3830 ch. 6

_____ drivers are as important to a differentiation strategy as ________ drivers are to a cost-leadership strategy. A. Scope; quality B. Quality; learning C. Value; cost D. Learning; experience

value; cost

In 2010, Levi Strauss & Co introduced a new line of jeans called Levi's Curve ID. Levi's launched this product based on research that found that 80 percent of women fall into three distinct body shapes. Customers can now go to Levi's website and use a product configurator in order to determine their "Curve ID" and purchase jeans most appropriate for their body type. Levi's is using what tool to improve their strategic position? A. A product differentiation strategy with complements as a value driver. B. A product differentiation strategy with customization as a value driver. C. A focused cost leadership with economies of scale as a cost driver. D. A focused cost leadership with economies of learning as a cost driver.

A product differentiation strategy with customization as a value driver.

A generic business strategy is more likely to help a cost-leadership firm achieve competitive advantage when it does which one of the following? A. Allows a firm to perform similar activities differently than its rivals with resulting lower costs B. Allows a firm to perform different activities than its rivals with greater value creation C. Allows a firm to perform similar activities than its rivals with greater costs or lower value creation D. Helps a firm create as large a gap as possible between the differential value created and the cost required

A. Allows a firm to perform similar activities differently than its rivals with resulting lower costs

Under the five forces model, a risk to a firm with a differentiation strategy is: A. When the focus of competition switches to price rather than features and new acceptable levels of quality have emerged due to innovation. B. When the focus of competition switches to price rather than features and the substitute products are considered below acceptable levels of quality. C. When the focus of competition switches to features rather than price, the substitute products are considered below acceptable levels of quality. D. When the focus of competition switches to features rather than price and new acceptable levels of quality have emerged due to innovation.

A. When the focus of competition switches to price rather than features and new acceptable levels of quality have emerged due to innovation.

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

Access to lower-cost input factors including raw materials and labor.

Avon has been able to raise the perceived value of its products while lowering production costs. It has also been able to create more value in relationship to its costs over rivals Revlon and L'Oreal. It can be said that: A. Avon has successfully moved from a differentiation to a cost-leadership strategy. B. Avon has a competitive advantage because it has the features customers value most in the cosmetics industry. C. Avon has successfully achieved an integration strategy and has a competitive advantage because it has higher value creation. D. Avon is the low cost leader of the cosmetics industry with their "sell at home" sales approach.

Avon has successfully achieved an integration strategy and has a competitive advantage because it has higher value creation.

Relative to the five-forces model, a low-cost strategy is beneficial when: A. Competition is based on product features, suppliers may increase costs, and buyers have bargaining power. B. Competition is based on product features, suppliers have very limited power, and buyers have bargaining power. C. Price competition is vigorous, suppliers may increase costs, and buyers have bargaining power. D. Price competition is vigorous, suppliers have very limited power, and buyers have bargaining power.

B. Competition is based on product features, suppliers have very limited power, and buyers have bargaining power.

When a firm is able to successfully employ an integration strategy, it will create a competitive advantage by: A. Combining high quality and product features to provide service that customers truly value. B. Using a first-mover advantage to be the lowest price in the market. C. Winning market share with a highly differentiated product. D. Beating rivals on product attributes while offering a better price.

Beating rivals on product attributes while offering a better price.

When pursuing a cost-leadership strategy, a business must remember that: A. Buyers will be reluctant to pay for a product unless the quality is acceptable. B. Buyers will be reluctant to pay for a product unless the quality is superior. C. Buyers will be reluctant to pay for the product unless it is customized. D. Product quality is more important in a broad market than in a narrow one.

Buyers will be reluctant to pay for a product unless the quality is acceptable.

When pursuing a differentiation strategy, a firm must remember that: A. Buyers will be willing to pay for value that is not perceived. B. Buyers will be reluctant to pay for value that is not perceived. C. Perceived value is not as important as the price of the product. D. Perceived value is more important in a broad market than in a narrow one.

Buyers will be reluctant to pay for value that is not perceived.

