Chapter 2 and Chapter 4

________ can force a cost leader to reduce its prices, but not below the level at which the cost leader's next-most-efficient competitor can earn average returns. a. Customers b. Suppliers c. Competitors d. Potential entrants to the industry

a. Customers

Wal-Mart is the nation's largest employer and second-largest company by revenue. What does this suggest about the industry's structure? a. Wal-Mart can exert considerable pressure as a buyer. b. Wal-Mart's presence in a market reduces rivalry. c. Wal-Mart faces significant substitutes. d. Wal-Mart increases the threat of new entrants.

a. Wal-Mart can exert considerable pressure as a buyer.

Wal-Mart follows a cost leadership strategy. This strategy offers goods or services with features that are: a. acceptable to customers. b. highly valued by customers. c. unavailable at other competitors' stores. d. able to meet unique needs of customers.

a. acceptable to customers.

Examination of Southwest Airlines' ________ shows its tightly integrated activities that make it difficult for competitors to imitate its cost leadership/differentiation strategy. a. activity map b. value chain c. profit pool d. information network

a. activity map

The activities needed to implement a cost leadership strategy ________ the activities needed to implement a focused cost leadership strategy. a. are virtually identical to b. vary mainly in the primary activities from c. vary mainly in the support activities from d. vary greatly in both primary and support activities from

a. are virtually identical to

An integrated and coordinated set of commitments and actions designed to exploit core competencies and gain competitive advantage in a specific product market is a definition of: a. business strategy. b. product strategy. c. strategic vision. d. sustained competitive advantage.

a. business strategy

Counterfeit products would be LEAST harmful to a company following the ________ strategy. a. cost-leadership b. differentiation c. integrated cost-leadership/differentiation d. five forces

a. cost-leadership

Brand loyalty is most likely to be found among customers of companies using the ________ strategy. a. differentiation b. cost-leadership c. focus d. five forces

a. differentiation

Clinique Laboratories, Inc., offers make-up and skin care products that are hypoallergenic while still offering fashionable colors and features. Clinique's prices are similar to those of other "department store" cosmetic lines, but double or triple the costs of "drugstore" cosmetic lines. This is a differentiation strategy that provides products: a. for customers who value the product features more than they value low prices. b. suited to the typical purchaser of make-up and skin care products. c. that the target customer perceives as having multiple substitutes in the marketplace. d. that "sell themselves" and are not dependent on customer loyalty.

a. for customers who value the product features more than they value low prices.

The impact of Hurricane Katrina on the oil industry would be classified as part of the ________ environment for a firm in the pharmaceutical industry. a. general b. competitor c. global d. industry

a. general

An effective cost leader seeks to continually improve levels of efficiency to enhance profit margins. Which of the following elements of industry structure does this affect most directly? a. potential entrants b. substitutes c. buyer power d. supplier power

a. potential entrants

The trend among U.S. middle-market consumers is that: a. price and value-for-the money is the driving factor in their purchases. b. they want to trade up to higher levels of quality and taste, and they are willing to pay premium prices for these products. c. the demand for unique and innovative products is driving out companies that have traditionally relied on the cost-leadership strategy. d. they are losing loyalty to brands and to companies which makes it difficult for firms to follow a differentiation policy.

a. price and value-for-the money is the driving factor in their purchases.

A firm that analyzes the past purchases of customers and tailors individualized sales pitches to these customers is making use of information gained through: a. scanning. b. monitoring. c. forecasting. d. assessing.

a. scanning

Expected retaliation against a new entrant to an industry can be expected to be severe under all the following conditions EXCEPT: a. strong government licensing requirements exist. b. industry growth is constrained. c. the existing competitor in the market has significant resources. d. the assets of existing competitors have few other uses.

a. strong government licensing requirements exist.

If buyers perceive the industry's product as a commodity: a. the rivalry in the industry will increase. b. price competition among competitors will decrease. c. the buyers will make their decisions based on quality. d. high switching costs exist.

a. the rivalry in the industry will increase.

Proportion, Inc., a manufacturer of specialty medical equipment for the disabled, has found an overseas contractor who could save the company 20 percent in manufacturing costs. The critical factor in Proportion's decision to outsource now is: a. whether there will be enough flexibility to handle special orders. b. whether the cost of transportation will increase. c. the skill level of the outsourcing company's employees. d. the U.S. government's growing opposition to the use of outsourcing by U.S. companies.

a. whether there will be enough flexibility to handle special orders.

