MGMT 464 Exam 2 (6)
Which of the following statements is true of learning curves? A. Learning curves are captured at one point in time when output is increased. B. Learning curves can be observed in manufacturing processes and professional services. C. As cumulative output increases, the learning curve becomes less steeper. D. The steeper the learning curve, the lesser the learning effects.
B
A cost-leader is protected from the threat of new entrants primarily due to its: A. superior customer service. B. luxury goods. C. economies of scale. D. premium pricing.
C
_____ is best described as decreases in cost per unit as output increases. A. Economies of scale B. Economies of scope C. Time compression economies D. Economies of replication
A
The concept of a(n) _____ attempts to capture both learning effects and process improvements at firms. A. managerial grid B. growth matrix C. experience curve D. diminishing utility curve
C
The productivity frontier function is concave, and it captures the: A. negative correlation between economies of scale and economies of scope. B. complementary relationship between differentiation and cost-leadership strategies. C. trade-off between value creation and production cost. D. inverse relationship between experience effects and learning effects.
C
_____ is best described as the process of manufacturing a large variety of tailor-made products or services at a relatively low unit cost. A. Just-in-time manufacturing B. Mass customization C. Unit-cost production D. Product diversification
B
_____ is when a firm is searching for new knowledge that could enhance its future performance. A. Pattern recognition B. Reverse mentoring C. Exploitation D. Exploration
D
Which of the following is more of a value driver than a cost driver? A. Superior customer service B. Economies of scale C. Learning-curve effects D. Experience-curve effects
A
When Jean Cult Inc. was operating at the minimum efficient scale of 10,000-12,000 units per month, the firm's cost per unit was $20. However, when the output level was increased beyond 12,000 units, the cost per unit increased to $22. This increase was attributed to the wear-and-tear of the machinery, and complexities of managing and coordinating. What is this phenomenon known as? A. Resource ambiguity B. Diseconomies of scale C. Network effect D. Learning-curve effect
B
A firm experiences _____ when there are increases in cost per unit as output increases. A. diseconomies of scale B. economies of scope C. time compression diseconomies D. economies of flow
A
A firm pursuing a differentiation strategy as opposed to a low-cost strategy will: A. focus its research and development on product technologies to add uniqueness. B. concentrate on leveraging its economies of scale through process technologies. C. build an organization structure that relies on strict budget controls. D. create a lower economic value as compared to its competitors.
A
A firm's learning curve is steeper than that of its competitor. What does this imply? A. The firm is at an advantage when compared to its competitor. B. The firm and its competitor have achieved cost parity. C. The firm experiences negative returns to scale. D. The firm experiences diseconomies of scale when compared to the competitor.
A
A successfully implemented integration strategy allows a firm to: A. charge a higher price than the cost leader in the industry. B. create lesser economic value than the differentiator in the industry. C. reduce its value gap beyond that created by the cost leader in the industry. D. increase its price above that of the differentiator in the industry.
A
An integration strategy differs from a low-cost strategy in that: A. the intent of an integration strategy is not to be the absolute lowest-cost provider because an integrator must also increase perceived value. B. the focus of an integrator is on lowering the economic value created, whereas a cost leader focuses on increasing the economic value created. C. economies of scale are more important to an integrator, while economies of scope are more important to a cost leader. D. an integrator's research and development focus is on process technologies, and a cost-leader's focus is on product technologies.
A
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 B. Network effects C. Diseconomies of scale D. Productivity frontier
A
Both BioThink Inc. and GD Pharma Inc. have discovered similar vaccines to prevent cancer. While GD Pharma's vaccine sells at $100 per unit, BioThink sells its vaccine at $90 per unit. This price differentiation has mainly been attributed to the companies' capital decisions. While BioThink used its retained earnings to develop the vaccine, GD Pharma borrowed funds from banks to develop the vaccine. Thus, GD Pharma pays a higher interest on its capital, which makes it necessary to price its vaccine higher. Thus, the key driver for BioThink's competitive advantage is: A. low-cost input factors. B. economies of scale. C. superior customer service. D. availability of complements.