_________ and __________ are two of the value drivers that managers can utilize when trying to improve a firm's differentiation strategic position. A. Co-opetition; complements B. Learning-curve effects; co-opetition C. Customer service; complements D. Economies of scale; co-opetition

Customer service; complements

Experience curves attempt to capture both _______________ and learning effects. A. Customization B. Economies of scale C. Economies of scope D. Competitive position

Economies of scale

Under the five forces model, a differentiation strategy works best when: A. The firm has intangible resources, supplier cost increases can be passed on to the customer, and equivalent substitutes are readily available. B. The firm has tangible resources, supplier cost increases can be passed on to the customer, and equivalent substitutes are readily available. C. The firm has tangible resources, supplier cost increases can be passed on to the customer, and the differentiation appeal creates customer loyalty. D. The firm has intangible resources, supplier cost increases can be passed on to the customer, and the differentiation appeal creates customer loyalty.

D. The firm has intangible resources, supplier cost increases can be passed on to the customer, and the differentiation appeal creates customer loyalty.

achieving economies of scale is an important cost driver for certain low-cost leaders. However, there is a saying that "sometimes bigger is worse" because at some point costs increase as output increases. This is referred to as: A. External economies B. Diseconomies of scale C. Economic inefficiencies D. Integration diseconomies

Diseconomies of scale

Learning curves were first used by aircraft manufacturers in the 1930s. Companies found a predictable relationship between increasing production output and cost per unit. What does it mean for a firm to have an 80% learning curve? A. Every time the cumulative output increases by 80%, the cost per unit will decrease by 20%. B. Every time the cumulative output is doubled, the cost per unit will decline by 80%. C. Every time the cumulative output goes up 20%, the cost per unit will decline by 80%. D. Every time the cumulative output is doubled, the cost per unit will decline by 20%.

Every time the cumulative output is doubled, the cost per unit will decline by 20%.

The fact that both Rolex and Timex have a competitive advantage selling wristwatches is an indication that: A. Following a different generic business strategy within the same industry can lead to a competitive advantage for more than one organization. B. Following the same generic business strategy can allow for two firms competing in the same industry to have a competitive advantage at the same time. C. In order to evaluate whether Rolex has a sustained competitive advantage it is useful to compare it to Timex from a cost perspective. D. In order to evaluate whether Timex has a sustained competitive advantage, it is useful to compare it to Rolex from a differentiation perspective.

Following a different generic business strategy within the same industry can lead to a competitive advantage for more than one organization.

Value drivers are tools that help managers: A. Increase perceived value and decrease costs. B. Improve value chain activities and increase costs. C. Achieve a low-cost position and maintain perceived value. D. Achieve cost parity and maintain perceived value.

Increase perceived value and decrease costs.

it can be said that the Tata Group is pursuing a(n) _____________ strategy at the corporate level when it comes to automobiles. A. Undiversified B. Unrelated C. Integration D. Linked integrative

Integration

Interface is a leader in sustainable and innovative carpeting, as evidenced by its Cool Carpet product, the world's first carbon-neutral floor covering. Its product is unique and has appealing customer attributes. If Interface raw material costs increased by 12% this year, what would be the likely outcome? A. Interface would lower profit margins to absorb this cost increase B. The company would launch an all-out effort to reduce other costs by 12%. C. Interface would pass a major portion of this increase along as a price increase to its customers. D. Interface would seek to find other materials with lower costs, even if it meant losing the carbon-neutral label on the product.

Interface would pass a major portion of this increase along as a price increase to its customers.

Innovation is important when pursuing an integration strategy because: A. It helps a firm resolve existing trade-offs between price and quality. B. Without innovation a firm can get "stuck in the middle." C. Innovation is the most important component regardless of strategy. D. It is the only way that a firm can improve its value chain activities.

It helps a firm resolve existing trade-offs between price and quality.

There are two generic strategic positions that require managers to make trade-offs between, in order to achieve success at an integration strategy. They are: A. Service-oriented and low cost. B. Product-oriented and high cost. C. High cost and commodity. D. Low cost and differentiation.

Low cost and differentiation.

When the CEO of Whole Foods, John Mackey, had to make decisions about the company's cost structure and value position he was: A. Making strategic trade-offs. B. Conducting a strategic group map evaluation. C. Trying to improve the firm's economies of scope. D. Leveraging the low-cost position of the company.

Making strategic trade-offs.

Generic business-level strategies that a firm can adopt include all of the following EXCEPT: A. Focused cost-leadership strategy. B. Focused differentiation strategy. C. Market differentiation strategy. D. Broad cost-leadership strategy.