A computer-controlled process that is used to produce a variety of products in moderate, flexible quantities with a minimum of manual intervention is called a/an: a. Total Quality Management System. b. Flexible Manufacturing System. c. Integrated Manufacturing Process. d. Differentiated Manufacturing Program.

b. Flexible Manufacturing System.

Which of the following trends is attributable to the age structure changes occurring worldwide? a. An aging workforce worldwide. b. Outsourcing of work from the U.S. to countries with growing high-tech sectors. c. The decreasing need for health care in the developed world. d. Increasing numbers of tax payers in the developed world.

b. Outsourcing of work from the U.S. to countries with growing high-tech sectors.

Which of the following systems would it be most useful for a small manufacturer of a line of innovative, high-performance, expensive recumbent bicycles to use? a. Flexible Manufacturing System b. Total Quality Management c. Integrated Manufacturing Process d. Enterprise Resource Management

b. Total Quality Management

Customer relationship management: a. is part of a Total Quality Management System. b. can be used to determine the trade-offs customers are willing to make between differentiation and cost. c. is most important for firms following the cost leadership strategy. d. allows companies to reduce the amount of time needed to introduce innovative products to the marketplace.

b. can be used to determine the trade-offs customers are willing to make between differentiation and cost.

The difference between the cost-leadership and the differentiation strategy and the focused cost leadership and the focused differentiation strategy is their: a. competitive advantage. b. competitive scope. c. use of reach, richness, and affiliation. d. primary and support activities on the value chain.

b. competitive scope.

Vermillion Restaurants operates three chains of moderately priced restaurants throughout the West, Southwest, and South. It is important to keep prices of menu items low. Consequently, the strategic leaders of Vermillion Restaurants are: a. concerned about the increasing average age of the U.S. population. b. concerned about government increases in border security. c. worried about the northward population movement in the U.S. d. the increasing trend in dual-career couples which increases household income.

b. concerned about government increases in border security.

In the current business environment, markets are identified by ________ rather than ________. a. geographic boundaries, customers b. customers, industry boundaries c. the value chain, competitors d. competitors, the value chain

b. customers, industry boundaries

The analysis process includes each of the following activities EXCEPT: a. scanning. b. deciphering. c. forecasting. d. assessing.

b. deciphering.

You are the agent for an internationally-known, prestigious film star at the peak of his career. In order to maximize his earning potential, your client is willing to be the spokesman for an appropriate company's products (for a very large fee). You would have the best chance of placing your client if you target firms with the ________ strategy. a. focused cost leadership b. focused differentiation c. global integration d. market segmentation

b. focused differentiation

Firms within strategic groups: a. follow dissimilar strategies. b. have similar strategies. c. typically engage in higher levels of inter-group rivalry than intra-group rivalry. d. exist almost exclusively in the manufacturing sector.

b. have similar strategies.

Business-level strategies detail commitments and actions taken to provide value to customers and gain competitive advantage by exploiting core competencies: a. in the selection of industries in which the firm will compete. b. in specific product markets. c. for all of the businesses in which the firm operates. d. for each particular geographic location in which the firm operates.

b. in specific product markets.

A number of independent hospitals and nursing homes have banded together to purchase medical, housekeeping, and other supplies in bulk. They have done this in order to: a. take advantage of substitute products. b. increase their bargaining power as buyers. c. decrease the intensity of competition in the healthcare industry. d. reduce the bargaining power of customers.

b. increase their bargaining power as buyers.

The business strategy that benefits the most from investments in TQM is: a. cost-leadership. b. integrated cost-leadership/differentiation. c. focused cost-leadership. d. focused differentiation.

b. integrated cost-leadership/differentiation.

When a firm following the integrated cost leadership/differentiation strategy fails to perform its primary and support activities in an optimal manner: a. its value chain is faulty. b. it is "stuck in the middle." c. its competitive scope is too narrow. d. it has lost touch with its market segment.

b. it is "stuck in the middle."

