per unit, and the maximum price customers are willing to pay is $47 per unit. TD Storage Inc. is a competitor of AccuroDisk Inc. that produces external hard disks for $37 per unit, and customers are willing to pay a maximum price of $50 per unit. What does this imply?

AccuroDisk creates a greater economic value than TD Storage.

As mention in Module 1, which of the following companies uses the differentiation strategy?

Cadillac & Tiffany

How is differentiation parity different from cost parity?

Differentiation parity deals with value not cost.

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.

How is a cost-leader protected from threats from powerful suppliers?

It is more able to absorb price increases through accepting lower profit margins.

TRUE or FALSE: a cost leader is the firm most likely to survive a price war

TRUE

In order to achieve a competitive advantage, the Coastal Haven Hotels, a a chain of luxury beach resorts, wants to increase its market share. Which of the following strategies is most likely to do so?

Take advantage of economies of scale and scope by opening a chain of lower-priced economy hotels that leverage the Costal Haven brand image.

From Module 1, which of the following retailers has a blue ocean strategy?

Target

True or False: An example of a company that uses the cost leadership strategy is SouthWest Airlines

True

Product features, customer service, complements are all examples of important

Value Drivers

When wireless service providers offer free or discounted mobile phones for subscriptions to their wireless voice and data service, the perceived value of the service offering increases. In this case, the value driver would be

availability of complements

DiscountHaven Inc. is a large chain of hypermarkets. It has cost benefits due to its extensive operation. The company's marketing and sales, logistics, administrative, and other such related costs get divided between a large number of product units stocked in its stores. This makes it difficult for smaller retail stores and supermarkets to compete against DiscountHaven's low prices. Thus, DiscountHaven has a competitive advantage due to its

economies of scale.

When pursuing a Blue Ocean strategy, a firm in a crowded marketplace attempts to out-compete rivals on both cost and product features with the goal of gaining market share at the expense of other competitors in the same industry. t or f

f

true or false: The goal of the differentiator is to have a smaller value gap than competitors.

false

When a differentiator charges a similar price as its competitors in the same strategic group but offers more perceived value, it

gains market share from other firms

A firm experiences diseconomies of scale when it

produces at an output level beyond the minimum efficient scale

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

strategic trade-offs

A blue ocean strategy differs from a low-cost strategy in that

the intent of a blue ocean strategy is not to be the absolute lowest-cost provider because a blue ocean must also increase perceived value.

The pursuit of both differentiation and low cost at the same time in a way that creates a leap in value for both the firm and consumers is called

value innovation.

T or F: In the "Wolters World" video from Module 1, putting the Cookie Monster character on children's tennis shoes can be seen as a cost leadership strategy

F

Red Sapphire is a wristwatch company known for its luxury watches and that follows a differential strategy. In this scenario, Red Sapphire should ideally compare its strategic position with a

watch maker that sells high-end, premium watches.

In a successful _______ strategy, the trade-offs between differentiation and low costs are reconciled.

Blue Ocean

When Simple Semiconductors was operating at the minimum effort scale of 10,000â 12,000 units per month, the firm's cost per unit was $45. However, when the output level was increased beyond 12,000 units, the cost per unit increased to $47. This increase was attributed to the wear-and-tear of the machinery, and complexities of managing and coordinating. What is this phenomenon known as?

Diseconomies of scale