Chapter 6

A firm that increases its output of a given product and experience a simultaneous decrease in per unit cost is taking advantage of

economies of scales

A tablet manufacturer that includes a free stylus with every purchase is using _____ to enhance users' experience and increase the perceived value of its tablets

complements

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 order for a firm to successfully implement a business-level strategy, it must limit the impact of

external threats internal weaknesses

What are pricing options offered by a blue ocean strategy

- the firm can charge a lower price than differentiators -the firm can charge a higher price than cost leadership

the most important cost drivers are

-cost of input factors -economies of scales -learning curve effects -experience-curve effects

A _____ strategy aims to create higher value for customers by offering product with unique features but a similar level of cost to those of competing products

Differentiation

Business-level strategy addressees which overarching question?

How do we compete?

A manufacture of electronic components can use it manufacturing machines to produce many different components such as semiconductors, sensors, and capacitors. In this case, the firm benefits form an economy of ____, reducing overall production cost by finding multiple uses for its components and facilities

Scope

Which of the following determine a firm's competitive advantage?

cost position relative to competitors value position relative to competitors

The example of Marriott offering a line of different hotels catering to different types of travelers is an example of

how a firm can compete by offering more perceived value at a similar price

Different value drivers contribute to competitive advantage if

the increase in perceived value exceeds the corresponding cost increase

An important requirement for increasing economic value creation under a differentiation strategy is to

control costs

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

A firm that offers a liberal return policy and free shipping on goods ordered online hopes to increase its perceived value by focusing on

customer service

A producer of consumer headphones that successfully differentiates its products with a patented noise-canecelling technology and celebrity endorsement will enjoy what benefits

-less intense competition from imitators -the ability to charge a premium price

Which of the following are examples of ways that a large retailing firm can increase the perceived value of its offerings by focusing on customer service?

-maintaining a domestic call center that is open 24 hr/day -offering a no questions asked return policy

The most important value drivers that managers can use to create a competitive advantage are

-product features -customer service -complements

To formulate an appropriate business level strategy, managers must answer the who-want-why-and-how questions of competition. Which of the following would be appropriate questions to ask?

Which customer segments will we serve? What customer needs will we satisfy? How will we satisfy our customers' needs?

Which of the following situations would justify the use of manufacturing robots by a producer of packaged goods?

an increase in demand from the market

The minimum efficient scale indicates the level of output needed to_____ the cost per unit as much as possible.

bring down

A firm that pursues a differentiation strategy will often find that the added expense of offering new or unique produce features offset the increase in perceived value, and profit margins begin to erode. This underscored the importance of _____ control for firms pursuing a differentiation strategy

cost

The goal of a _____-_____ strategy is to achieve cost below those of competitors while maintaing similar value. A firm with this strategy could or could not achieve differentiation parity

cost-leadership

How to compete on a business level is defined by the variables value and cost. Together they define the

economic value created

Furniture retailer IKEA has use the value innovation framework of ____ to successfully implement a blue ocean strategy

eliminate-reduce-raise-create

the ____ is the range of output needed to minimize the cost per unit as much as possible

minium efficient scale

In a focused differentiation strategy, the competitive scope is _____ than in a traditional differentiation strategy.

narrower

The benefits of a cost-leadership strategy regarding the threat of entry in an industry are

protection against entry due to economies of scales

In a focus cost-leadership strategy, a firm

provides low-cost product to a niche market

The most significant challenge Jet Blue has faced in implementing its business strategy is

reconciling the trade offs between cutting cost and providing superior service

A firm's strategic profile based on value creation and cost is called it

strategic postion

Choosing a business level strategy helps to define a firm's _____ in a given product market

strategic postion

A _____ is a situation that requires choosing between a cost or value position.

strategic trade off

What is the relationship between fixed cost and economies of scale

the amount of fixed cost allocated to each unit of output decreased as output increases

To formulate an appropriate business level strategy, managers must answer the ____ questions of competition

who, what, why, how

If two firms produce very similar products at the same rate of output, and firm A is able to achieve lower per unit cost than firm B by taking advantage of a new manufacturing technology, firm A is benefiting from

an experience-curve effect based on process innovation

Unique features and attributes that differentiate a product from competitors' offering allow the firm to ___

charge premium pricing

The Ritz-Carlton provided 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

A successful blue ocean strategy requires strategist to reconcile the trade-offs between

differentiation and cost leadership

A firm experiences ____ when increase in output results in an increase in cost.

diseconomies of scale

The beneficial effect of a differentiation strategy on the power of suppliers in an industry is

protection against an increase in input prices

In the learning curve, the _____ the learning curve, the more learning takes place

steeper

Implementing a blue ocean strategy requires making competition irrelevant and creating a new market space, otherwise known as

value innovation

Which of the following business strategies does Jet Blue pursue in order to gain a competitive advantage?

Differentiation and cost leadership

The most important value drivers that managers can use to create a competitive advantage are

-complements -product features -customer service

Larger output allows firms to invest in more specialized systems such as

-manufacturing robots -enterprise resource planning software

Which of the following are significant threats to a firm pursing a cost-leadership strategy?

-replacement by innovative substitutes -value falling below the acceptable threshold -competitors adopting similar business strategies

which of the following are questions that managers must answer when pursing value innovation

-which product factors to raise above the industry standard -which product factors to eliminate -which product factors to reduce below the industry standard -which new product factors to create

Economies of _____ are the savings that come from producing two or more different outputs at a lower cost than producing each output individually

Scope