The competition among firms in the same strategic group will be ________ between firms belonging to different strategic groups even if they sell similar products or services. a. similar in intensity to that b. more intense than that c. less intense than that d. variable in intensity than that

b. more intense than that

A service that is effectively differentiated from that offered by rivals has qualities that are: a. perceived as standardized by the customer. b. perceived by the customer to add value for which they are willing to pay a premium. c. valued by the typical industry customer. d. seen as essential attributes

b. perceived by the customer to add value for which they are willing to pay a premium.

All of the following are examples of barriers to entry into an industry EXCEPT: a. frequent-stayer programs in the lodging industry. b. production techniques that keep unit costs stable as production increases. c. highly effective product advertising campaigns. d. the requirement for government permits.

b. production techniques that keep unit costs stable as production increases.

Using Internet technology and e-commerce to increase information volume, Amazon has built a cost effective capability around information exchanges with its customers. This represents which of the three dimensions of service? a. reach b. richness c. affiliation d. advantage

b. richness

When firms compete aggressively trying to attract competitors' customers from rivals, it is an indication of: a. an industry with low exit barriers. b. slow industry growth. c. increasing economies of scale. d. high bargaining power among buyers.

b. slow industry growth.

Mandeville Industrial Lubricants is the low-cost leader in its industry. The increasing price of petroleum has caused its cost of manufacturing to increase. As the low-cost leader, MIL may be able to maintain its above-average earnings by: a. competing with rivals on the basis of product features. b. passing on the increased costs of production to its customers. c. absorbing the increased costs. d. exiting the industry.

c. absorbing the increased costs.

Without proper ________, the firm cannot understand the data it collects from the external environment. Despite this fact, only a small percentage of firms use formal processes to perform this function. a. scanning b. monitoring c. assessing d. forecasting

c. assessing

Focus strategies are: a. associated only with the cost leadership approach. b. associated only with the differentiation. approach. c. associated with both cost leadership and differentiation strategies. d. balance cost leadership and differentiation simultaneously.

c. associated with both cost leadership and differentiation strategies.

Montane Products, which has only one plant, is the major employer in a small town in Wyoming. If the plant closes, not only will it be nearly impossible for the workers to replace their jobs, many businesses in the town will suffer: retailers, grocers, auto repair shops, etc. Montane has been owned and operated by the same local family for three generations. This is an example of: a. slow industry growth. b. high strategic stakes. c. barriers to exit. d. competitive intensity.

c. barriers to exit.

The set of data and information the firm gathers to better understand and better anticipate competitors' objectives, strategies, assumptions, and capabilities is called: a. value chain projection. b. market mapping. c. competitor intelligence. d. industrial wisdom.

c. competitor intelligence.

In order to meet and exceed customer expectations, firms must: a. constantly manipulate customers' perceptions of their wants. b. address the who, what, when, where, how, and why as they apply to need satisfaction. c. continuously improve, innovate, and upgrade their core competencies. d. successfully defend their established core competencies to repel innovation and imitation.

c. continuously improve, innovate, and upgrade their core competencies.

Value creating strategies satisfy customer needs through: a. firm resources. b. firm assets. c. core competencies. d. capabilities.

c. core competencies.

External environmental conditions: a. are changing so rapidly that firms must react to emerging forces rather than predicting changes. b. exist separately from the firm's internal characteristics and require separate strategic attention by the firm. c. create threats and opportunities for firms. d. are relatively weak influences on the firm's profitability.

c. create threats and opportunities for firms.

In general, the real income of U.S. consumers has been: a. stable. b. increasing. c. declining. d. cyclical.

c. declining.

Excelsior Research has developed an innovative product that was the result of a long and very expensive process. This product is a significant improvement over its major competitor's product, but the market for the product is limited in size and there is a ceiling on the amount the potential buyers will spend. In order to recoup its investment, Excelsior needs to: a. obtain government protection through tariffs from overseas competitors who may steal its product design. b. outsource the manufacture of this product to save costs. c. enter the international market to increase the market for its product. d. make certain that the patent on its invention is strong.

c. enter the international market to increase the market for its product.

Focus strategies: a. shelter a firm from the risks associated with industry-wide strategies because of their niche focus. b. allow a firm to avoid global risk by focusing on niches in national or regional markets. c. face different types of risks than industry-wide strategies. d. are more likely to fail than industry-wide strategies.

c. face different types of risks than industry-wide strategies.

