CH 4&5

Taurus Inc. usually produces 5,000 handcrafted products in a day. Recently, the demand for handcrafted products drastically increased as one of its products became a popular item for home décor. Due to this increase, the company had to up its production level to 10,000 products per day. This, however, decreased the price of individual products. This scenario best illustrates _____. A) economies of finance B) economies of scale C) economies of scope D) economies of wealth

B) economies of scale

Which of the following is true of product differentiation? A) It does not typically require higher costs. B) It is independent of intangible features such as brand image and value. C) It is a matter of customer thought and perception. D) It cannot occur when two companies use similar technologies.

C) It is a matter of customer thought and perception.

There are several cost drivers (or sources of cost advantage) that can be managed in order to establish a cost advantage/leadership. One of the basic cost drivers is: A) shifting to small-scale production processes in order to create customized products. B) creating personalized customer service in order to minimize price-sensitivity. C) access to lower-cost input factors including raw materials and labor. D) access to unique features that turn commodities into differentiated products.

C) access to lower-cost input factors including raw materials and labor.

When a firm makes choices between a cost or value/differentiation position to achieve competitive advantage, it is primarily involved in _____. A) collective bargaining B) arbitration C) strategic trade-offs D) mediation

C) strategic trade-offs

Which of the following statements is true of research and development (R&D)? A) Eliminating R&D helps firms to lead in launching new product designs. B) Adding R&D allows a firm to have a cost advantage over competitors. C) Small volumes of production enable firms to spread the cost of research and development (R&D), advertising, and general and administrative expenses. D) The higher a firm's R&D costs, the more the need for the company to expand globally allowing costs to be spread across more customers.

D) The higher a firm's R&D costs, the more the need for the company to expand globally allowing costs to be spread across more customers.

Why are differentiation and cost advantage strategies referred to as generic business strategies? A) They can be simultaneously pursued by a firm without any trade-offs. B) They require similar strategic positions in order to increase a firm's chances to gain competitive advantage. C) They can be applied only by businesses which have a competitive advantage. D) They can be used by any organization regardless of industry context.

D) They can be used by any organization regardless of industry context.

Firms pursuing a differentiation advantage strategy primarily seek to: A) keep their cost structures lower than that of the cost leader. B) reduce the value gap to gain a competitive advantage. C) provide products that are a direct imitation of the competitors' products. D) create higher customer perceived value than the value that competitors create.

D) create higher customer perceived value than the value that competitors create.

All of the following are sources typically used to achieve cost-advantage/leadership EXCEPT: A) controlling the cost of inputs B) leveraging economies of scale C) learning by doing D) offering products that have superior value

D) offering products that have superior value

In order for a firm to formulate an effective business-level strategy (cost-advantage/leadership or differentiation advantage), it is important to remember that competitive advantage is determined by: A) the characteristics of the firm itself. B) the absolute strategic positioning of the firm. C) the characteristics of the industry in which a firm competes. D) the characteristics of both the industry and the firm.

D) the characteristics of both the industry and the firm.

When pursing a differentiation advantage strategy, one source of differentiation is to add superior product features in order to create a level of value creation that competitors cannot easily imitate. T/F

True