A
Coral Orchids 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 B. Low cost of input factors C. Availability of complements D. Economies of scale
A
Free Color Inc. is an apparel company that caters to the highly price-conscious customers. Through its simple apparel designs, acceptable quality levels, and minimal customer service, the company has been able to sell its merchandise at the lowest prices in the industry. Which of the following generic business strategies is Free Color applying? A. Cost-leadership B. Differentiation C. Niche marketing D. Product diversification
A
GlamorRace is a cosmetic brand that pursues a cost-leader strategy. Which of the following statements is true of the cosmetic brand? A. It appeals to the price-conscious buyers. B. Its primary value driver is product uniqueness. C. It charges a premium price for its products. D. It directly competes against luxury cosmetic brands that charge premium prices.
A
In a successful _____, the trade-offs between differentiation and low cost are reconciled. A. integration strategy B. focused differentiation strategy C. liquidation strategy D. divestment strategy
A
Innovate Electronics Inc. allows its customers to personalize their refrigerators in terms of the dimensions, the panels inside, and the color and design of the outer body. Also, customers can include additional features like in-built radios, extra lights, and cold water dispensers based on their individual requirements. The company successfully manufactures these tailor-made goods at a relatively low unit cost and provides it to the customers at a price almost equal to that of the standard refrigerators sold by other companies. What does this scenario best illustrate? A. Mass customization B. Cannibalization C. Product standardization D. Direct imitation
A
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. B. Economies of scale occur over time, whereas learning effects are captured at one point in time. C. Firms experience economies of scale when output increases, and learning effects when output decreases. D. Economies of scale reduce cost per unit, learning effects increase cost per unit.
A
A _____ primarily details the goal-directed actions managers take in their quest for competitive advantage when competing in a single product market. A. business-level strategy B. code of ethics C. mission statement D. functional-level strategy
A
A company that uses a differentiation strategy can achieve a competitive advantage as long as its: A. economic value created is greater than that of its competitors. B. value gap is lower than that of its competitors. C. strategic position is below the productivity frontier. D. products and services create a lower consumer surplus than that of its competitors.
A
A differentiator is least likely to be threatened by increases in input prices due to powerful suppliers when the: A. differentiator is able to create a significant difference between perceived value and current market prices. B. differentiator is able to significantly reduce the value gap. C. source of a competitor's differential appeal is tangible rather than intangible. D. new product features added raise costs but not the perceived value in the minds of consumers.
A
At a certain output level, the per-unit cost incurred by a firm to manufacture a product is $5. Other factors remaining constant, what will be the new per-unit cost if the cumulative output is doubled, and the firm is able to achieve an 80 percent learning curve? A. $4 B. $5 C. $3 D. $6
A
Bass Watches Inc. initially spent eight man-hours to assemble a wrist watch. 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 B. Network effect C. Black-swan event D. Time compression diseconomies
A
Value drivers contribute to a firm's competitive advantage only if: A. the increase in value creation exceeds the increase in costs. B. they can shrink the firm's value gap. C. they can restrict the firm from claiming a premium price for its products. D. the decrease in perceived value leads to an increase in costs.
A
When a firm applies its current knowledge to enhance its performance in the short term, it is referred to as _____. A. exploitation B. exploration C. pattern recognition D. lateral thinking
A
When a firm combines experience based learning and process innovation, the firm: A. jumps to a steeper learning curve. B. experiences an increase in per-unit cost. C. loses its competitive advantage. D. moves down the existing learning curve.
A
When a firm is successful at pursuing an integration strategy, _____. A. investments in differentiation are complements B. value and cost exhibit a positive correlation C. low cost acts as a substitute D. investments in process and product technologies are substitutes
A
When a firm operates at the minimum efficient scale, the: A. returns to scale are constant. B. cost per unit is the highest. C. firm experiences diseconomies of scale. D. firm attains the highest cost position.