Through ________ a firm is able to determine the proper time to introduce new products. a. scanning b. monitoring c. forecasting d. assessing

c. forecasting

As their loyalty to a brand ________, customer's sensitivity to price rises ________. a. increases, remains the same b. decreases, decreases c. increases, decreases d. decreases, remains the same

c. increases, decreases

The five forces of competition determine the ________ and the industry's profit potential. a. value chain of the industry b. industry's profit pool c. intensity of competition in the industry d. industry's boundaries

c. intensity of competition in the industry

The Vioxx scandal that has major negative implications for its manufacturer, Merck, is mainly a function of events in the ________ segment of the general environment. Vioxx a prescription pain medication is suspected of causing life-threatening side effects. a. technological b. economic c. political/legal d. sociocultural

c. political/legal

The ________ dimension of relationships with customers has to do with the firm's access to and connection to its customers. a. affiliation b. richness c. reach d. responsiveness

c. reach

A company using a business strategy with a narrow scope: a. is following a cost leadership business strategy. b. is focusing on a broad array of geographic markets. c. seeks to limit the group of customer segments served. d. faces a decreasing number of activities on its value chain.

c. seeks to limit the group of customer segments served.

The general environment consists of each of the following factors EXCEPT: a. demography. b. sociocultural influence. c. substitute products. d. technology.

c. substitute products.

Using strategic groups to understand an industry's competitive structure requires the analyst to plot all the following EXCEPT: a. how firms make pricing decisions. b. the product quality of the firms. c. the geographic location of the firms. d. the distribution channels the firms use.

c. the geographic location of the firms.

There are only two shipyards in the U.S. that manufacture a certain type of craft for the U.S. Navy and Coast Guard. The shipyards also manufacture these craft for the recreational cruise industry and for international commercial shipping lines, which make up 70 percent of their sales. These two shipyards have power as a supplier to the military for all the following reasons EXCEPT: a. satisfactory substitute products are not available. b. the government is not a significant customer for the shipyards. c. the shipyards pose a credible threat of forward integration. d. they dominate the industry.

c. the shipyards pose a credible threat of forward integration.

In a company using the cost leadership strategy, a human resources value-creating activity would be: a. a bonus system for ideas leading to new products. b. the use of some subjective performance appraisal measures. c. training programs to improve employee efficiency. d. extensive career planning for employees.

c. training programs to improve employee efficiency.

What factor has most affected the ability of workers to move away from metropolitan areas and still maintain their jobs with companies in distant locations? a. Growing numbers of dual career couples. b. Increasing use of flextime by companies. c. Improved public and private transportation. d. Advances in communications technology.

d. Advances in communications technology.

Which of the following statements is TRUE? a. The Swing and the Baby Boom generations are basically similar in their needs, but Generation X is quite different than the Swing and Baby Boom generations in its needs. b. It is illegal to segment consumer markets on lifestyle grounds. For instance, marketing to the gay community is considered discriminatory. c. Consumer markets can be segmented, whereas industrial markets are all broad-based. d. Any human characteristic can be the basis for market segmentation.

d. Any human characteristic can be the basis for market segmentation.

Brinker's Dairy, a family-owned farm in the Midwest, is having difficulty competing with the large commercial dairies that dominate the wholesale milk market. Brinker's Dairy is considering taking a focus strategy. Which of the following actions would NOT be consistent with a focus strategy? a. Converting to organic processes and targeting the natural-foods customer. b. Switching from selling milk to wholesalers to producing boutique cheese from the dairy's milk. c. Marketing the dairy's milk directly to the customer instead of going through the wholesaler. d. Purchasing neighboring dairies in order to increase production and gain more market share.

d. Purchasing neighboring dairies in order to increase production and gain more market share.

Which of the following is NOT a common risk associated with the differentiation strategy? a. Customers find the price gap between the low-cost product and the differentiated product too large. b. Customers' experience with other products may narrow their perception of the value of a product's differentiated features. c. Counterfeit goods are widely available to customers. d. Suppliers of raw materials erode a firm's profit margin with price increases.

d. Suppliers of raw materials erode a firm's profit margin with price increases.

