ch 6 bp
The concept of a(n) ______ attempts to combine both learning effects and process improvements.
experience curve
Which of the following accurately describes the relationship between value and cost that would suggest that firm A has created a competitive advantage over firm B?
(V - C)A > (V - C)B
Why do many firms fail to successfully implement a blue ocean strategy?
because they end up being "stuck in the middle," unable to increase value and lower costs at the same time
The minimum efficient scale indicates the level of output needed to _______ the cost per unit as much as possible.
bring down
A ______ outlines the steps a manager will take to achieve competitive advantage in a single product market.
business-level strategy
Which of the following are input factors?
capital labor raw materials information technology services
Unique features and attributes that differentiate a product from competitors' offerings allow the firm to ______.
charge premium pricing
Which type of strategy is being used if a company offers a product at a lower cost than its competitors?
cost-leadership strategy
According to the ______ rule, increasing the surface area (size) of a storage unit or retail facility results in a disproportionate increase in volume (space).
cube square
How to compete on a business level is defined by the variables value and cost. Together they define the ______.
economic value created
A firm that increases its output of a given product and experiences a simultaneous decrease in per unit costs is taking advantage of ______.
economies of scale
A firm's strategic position is determined by the relationship of which two variables?
value creation and cost
Which capability is required to create superior product features?
R&D
What is the relationship between fixed costs and economies of scale?
The amount of fixed costs allocated to each unit of output decreases as output increases.
Baby Buggy Baby sells high-end baby strollers. In an attempt to maintain its competitive advantage, the firm began adding additional features to its strollers. Customers liked these features and sales increased, but the company's profit margins shrank. Which of the following is the likely reason for this?
The firm neglected to control costs.
True or false: A company that achieves differentiation parity at a lower cost has implemented a successful cost-leadership strategy.
True
An important requirement for increasing economic value creation under a differentiation strategy is to ______.
control costs
A firm that pursues a differentiation strategy will often find that the added expense of offering new or unique product features offsets the increase in perceived value, and profit margins begin to erode. This underscores the importance of control for firms pursuing a differentiation strategy.
cost or costs
A ______ strategy requires achieving the lowest costs in the industry while maintaining a level of value that is acceptable to customers.
cost-leadership
True or false: Tesla's high stock market valuation is partly justified by the company's learning curve.
True
Which of the following scenarios would result in strengthening a firm's strategic position?
A firm adds a new product feature that greatly increases the perceived value of the product at a minimal cost to the firm.
Why does the learning curve go down when productivity is considered?
As workers repeatedly engage in an activity, they become more efficient, driving down costs.
What is one of the benefits of pursuing a differentiation strategy when it comes to the power of suppliers?
Differentiation provides protection against an increase in input prices.
As JetBlue grew, which of the following occurred during the years following 2007?
It suffered a competitive disadvantage.
In terms of productivity, which of the following is true of learning curves?
They go down.
What must strategic leaders keep in mind if they are going to achieve successful strategic positioning?
To achieve strategic positioning, firms must make important trade-offs.
In addition to having the lowest cost, a low-cost leader is likely to have ______.
a large market share
By using a differentiation strategy, a firm aims to ______.
add unique features that will increase the perceived value of a product
If two firms produce very similar products at the same rate of output, and firm A is able to achieve lower per-unit costs than firm B by taking advantage of a new manufacturing technology, firm A is benefiting from
an experience-curve effect based on process innovation.
