Chapter 6

________ is best described as decreases in cost per unit as output increases. A. Economies of scale B. Economies of replication C. Time compression economies D. Economies of scope

A. Economies of scale

What must a cost-leadership strategy accomplish to be successful? A. It must increase the firm's cost above that of its competitors while offering adequate value. B. It must reduce the firm's cost below that of its competitors while offering adequate value. C. It must increase the firm's cost above that of its competitors while offering superior value. D. It must reduce the firm's cost below that of its competitors while offering superior value.

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

How did Marriott use economies of scope to achieve greater economic value than its competitors? A. Marriott lowered its cost structure by focusing its production assets on one type of hotel, which increased the diversity of its hotel line and thus its differentiated appeal. B. Marriott lowered its cost structure by sharing its production assets over several types of hotels, which increased the diversity of its hotel line and thus its differentiated appeal. C. Marriott sees decreases in cost per hotel unit as number of customers increases. D. Marriott sees increases in cost per hotel unit as number of customers increases.

B. Marriott lowered its cost structure by sharing its production assets over several types of hotels, which increased the diversity of its hotel line and thus its differentiated appeal.

Tangles Costume Jewelry offers slightly lower quality merchandise than competitors at a much lower price. What strategy is Tangles using? A. niche marketing B. cost-leadership C. differentiation D. product diversification

B. cost-leadership

A differentiation strategy works best when a A. firm's differentiated products are commoditized, and costs of providing uniqueness do not rise above the customer's willingness to pay. B. firm has tangible resources, its focus of competition shifts to price, and equivalent substitutes are readily available. C. firm has intangible resources, is able to pass on increases in supplier cost to the customer, and its differentiation appeal creates customer loyalty. D. firm's focus of competition shifts to price, and when increasing differentiation of product features do not create additional value.

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

How is a cost-leader protected from threats from powerful suppliers? A. It is able to create a significant difference between perceived value and current market prices. B. It is more able to absorb price increases through accepting lower profit margins. C. It is more able to absorb price increases through generating higher profit margins. D. It is able to create a significant difference between actual value and future market prices.

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

Which of the following best explains why a blue ocean strategy is difficult to implement? A. It requires the combination of fundamentally similar strategic positions—differentiation and strategic innovation. B. It requires the reconciliation of fundamentally different strategic positions—differentiation and low cost. C. It combines the benefits of similar strategic positions—differentiation and low cost. D. It requires the reconciliation of fundamentally different strategic positions—differentiation and strategic innovation.

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

Starfish Sodas has successfully achieved a competitive advantage in the soft drink industry as a differentiator. Which of the following scenarios would undermine Starfish's position? A. Starfish improves the recipe for its most popular soda without increasing the price. B. Starfish's customers start to consider soda a commodity. C. Starfish's product has not established an acceptable standard of quality. D. Starfish introduces a new biodegradable bottle that raises cost and perceived value.

Starfish's customers start to consider soda a commodity.

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. create higher value creation and thus generate greater sales. B. gain a market share and make up the loss in margin through increased sales. 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.

gain a market share and make up the loss in margin through increased sales.

A blue ocean strategy differs from a low-cost strategy in that A. economies of scale are more important to a blue ocean strategy, while economies of scope are more important to a cost-leader. B. 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. C. the focus of a blue ocean strategy is on lowering the economic value created, whereas a cost-leader focuses on increasing the economic value created. D. a blue ocean's research and development focus is on process technologies, and a cost-leader's focus is on product technologies.

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.