Firms use ________ to increase customer satisfaction, cut costs, and reduce the amount of time required to introduce innovative products to the market. a. tightly integrated activity maps b. information networks c. Flexible Manufacturing System d. Total Quality Management Systems

d. Total Quality Management Systems

An industry is best described as consisting of: a. a group of firms producing the same products or services. b. firms producing with comparable levels of vertical integration. c. firms that sell identical products to the same customer base. d. a group of firms producing products that are close substitutes.

d. a group of firms producing products that are close substitutes.

Which of the following is NOT an entry barrier to an industry? a. retaliation expected by competitors b. economies of scale c. customer loyalty to a product d. bargaining power of buyers

d. bargaining power of buyers

Firms use their ________ to implement value-creating strategies and to meet customer needs. a. differentiated activity maps b. Flexible Manufacturing Systems c. information networks d. core competencies

d. core competencies

A particular specialty retail store has a location close to the customers for this particular selection of merchandise. Any competitor wishing to enter this market would have to persuade potential customers to drive an inconvenient distance to their store. This type of barrier to entry is classified as: a. access to distribution channels. b. product differentiation. c. switching costs. d. cost disadvantages independent of scale.

d. cost disadvantages independent of scale.

The risks of the differentiation strategy include: a. balancing low price and high differentiation is difficult. b. other firms being able to match the low price of the firm. c. production equipment may become obsolete due to innovation by competitors. d. customers deciding that the differentiated product features are not worth the price.

d. customers deciding that the differentiated product features are not worth the price.

The line between ethical and legal practices in gathering competitor intelligence is especially blurry when considering: a. multiple board memberships held by prominent persons. b. hiring of employees from competitors. c. international competitors. d. electronic transmissions.

d. electronic transmissions.

The risks of a cost leadership strategy include all the following EXCEPT: a. investments in manufacturing equipment can become obsolete due to innovation. b. firms may fail to understand customers' perceptions of competitive levels of differentiation. c. competitors may learn how to successfully imitate the company's product. d. firms following the integration strategy may undercut the firm's prices.

d. firms following the integration strategy may undercut the firm's prices.

A company limiting the group of customers that it serves is following a ________ strategy. a. fragmentation b. segmentation c. niche d. focus

d. focus

The increasing importance and rapidity of technological change makes the function of ________ more difficult and more critical to organizational survival. a. scanning b. monitoring c. assessing d. forecasting

d. forecasting

An environment, which is composed of elements in the broader society that can influence an industry and the firms within it, is the ________ environment. a. industry b. competitive c. sociocultural d. general

d. general

The generic business strategy that carries the most risk, especially if it does not establish a leadership position is: a. cost-leadership. b. differentiation. c. either of the focus strategies. d. integrated cost leadership/differentiation strategy.

d. integrated cost leadership/differentiation strategy.

The most important activity on the value chain for firms competing on the basis of cost is: a. marketing. b. operations. c. procurement. d. logistics.

d. logistics.

Clustering people with similar needs into individual and identifiable groups is called: a. stereotyping the consumer. b. consumer profiling. c. customer differentiation. d. market segmentation.

d. market segmentation.

The four dimensions of competitor analysis include all the following EXCEPT determining the firm's: a. future objectives. b. assumptions. c. capabilities. d. organizational culture.

d. organizational culture.

The fastest growing group of contingency workers is in the ________ area. a. engineering b. hotel, restaurant, and resort c. higher education d. technical and professional

d. technical and professional

The entry of a new competitor to an industry will result in lower returns for competing firms unless: a. the new competitor is inefficient. b. the new competitor's product prices are higher. c. the new competitor's products are inferior in quality. d. the demand for the product is growing.

d. the demand for the product is growing.

The five forces model shows that the stronger the competitive forces in the industry are: a. the more stable is the power balance between buyers and suppliers. b. the more likely the industry is going to become globalized. c. the higher the potential profit pool. d. the less attractive the industry.

d. the less attractive the industry.

An analysis of the economic segment of the external environment would NOT include: a. interest rates. b. international trade. c. the strength of the U.S. dollar. d. the power of banks to increase service charges on checking accounts.

d. the power of banks to increase service charges on checking accounts.

Competitor intelligence could ethically come from all the following EXCEPT: a. Web searches. b. SEC filings. c. product displays at trade shows. d. wiretapping.

d. wiretapping.