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. B. Strategic positions are fixed; they do not change like the environment. C. Differentiation and cost leadership require similar strategic positions. D. A firm is said to have a competitive advantage when it ends up with strategic positions below the productivity frontier.
A
_____ 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 B. Break-even output C. Maximum output capacity D. Optimum sustainable yield
A
A firm is said to have a competitive advantage over its rivals when it: A. experiences diseconomies of scale. B. reaches the productivity frontier. C. moves up a given learning curve. D. lowers the value gap created.
B
According to the five forces model, which of the following is viewed as a major risk to a business pursuing a cost-leadership strategy? A. Competition switching from non-price attributes to pricing B. Innovation that allows competitors to emerge with more economical replacements C. New entrants with small production scale D. Suppliers requesting a 2% price increase across the industry
B
At a certain output level, the per-unit cost incurred by a firm to manufacture a product was $60. Once the cumulative output doubled, the cost per unit reduced to $54. All other factors remaining constant, the firm has been able to achieve a(n): A. 80 percent learning curve. B. 90 percent learning curve. C. 60 percent learning curve. D. 54 percent learning curve.
B
BodyBlush 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 BodyBlush applying? A. Mass customization B. Economies of scope C. Learning-curve effect D. Network effect
B
Combining economies of learning with the existing production technology allows a firm to: A. move up a given experience curve. B. move down a given learning curve. C. jump to a less steeper learning curve. D. jump to a flatter experience curve.
B
Diseconomies of scale refer to: A. decreases in cost as profit increases. B. increases in cost as output increases. C. increases in economic value as per-unit cost decreases. D. decreases in profit when consumer demand decreases.
B
Home Smart Inc. is a chain of supermarkets that sells its products at higher prices than its competitors. Yet, the supermarket chain has a large customer base due to its wide product portfolio and superior customer service. Which of the following generic business strategies has Home Smart adopted in this scenario? A. Cost-leadership B. Differentiation C. Market penetration D. Product diversification
B
KitchenThings Inc. is a company that manufactures plastic kitchenware. It operates at an output level that allows it to keep its unit cost per output to the lowest in the industry. This in turn allows KitchenThings to be the price leader. Other competing companies cannot operate at the same level due to a lack of consumer demand for their products. This puts them at a competitive disadvantage. In this scenario, the cost driver behind KitchenThings's strategic position is _____. A. superior customer service B. economies of scale C. availability of complements D. learning-curve effects
B
The productivity frontier provides a theoretical reflection of the possible best practices at any given time. Why is this an important tool for managers? A. It suggests ways to lower the value gap created. B. Strategic positions are not fixed, and firms have to refine their positions over time. C. Firms strive to stay below the productivity frontier. D. It allows managers to maintain a less steeper learning curve as compared to their competitors.
B
The productivity frontier represents a(n): A. convex structure (bulging inward) to capture the trade-off between value creation and production cost. B. set of best-in-class strategic positions the firm can take relating to value creation and low cost at a given point in time. C. output level a firm must operate at to achieve the break-even point. D. combination of two commodities that can be purchased with a fixed amount of budget.
B
To be cost-competitive, a firm should: A. position itself below the productivity frontier. B. operate at the minimum efficient scale. C. attain the highest cost position. D. avoid moving on to a steeper experience curve.
B
True Empire Autos Inc. is an automobile company known for its luxury cars and follows a differentiation strategy. In this scenario, True Empire Autos should ideally compare its strategic position with a(n) _____. A. automobile company that sells pre-owned cars B. automobile company that sells high-end, premium cars C. automobile company that manufactures economy cars D. pen manufacturing company that follows a differentiation strategy
B
When a differentiator charges a similar price as its competitors in the same strategic group but offers more perceived value, it: A. loses its competitive advantage. B. gains market share from other firms. C. lowers the economic value created. D. results in diseconomies of scale.