Which of the following situations would justify the use of manufacturing robots by a producer of packaged foods?
an increase in demand from the market
Bundling of products and services that are consumed in tandem to create value is an example of ______.
complements
Value drivers known as ______ add value to a product or service when they are consumed in tandem with the focal product.
complements
The Ritz-Carlton provides a personalized customer experience based on sophisticated analysis of data gathered about each guest. This focus on ______ allows the hotel to increase its perceived value.
customer service
Which value driver would be the focus of a company that sells products that are similar to competing products and that provides a 60-day guarantee with no questions asked?
customer service
What are the three most important value drivers that managers can use to create a competitive advantage?
customer service complements product features
A struggling retailer seeking to implement a blue ocean strategy is likely to experience difficulty with ______.
cutting costs and increasing value at the same time
Economies of scale are ______.
decreases in cost per unit as output increases
A ______ strategy attempts to create products with unique and attractive features in order to increase the price that consumers are willing to pay.
differentiation
A(n) ______ strategy attempts to increase the perceived value of a product while controlling costs.
differentiation
Which of the following are considered the two generic business-level strategies?
differentiation cost-leadership
A successful blue ocean strategy requires strategists to reconcile the trade-offs between ______.
differentiation and cost-leadership
Patti's Potato Chips is a national potato-chip manufacturer. Calpurnia's Crisps is a small-batch gourmet potato-chip maker. Based on just this information, which of the following is the greatest advantage Patti's has over Calpurnia's?
economies of scale
When pursuing a differentiation strategy, a firm can achieve a competitive advantage by ______.
ensuring that its economic value exceeds that of its competitors
True or false: Formulating a business strategy is a relatively easy task because only a few strategic options are available.
false
An auto manufacturer that has access to cheaper labor and raw materials than its rivals will have a competitive advantage regarding lower cost of ______ factors.
input
In the relationship between per-unit cost and output, the minimum efficient scale ______.
is where the per-unit cost is lowest
Which of the following are components of a cost-leadership strategy?
lowest costs in the industry acceptable value
Larger output allows firms to invest in more specialized systems such as ______.
manufacturing robots enterprise resource planning software
The ______ is the range of output needed to minimize the cost per unit as much as possible.
minimum efficient scale
Whereas the firm's strategic position can be considered either differentiated or cost-focused, the scope of competition is considered ______.
narrow or broad
In a focused differentiation strategy, the competitive scope is _______ than in a traditional differentiation strategy.
narrower
Tesla has an 80% learning curve, which means that ______.
per-unit cost drops 20% whenever output doubles
Two important features that managers can adjust in an effort to improve the firm's strategic position are ______.
product features and customer service
The most significant challenge JetBlue faced in implementing its business strategy was _____.
reconciling the trade-offs between cutting costs and providing superior service
Products in the affordable "business-casual" clothing market have largely become commoditized, and most retailers have begun to compete mainly on price rather than product features. In this environment, it is impossible for one retailer to gain market share without another losing it. This is an example of a ______ ocean.
red
A cost leader can achieve a competitive advantage by ______.
reducing costs below those of competitors while maintaining a similar value
Which of the following are significant threats to a firm pursuing a cost-leadership strategy?
replacement by innovative substitutes competitors adopting similar business strategies value falling below the acceptable threshold
A manufacturer of electronic components can use its manufacturing machines to produce many different components such as semiconductors, sensors, and capacitors. In this case, the firm benefits from an economy of__________ , reducing overall production costs by finding multiple uses for its components and facilities.
scope
Economies of ______ are the savings that come from producing two or more different outputs at a lower cost than producing each output individually.
scope
Economies of scale present an opportunity to increase profits because as the number of units within the relevant range increases, fixed costs ______.
stay the same
A producer of consumer headphones that successfully differentiates its products with a patented noise-canceling technology and celebrity endorsements will enjoy which of the following benefits?
the ability to charge a premium price less intense competition from imitators
The perceived value that a company creates for consumers less the company's costs to create the value equals ______.
the economic value created
A company with a cost-leadership strategy faces significant difficulties when _____.
the focus of competition shifts from price to non-price attributes
Different value drivers contribute to competitive advantage only if ______
the increase in perceived value exceeds the corresponding cost increase
Which competitive forces can result in erosion of margins for both differentiation and cost-leadership business strategies?
threat of entry power of suppliers power of buyers
A firm that manages to avoid competition entirely by offering a product or service that creates an uncontested market space is engaging in ______.
value innovation
Implementing a blue ocean strategy requires making competition irrelevant and creating a new market space, otherwise known as ______.
value innovation
