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Due to its large sales volume and low cost structure, Quick Serve Mini-Marts enjoys a cost leadership position. Which of the following scenarios might threaten Quick Serve's competitive advantage?

A new competitor is perceived to provide similar value, but in addition offers innovative self-checkout.

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.

Swan Song is a spa that caters to the needs of a small percentage of highly health-conscious consumers. It offers state-of-the-art treatments in a luxurious setting. Since there are very few spas that offer the same unique services, customers are willing to pay a premium price for its products and services. In this scenario, Swan Song is following a

focused differentiation strategy.

When a blue ocean strategy goes bad, a firm has neither a clear differentiation nor a clear cost-leadership profile. This situation is referred to as

stuck in the middle.

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.

A _____ primarily details the goal-directed actions managers take in their quest for competitive advantage when competing in a single product market.

business-level strategy

Heirloom Furniture is a brand reputed for its wide variants of sofas that introduced a new range of mattresses and bed frames 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 Heirloom applying?

economies of scope

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

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

Chique Apparel offered clothing at a low price but failed to differentiate its product as being exclusive.

How is differentiation parity different from cost parity?

Differentiation parity deals with value not cost.

While Fun Frames incurs a cost of $12 for a pair of eyeglasses, Highwire, its competitor, manufactures a pair of glasses at $10. Both the companies are able to sell their glasses for a maximum of $30 per pair. Which of the following statements is true in this scenario?

Fun Frames and Highwire have achieved differentiation parity.

What must a cost-leadership strategy accomplish to be successful?

It must reduce the firm's cost below that of its competitors while offering adequate value.

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

experience curve

Meadows Mowers initially spent nine man-hours to assemble a lawnmower. But as the production doubled, the number of hours spent on assembling a mower reduced by 20 percent. This increase in productivity reduced the company's cost per unit. What is this phenomenon referred to as?

learning-curve effect

Combining economies of learning with the existing production technology allows a firm to

move down a given learning curve.

The primary goal of a firm pursuing a blue ocean strategy should be to

offer a differentiated product or service at a low cost.

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.

Which of the following best describes a strategic trade-off?

the tension between value creation and the pressure to keep costs in check

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.

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

watch maker that sells high-end, premium watches.