B
When a firm makes choices between a cost or value position to achieve competitive advantage, it is primarily involved in _____. A. collective bargaining B. strategic trade-offs C. arbitration D. mediation
B
When a firm manufactures 2,000-3,000 units of a product, it incurs an average cost of $10 per unit. When it manufactures 3,000-4,000 units of the same product, the average cost per unit reduces to $7. However, manufacturing beyond 4,000 units will raise the average cost per unit to $9. Which of the following is the firm's minimum efficient scale? A. 2,000-3,000 units B. 3,000-4,000 units C. Below 2,000 units D. Above 4,000 units
B
When a firm operates at an output level of 9,000 units, the per-unit cost is $5. When the production is between 10,000-12,000 units, the per-unit cost is $4. At a production level of 13,000 units, the production cost is again $5 per unit. At 14,000 units and above, the production cost increases further. At what output level does the firm experience economies of scale? A. 9,000 units B. 11,000 units C. 13,000 units D. 15,000 units
B
Why are differentiation and cost-leadership strategies referred to as generic business strategies? A. They can be simultaneously pursued by a firm without any trade-offs. B. They can be used by any organization independent of industry context. C. They require similar strategic positions in order to increase a firm's chances to gain competitive advantage. D. They can be applied only by businesses which have a competitive advantage.
B
Which of the following situations will have greater effects from economies of scale than from learning effects? A. When conducting surgeries B. When practicing corporate law C. When mass manufacturing pens D. When making business decisions
C
Both Myoco Electronics Inc. and Electra Series Inc. have achieved cost parity in the television market. To gain and sustain a competitive advantage against Electra Series, Myoco Electronics should: A. achieve differentiation parity with Electra Series. B. keep its value gap lower than that of Electra Series. C. create greater perceived economic value than Electra Series. D. increase its cost of production to more than that of Electra Series.
C
A firm achieves differentiation parity ideally when: A. it creates the same customer value as its competitors. B. its cost of production is higher than that of its competitors. C. it successfully sells its products and services at a higher price than its competitors. D. its product features and services are better than that of its competitors.
C
A firm experiences diseconomies of scale when it: A. has a constant returns to scale. B. moves down the experience curve. C. produces at an output level beyond the minimum efficient scale. D. has a steep learning curve when compared to its competitors.
C
A firm's business strategy will lead to a competitive advantage if it allows the firm to: A. execute the same activities performed by the rivals in a similar manner. B. reduce the value gap. C. perform different activities than its rivals. D. position itself below the productivity frontier.
C
Body Sync Inc. is a chain of gyms. It offers a fitness package that allows its members to use the gym facilities for 12 months by paying only for 10 months. Included in the package are two health check-ups and a gym kit. These add-ons by themselves are not very valuable, but as a package they can enhance the perceived value of the service offerings. In this case, Body Sync's primary value driver is: A. economies of scale. B. learning-curve effects. C. availability of complements. D. experience-curve effects.
C
Both Viten Electronics Inc. and JL Electronics Inc. incur a cost of $400 to manufacture an LED television. However, the economic value created by JL Electronics is more than that created by Viten Electronics. What does this indicate? A. Viten Electronics has a competitive advantage over JL Electronics. B. Both Viten Electronics and JL Electronics have achieved competitive parity. C. JL Electronics can charge a premium price on its televisions. D. Viten Electronics has created a higher value gap than JL Electronics.
C
BuyMart 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 BuyMart's low prices. Thus, BuyMart has a competitive advantage due to its: A. superior customer service. B. time compression economies. C. economies of scale. D. learning-curve effects.
