BUS 189 Chapter 6

PureRinse Inc. is a brand reputed for its wide variants of body wash that introduced its range of shampoos and skin moisturizers a few years ago. Since most of its products could be produced using the same resources and technology, the company's cost structure lowered, while its product portfolio widened. In this scenario, which of the following value and cost drivers is PureRinse applying?

B. economies of scope

A firm experiences diseconomies of scale when it

C. produces at an output level beyond the minimum efficient scale

Which of the following examples uses a focused differentiation strategy?

D. a cosmetics brand that offers superior-quality skin lotion priced at 100 dollars per bottle

Bass Watches Inc. initially spent eight man-hours to assemble a wristwatch. But as the production doubled, the number of hours spent on assembling a watch reduced by 20 percent. This increase in productivity reduced the company's cost per unit. What is this phenomenon referred to as?

A. learning-curve effect

A blue ocean strategy tends to be successful only if a firm is able to rely on a _____ that allows it to reconcile trade-offs.

B. value innovation

value drivers.

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

value innovation

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

_____ 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.

A. Minimum efficient scale

A differentiation strategy works best when a

D. firm has intangible resources, is able to pass on increases in supplier cost to the customer, and its differentiation appeal creates customer loyalty.

Which of the following is a key question managers must answer to formulate an appropriate business-level strategy?

B. How will we satisfy our customer needs?

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

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

Trader Joe's successfully used a blue ocean strategy by offering lower-cost food than Whole Foods for the same market of patrons. By doing this, Trader Joe's was able to A. gain a market share and make up the loss in margin through increased sales. B. create higher value creation and thus generate greater profit margins. C. gain a market share and make up the loss in margin through increased pricing. D. create higher value creation and thus generate greater profit margins.

A

Which of the following statements is true of a strategic position?

A. Choosing a strategic position requires making important trade-offs between value and cost positions.

_____ is best described as decreases in cost per unit as output increases.

A. Economies of scale

Which of the following statements accurately brings out the difference between economies of scale and learning effects?

A. While there are no diseconomies to learning, there are diseconomies to scale.

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

A. blue ocean

A firm achieves differentiation parity ideally when

A. it creates the same customer value as its competitors.

As the cumulative output in a firm increases, managers learn how to optimize the production process and improve workers' performance through repetition. This drives down the per-unit cost. Which of the following phenomena is best described here?

A. learning effects

Lush Roses is a chain of premium hotels around the globe that charges higher prices for its rooms and suites when compared to the average industry standards. Yet, the hotel enjoys the largest market share in the industry. This is mainly due its highly responsive staff that has a strong commitment toward achieving a 100 percent guest satisfaction. In this scenario, which of the following is the key value driver?

A. superior customer service

Which of the following is more of a value driver than a cost driver?

A. superior customer service

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

A. 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.

When a firm combines experience based learning and process innovation, the firm

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

What is a value gap?

B. economic value creation

To be cost-competitive, a firm should

B. operate at the minimum efficient scale.

Which of the following statements accurately brings out the difference between economies of scale and economies of scope?

C. Economies of scope are the savings that come from producing two or more outputs from the same resources, whereas economies of scale are decreases in per-unit cost with increases in output.

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 Discount Haven's low prices. Thus, Discount Haven has a competitive advantage due to its

C. economies of scale.

The concept of a(n) _____ attempts to capture both learning effects and process improvements at firms.

C. experience curve

In contrast to a differentiator, a cost-leader will

C. focus its research and development on process technologies to improve efficiency.

Which of the following will hamper a differentiator's ability to achieve a competitive advantage?

C. lower value gap

Economies of scale do not allow firms to

C. spread their variable costs over a larger output.

Which of the following situations will have greater effects from economies of scale than from learning effects?

C. when mass manufacturing pens

Red Ocean

Compete in existing market space; beat the competition; exploit existing demand; make the value-cost trade-off; align the whole system of a firm's activities with its strategic choice of differentiation or low cost.

Which of the following contributed the most to JCPenny's failed blue ocean strategy?

D. failure to combine a cost-leadership position with a differentiation position

When Internet service providers offer free routers for subscriptions to their wireless Internet packs, the perceived value of the service offering increases. In this case, the value driver would be

D. availability of complements.