Market differentiation strategy.

All of the following are tools typically used to achieve cost-leadership EXCEPT: A. Controlling the cost of inputs. B. Leveraging economies of scale. C. Offering products that have superior value. D. Learning by doing.

Offering products that have superior value.

When it comes to strategic positioning and generic business strategies, which of the following is TRUE: A. All of the business strategies are equally difficult to adopt. B. Only a few exceptional firms are able to balance the value-cost strategic trade-offs and adopt an integration strategy successfully. C. Once a firm has established itself with a strategy, it should stick with what it knows. D. Strategic positioning is not as critical to competitive advantage as is the firm's resources and economic environment.

Only a few exceptional firms are able to balance the value-cost strategic trade-offs and adopt an integration strategy successfully.

Combining the dimensions of a firm's __________ and __________ tells us which generic business strategy the firm will pursue. A. Economies of scope; economies of scale B. Five forces; economies of scope C. Scope of competition; core capabilities D. Strategic position; scope of competition

Strategic position; scope of competition

Spreading fixed costs over larger output, employing specialized systems and equipment, and ________________ are three primary ways that achieving economies of scale can help a business. A. Increasing capital investments in input factors B. Producing two or more outputs using common resources C. Taking advantage of certain physical properties D. Spreading marginal costs over smaller units

Taking advantage of certain physical properties

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

The characteristics of both the industry and the firm.

A company that uses a cost-leadership strategy achieves a competitive advantage as long as: A. The economic value that is created is less than that of the competition. B. The economic value that the firm creates is equal to that of the competition. C. The economic value that the firm creates is greater than that of the competition. D. The economic value that is created is dependent on strategic parity.

The economic value that the firm creates is greater than that of the competition.

A company that uses a differentiation strategy achieves a competitive advantage as long as: A. The economic value that the firm creates is equal to that of the competition. B. The economic value that the firm creates is greater than that of the competition. C. The economic value that is created is less than that of the competition. D. The economic value that is created is dependent on strategic parity.

The economic value that the firm creates is greater than that of the competition.

When a firm is able to achieve higher economic value creation than its competition through differentiation, the competitive advantage is reflected by: A. The firm's ability to move into a new strategic group. B. The firm's ability to charge higher prices. C. The firm's ability to charge lower prices. D. The firm's ability to leverage complements.

The firm's ability to charge higher prices.

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 of the added costs of increased value in its products/service. B. A successful integration strategy requires that the business be the lowest-cost provider in order to drive higher value creation than the competition. C. Economy of scale is more important to an integrator, while economy of scope is more important to a low-cost strategy. D. An integration strategy requires first that the business be stuck in the middle, while a low-cost strategy avoids this condition.

The intent of an integration strategy is not to be the absolute lowest-cost provider because of the added costs of increased value in its products/service.

One of the reasons that big box retailers like Home Depot are able to achieve economies of scale is that: A. They have both broad and narrow economies of scope. B. They are able to take advantage of physical properties and maximize their scale efficiencies by stocking more merchandise and handling inventory more efficiently. C. They are able to take advantage of market size and spread investment losses over many locations. D. They have been able to protect themselves from the threat of buyer power by increasing input prices.

They are able to take advantage of physical properties and maximize their scale efficiencies by stocking more merchandise and handling inventory more efficiently.

OXO differentiates kitchen utensils by using a patent-protected, ergonomically designed rubber grip. By adding unique product features, OXO can: A. Turn differentiated products into standardized products with price parity. B. Turn differentiated products into standardized products with price disadvantages. C. Turn commodity products into differentiated products with price disadvantages. D. Turn commodity products into differentiated products with premium pricing.

Turn commodity products into differentiated products with premium pricing.

Under the five forces model, a risk to a business with a cost-leadership strategy is: A. Competition switches from customer service to pricing. B. When technological innovations open up cost reductions for substitutes or competitors. C. New entrants are all start-up firms with low volumes. D. Suppliers request a 2% price increase across the industry.

When technological innovations open up cost reductions for substitutes or competitors.

A firm's strategic position reflects: A. Whether it is competing on differentiation or cost. B. Whether it is competing within a targeted strategic group or not. C. Whether is has a competitive advantage or not. D. Whether it has first-mover advantages or not.