C
DFS Electronics Inc. ensures that all its products are highly durable and reliable by using techniques like zero-defect and lean manufacturing systems. These efforts not only add to the products' differential appeal, but also help the company save costs during production and avoid expenses due to after-sales services. Thus, the common value and cost driver responsible for DFS Electronics' strategic position as an integrator is the _____. A. network effect B. availability of complements C. quality D. diseconomies of scale
C
Economies of scale do NOT allow firms to: A. spread their fixed costs over a larger output. B. employ specialized systems and equipment. C. spread their variable costs over a larger output. D. take advantage of certain physical properties.
C
Even without differentiation parity, a firm pursuing a cost-leadership strategy can still gain a competitive advantage as long as its: A. learning curve is not steeper than that of its competitors. B. per-unit costs are higher than that of its competitors. C. economic value creation exceeds that of its competitors. D. value gap is lower than that of its competitors.
C
Evia Cycles Inc. incurs $400 to manufacture a bicycle, and the maximum price customers are willing to pay is $550 per unit. Archer Cycles Inc., its competitor, incurs $450 to manufacture a similar bicycle, and customers are willing to pay a maximum price of $620 for it. What does this indicate? A. Both Evia Cycles and Archer Cycles have achieved differentiation parity. B. Evia Cycles has a competitive advantage over Archer Cycles. C. Archer Cycles has created a greater economic value than Evia Cycles. D. Both Evia Cycles and Archer Cycles have achieved cost parity.
C
In a focused cost-leadership strategy, a firm: A. caters to the segment of the market that is least cost-sensitive. B. provides high-priced products for many different segments of the mass market. C. delivers low-cost products and services to a specific, narrow part of the market. D. focuses on reducing the economic value created to drive down costs.
C
In contrast to a differentiator, a cost leader will: A. charge a premium price for its products and services. B. build an organization culture where creativity and customer responsiveness thrive. C. focus its research and development on process technologies to improve efficiency. D. avoid an organizational structure that relies on strict budget controls.
C
Oviyo Inc. has been successful at differentiating itself from competitors by claiming a premium price for its digital cameras based on superior image quality and advanced technology. In this scenario, which of the following is the key value driver? A. Economies of scale B. Low-cost input factors C. Product features D. Premium prices
C
The primary goal of a firm pursuing an integration strategy should be to: A. create the highest perceived value in its respective industry. B. build a reputation of being the lowest-cost producer in its chosen industry. C. achieve a larger economic value created than that of rivals in the industry. D. achieve a less steeper learning curve.
C
TrueDisk Inc. manufactures external hard disks for $32 per unit, and the maximum price customers are willing to pay is $47 per unit. SW Storage Inc. is a competitor of TrueDisk 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? A. TrueDisk and SW Storage share differentiation parity. B. SW Storage has a competitive advantage over TrueDisk in terms of perceived value. C. TrueDisk creates a greater economic value than SW Storage. D. SW Storage is a cost leader when compared to TrueDisk.
C
Wear Crush Inc. is an apparel company known for its affordable clothes that follows a cost-leadership strategy. In this scenario, Wear Crush should ideally compare its strategic position with: A. a company that sells wristwatches at affordable prices. B. a luxury apparel company that sells designer clothes. C. an apparel company popular among price-conscious customers. D. an online company that sells customized pet clothing.
C
Which of the following statements accurately brings out the difference between economies of scale and economies of scope? A. Economies of scale refer to the decreases in per-unit cost with decreases in output, whereas economies of scope refer to the increases in per-unit cost with increases in output. B. Economies of scale result in decreasing returns to scale, and economies of scope result in constant returns to scale. 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. D. Economies of scope are realized when a firm operates at the minimum efficient scale, whereas economies of scale are realized when the firm operates beyond the minimum efficient scale.
