MAN4720 Ch 6 Practice Questions & Quiz
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 - (V-C)a > (V-C)b - (V-C)a < (V-C)b - (V-C)a > (V-C)c
(V-C)a > (V-C)b
Firms focusing on operating a cost-leadership strategy are most likely to develop their product or service to emphasize the - emotional aspects - functional aspects - presentational aspects - promotional aspects -social aspects
Functional aspects
An experience curve attempts to capture both - network effects and diseconomies of scale - time compression diseconomies and mass customizations - learning effects and process improvements - economies of scope and network effects
Learning effects and process improvements
All of the following are tools primarily used to achieve cost-leadership except - controlling the cost of inputs - leveraging economies of scale - offering products at a premium price - learning by doing
Offering products at a premium price
Choosing a business-level strategy helps to define a firm's ______ in a given product market. - ethical climate - industry structure - mission statement - strategic position
Strategic position
Value drivers known as ______ add value to a product or service when they are consumed in tandem with the focal product. - complements - citations - constructs - customizations
Complements
An important requirement for increasing economic value creation under a differentiation strategy is to ______. - eliminate unnecessary product features - stimulate demand through celebrity endoresements - increase prices - control costs
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
A successful blue ocean strategy requires strategists to reconcile the trade-offs between ______. - profit margins and sales volume - number of employees and high wages - private and public investment - differentiation and cost-leadership
Differentiation and cost-leadership
In the ________, firms change the underlying technology while holding cumulative output constant. - learning curve - experience curve - minimum efficient scale - maximum efficient scale
Experience curve
A firm's strategic position is determined by the relationship of which two variables? - supply and demand - number of different products in the firm's portfolio and countries in which they are sold - number of products sold and price of product - value creation and cost
Value creation and cost
A ______ outlines the steps a manager will take to achieve competitive advantage in a single product market. - competitive position - corporate-level strategy - financial analysis - business-level strategy
Business-level strategy
The viability of a differentiation strategy is severely undermined when the - difference between perceived value and costs is significant - focus of competition shifts to value-creating features rather than price - differential appeal is based more on intangible resources than tangible resources - differentiated products become commoditized throughout the industry
Differentiated products become commoditized throughout the industry
The cube-square rule makes it _______ for smaller stores to compete with larger retailers. - harder - just as difficult - useless - easier
Harder
A(n) ______ strategy attempts to increase the perceived value of a product while controlling costs. - competitive implementation - integrated balanced approach - differentiation - cost-leadership
Differentiation
Select all that apply Which of the following determine a firm's competitive advantage? (Check all that apply.) - size of the company - cost position relative to competitors - value position relative to competitors - number of products produced by the firm
- Cost position relative to competitors - Value position relative to competitors
Select all that apply A firm pursuing a blue ocean strategy can increase its profit margins by implementing which of the following pricing options? (Check all that apply.) - charge a higher price than the cost leader - charge a lower price than the differentiator - charge a lower price than the cost leader - charge a higher price than the differentiator
- charge a higher price than the cost leader - charge a lower price than the differentiator
Select all that apply 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 - suppliers increasing input prices
- competitors adopting similar business strategies - replacement by innovative substitutes - value falling below the acceptable threshold
Select all that apply In order for a firm to successfully implement a business-level strategy, it must limit the impact of ______. (Check all that apply.) - technological advancements - external threats - consumer demand - its own internal weaknesses
- its own internal weaknesses - external threats
Select all that apply 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? (Check all that apply.) - an increased exposure to the threat of price wars - less intense competition from imitators - the ability to charge a premium price - reduced per unit costs
- less intense competition from imitators - the ability to charge a premium price
Select all that apply 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? (Check all that apply.) - less intense competition from imitators - an increased exposure to the threat of price wars - the ability to charge a premium price - reduced per unit costs
- less intense competition from imitators - the ability to charge a premium price
Select all that apply Which of the following 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 the cost leader - the firm can charge a lower price than the cost leader - the firm can raise its price due to diseconomies of scale
- the firm can charge a lower price than differentiators - the firm can charge a higher price than the cost leader
Select all that apply The two factors upon which the success of strategy of either cost leadership or differentiation is built are ______. (Check all that apply.) - external opportunities in the market - the firm's internal strengths - the regulatory environment - consumer needs
- the firm's internal strengths - external opportunities in the market
In addition to having the lowest cost, a low-cost leader is likely to have ______. - a large market share - unique product offerings - a small but loyal customer base - high overhead
A large market share
A differentiation strategy can be threatened when ______. - the perceived quality of cost leadership diminishes - the firm leverages opportunities on competitive efforts - a product becomes commoditized, and the focus of the competition shifts to price - the focus of competition shifts to non-price attributes
A product becomes commoditized, and the focus of the competition shifts to price
Mont Blanc uses a differentiation strategy that focuses on the social and emotional aspects of their product to appeal to a specific consumer segment. Which of the following initiatives would most be in keeping with their strategy? - an agent with online providers to offer discounted pens - an increase in the service warranty from 1 year to 2 years - an agreement with OfficeMax to more prominently show Mont Blanc pens in the writing instrument section of their stores - an engraving service for pen owners who may wish to will their pens to loved ones - the release of a new pen that uses a smoother roller ball effect
An engraving service for pen owners who may wish to will their pens to loved ones
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 - value driver advantages based on product features - a learning curve effect based on output differential - an experience-curve effect based on process innovation - creative destruction
An experience-curve effect based on process innovation
For a differentiation strategy to strengthen a company's strategic position and boost its competitive advantage, ______. - any increases in cost is unacceptable - an increase in costs must exceed the increase in value creation - an increase in value creation must not be more than the increase in costs - an increase in value creation must exceed the increase in costs
An increase in value creation must exceed the increase in costs
Why do many firms fail to successfully implement a blue ocean strategy? - because too many other companies already try to implement a blue ocean strategy, making it hard to compete that way - because they become involved in situations involving ethical dilemmas - because they end up being "stuck in the middle," unable to increase value and lower costs at the same time - because they merge with international competitors for value creation
Because they end up being "stuck in the middle," unable to increase value and lower costs at the same time
While SMART Tech Inc. incurs $350 to manufacture a laptop, its competitor, Better Electronics Inc., incurs $300. However, laptops of both the companies have been able to create the same value among customers. From the given scenario, it can be inferred that - SMART Tech has a competitive advantage over Better Electronics - SMART Tech is a cost leader when compared to Better Electronics - Better Electronics and SMART Tech share a differentiation parity - Better Electronics can charge a higher price for its laptops
Better Electronics and SMART Tech share a differentiation parity
Which of the following would not be a reason for Bic to decide to compete in Mont Blanc's market? - Bic is a large publicly traded company with significant financial resources. - Bic's marketing department isn't geared to addressing Mont Blanc's target market. - Bic's distribution capabilities are not well designed to reach Mont Blanc's target market. - Bic's reputation would be detrimental when competing in Mont Blanc's target market. - Bic's manufacturing facilities would need to be retooled to compete in Mont Blanc's target market.