Whether it is competing on differentiation or cost.

When a business drives costs down as its cumulative output increases, it is referred to as: A. A learning curve. B. An output curve. C. A demand curve. D. A distribution curve

a learning curve

A firm's strategic position is: A. Determined by its business-level strategy. B. Created through strategic trade-offs. C. An attempt to create a large gap between value creation and costs. D. All of these.

all of these

Essentially, a successful integration strategy: A. Gives customers more perceived value while exceeding their price expectation. B. Allows a firm to make strategic trade-offs effectively. C. Enables a firm to increase value creation while keeping costs in check. D. All of these.

all of these

Higher product value tends to go along with which of the following items? A. Higher prices B. A higher willingness to pay C. Higher costs D. All of these

all of these

Buy Us is a big box retailer who is in direct competition with Walmart and Target. Buy Us initially tried to respond to Walmart by cutting its prices and reducing costs. Walmart has greater buying power and a more efficient supply chain, therefore Buy Us was not able to compete on costs. The company then tried to differentiate itself by signing a celebrity to create an in-house line of clothing. However, Target has a celebrity clothing line that has a more differentiated appeal. The economic value created by Buy Us is currently less than Target and Walmart. It can be said that: A. Buy Us is successful in creating an integration strategy positioned between Walmart and Target. B. Buy Us is "stuck in the middle" and has a competitive disadvantage. C. Buy Us is still creating an integration strategy positioned between Walmart and Target and is on the right track. It should continue this business strategy. D. Buy Us is "stuck in the middle" and has a competitive advantage.

buy Us is "stuck in the middle" and has a competitive disadvantage.

When pursuing an integration strategy, managers use levers to help them simultaneously increase perceived value and lower costs. Which of the following is NOT one of these levers? A. Quality B. Complements C. Economies of scope D. Structure, culture, and routines

complements

When the focus of competition is on differentiation, a firm tends to use all of these levers EXCEPT: A. New product launches. B. Cost input factors. C. Marketing and promotion. D. Unique product features.

cost input factors

When it comes to pursuing an integration strategy, managers manipulate both _____ and ________ drivers. A. Cost; value B. Cost; core capability C. Value; core capability D. Market; economic

cost;value

When a firm offers products with unique features and higher value for customers than that of the competition, it is implementing a: A. Product-broad strategy. B. Differentiation strategy. C. Cost-leadership strategy. D. Product-focused strategy.

differentiation strategy

When costs per unit fall as output increases, _________________ occur. A. Economies of scope B. Diseconomies of scale C. Economies of efficiency D. Economies of scale

economies of scale

___________ and ____________ are the two focused generic business strategies. A. Focused differentiation; focused low-cost B. Integration; focused low-cost C. Integration; focused differentiation D. Cost leadership; differentiation

focused differentiation; focused low-cost

All of the following are questions that managers answer when selecting a business-level strategy EXCEPT: A. Who will we serve? B. How many product markets will we be in? C. What customer needs and desires will we satisfy? D. Why do we want to satisfy these needs?

how many product markets will we be in?

When competing on the basis of low-cost leadership, a primary objective is to: A. Lower manufacturing costs. B. Lower production costs. C. Lower supplier costs. D. Lower overall costs.

lower overall costs

When management decides whether to pursue a broad market position or a narrow market position, they are defining the: A. Economies of scale. B. Economies of scope. C. Scope of competition. D. Scope of core capabilities.

scope of competition

The ___________ is the difference between value creation and cost. A. Profit gap B. Net profit C. Value gap D. Revenue gap

value gap

One of the risks of pursuing an integration strategy is: A. That a firm could lose sight of its mission. B. That this strategy is easy for rivals to imitate. C. That the firm may get "stuck in the middle." D. That it is ineffective when competing on a global scale.

that the firm may get "stuck in the middle"

The two primary competitive levers that managers can use in order to answer the question of how to compete are: A. Cost and core competencies. B. Value and cost. C. Value and core competencies. D. Cost and revenues.

value and cost

A low-cost leader optimizes all of its ___________ in order to achieve a low-cost position. A. Five forces activities B. Strategic group activities C. Value chain activities D. Economic chain activities

value chain activities