C
Which of the following will hamper a differentiator's ability to achieve a competitive advantage? A. Lower production costs B. Premium prices C. Lower value gap D. Customized goods
C
Whole Foods differentiates itself from competitors by offering top-quality foods obtained through sustainable agriculture. This business strategy implies that Whole Foods focuses on: A. decreasing the existing value gap by providing luxury goods to customers. B. maintaining a less steeper learning curve as compared to its competitors. C. increasing the perceived value created for customers, which allows it to charge a premium price. D. lowering its costs compared to its competitors', while offering adequate value for its products and services.
C
A differentiation strategy works best when a: A. firm has tangible resources, its focus of competition shifts to price, and equivalent substitutes are readily available. B. firm's focus of competition shifts to price, and when increasing differentiation of product features do not create additional value. C. firm's differentiated products are commoditized, and costs of providing uniqueness do not rise above the customer's willingness to pay. D. firm has intangible resources, is able to pass on increases in supplier cost to the customer, and its differentiation appeal creates customer loyalty.
D
Firms pursuing a differentiation 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
Green Curry is a restaurant that caters to the needs of a small percentage of highly health-conscious consumers. It has an all-organic, vegan menu. Since there are very few restaurants that offer the same unique services, customers are willing to pay a premium price for its products and services. In this scenario, Green Curry is following a _____. A. product diversification strategy B. liquidation strategy C. mass market strategy D. focused differentiation strategy
D
In the multiplex industry, Vibrant Movies Inc. is an upscale multiplex that focuses on superior customer experience. The firm charges premium prices for its movie tickets and services. Global Cine Inc., in contrast, charges the lowest price in the industry with its no-frills approach. In between these two segments is True Movies Inc., which offers a customer experience comparable to that of Vibrant Movies at a price almost as low as that of Global Cine. What strategy is True Movies pursuing in this scenario? A. Liquidation strategy B. Product diversification strategy C. Market penetration strategy D. Integration strategy
D
Rosa Apparels Inc. outsources its production to contract manufacturers located in underdeveloped nations where unskilled labor is available in plenty for very low wages. This has helped the apparel brand become a price leader in the industry. Which of the following is the key driver behind Rosa Apparel's strategic position? A. Network effects B. Superior customer service C. Availability of complements D. Low-cost input factors
D
What does it mean for a firm to have an 80 percent learning curve? A. Every time the cumulative output increases by 80 percent, the cost per unit will decline by 20 percent. B. Every time the cumulative output is doubled, the cost per unit will decline by 80 percent. C. Every time the cumulative output goes up by 20 percent, the cost per unit will decline by 80 percent. D. Every time the cumulative output is doubled, the cost per unit will decline by 20 percent.
D
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: A. economies of scale. B. learning-curve effects. C. experience-curve effects. D. availability of complements.
D
Which of the following drivers simultaneously increases value while lowering cost? A. Economies of scale B. Superior customer service C. Availability of complements D. Innovation
D
Which of the following factors contributes to the success of the cost-leadership strategy of Ryanair airlines? A. The high input costs B. The luxury services C. The lower value gap D. The rock-bottom air fares
D
Which of the following is a firm effect that has an impact on the competitive advantage of a firm? A. The exit barriers within the industry in which the firm operates B. The number of companies operating in the industry in which the firm operates C. The intensity of rivalry among existing companies in the firm's chosen industry D. The value and the cost position of the firm relative to its competitors
D
Which of the following sources of differential appeal is least effective in helping a firm sustain its advantage? A. Reputation for innovation B. Reputation for quality C. Superior customer experience D. Observable product features
D
While Aros Inc. incurs a cost of $20 for a pair of shoes, Shoes Cult Inc., its competitor, manufactures a pair of shoes at $22. Both the companies are able to sell their shoes for a maximum of $30 per pair. Which of the following statements is NOT true in this scenario? A. Both Aros and Shoes Cult have achieved differentiation parity. B. Aros is a cost leader when compared to Shoes Cult. C. Aros has created a greater economic value than Shoes Cult. D. Shoes Cult has a competitive advantage over Aros.
D