Bic is a large publicly traded company with significant financial resources
Supreme Coffee Roasters is a premium cafe that is reputed for its superior customer service. The coffee shop also serves gourmet food to its customers, which allows it to charge a premium price. Cheap Beans, in contrast, is a chain of coffee shops that charges the lowest price in the industry due to its self-service policy. However, Vale's Coffee Inc. has found a balance between these two strategic groups by using automated ordering to free up its employees to work as master baristas and bakers, thus focusing on creating excellent products. It charges a price slightly above that of Cheap Beans. In this scenario, Vale's Coffee is following a - liquidation strategy - product diversification strategy - market penetration strategy - blue ocean strategy
Blue ocean strategy
If costs are equal, when a firm has a higher value gap than its competitor, it can be inferred that the firm - can charge a premium price for its products and services - has achieved a competitive parity in its chosen industry - has lost its competitive advantage to its competitor - can adopt a cost-leadership strategy
Can charge a premium price for its products and services
There are several cost drivers that can be managed in order to establish a low-cost leadership advantage. One of the primary cost drivers is - adding unique features that turn standard commodities into differentiated products - combining experience-based learning and process innovation to move onto a steeper learning curve - creating personalized customer service in order to minimize price sensitivity among customers - shifting to small-scale production processes in order to create highly customized products
Combining experience-based learning and process innovation to move onto a steeper learning curve
A tablet manufacturer that includes a free stylus with every purchase is using ______ to enhance users' experiences and increase the perceived value of its tablets. - customer service - complements - differentiation - product features
Complements
A ______ strategy requires achieving the lowest costs in the industry while maintaining a level of value that is acceptable to customers. - proposition - differentiation - cost-leadership - minimally efficient
Cost-leadership
Oberlo Autos competes against the global leaders in the automobile industry by developing and selling acceptable quality vehicles at a lower price. This has been possible due to the company's large-scale production that reduces its manufacturing expenses. Which of the following generic business strategies is Oberlo Autos applying in this scenario? - differentiation strategy - product diversification strategy - cost-leadership strategy - liquidation strategy
Cost-leadership strategy
Which type of strategy is being used if a company offers a product at a lower cost than its competitors? - differentiation strategy - focused differentiation strategy - cost-leadership strategy - blue ocean strategy
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). - minimum efficient - cube square - superstore - maximum effective
Cube square
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 - product features - profits - complements
Customer Service
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 - product features - good value - marketing
Customer service
A struggling retailer seeking to implement a blue ocean strategy is likely to experience difficulty with ______. - communicating the plan to lower-level employees - cutting costs and increasing value at the same time - maintaining high quality customer service - locating products that satisfy customer needs
Cutting costs and increasing value at the same time
Delish Corp is a chain of supermarkets that sells its fruits and vegetables 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 Delish Corp adopted in this scenario? - Delish Corp is probably pursuing a differentiation strategy - Delish Corp is probably pursuing a cost-leadership strategy - Delish Corp is probably pursuing a market penetration strategy - Delish Corp is probably pursuing a growth strategy
Delish Corp is probably pursuing a differentiation strategy
Firms pursuing a cost-leadership strategy seek to - create higher value for customers and offer premium pricing - keep their cost structures at the same or similar levels as that of the competitors - deliver products or services at a lower cost than competitors - gain competitive advantage by reducing the value gap
Deliver products or services at a lower cost than competitors
In a focused differentiation strategy, a firm seeks to - offer low-priced products and services with a narrow focus on a niche market - create higher customer value than the competitors in different segments of a mass market - deliver products or services with unique features to a specific, narrow part of the market - focus on reducing the value gap to differentiate itself from the competitors
Deliver products or services with unique features to a specific, narrow part of the market
A ______ strategy aims to create higher value for customers by offering products with unique features but a similar level of costs to those of competing products. - cost-leadership - competitive industry - differentiation - focused trade-off
Differentiation
A(n) ______ strategy may fail when the focus of the competition shifts to price rather than unique product features. - experience curve - economies of scale - differentiation - cost-leadership
Differentiation
ACME Inc. has retained you to review their low-cost strategy for their company. Based on several consultations with the client, you realize that their per unit costs are actually increasing as their business grows and expands. You conclude that this firm is experiencing - diseconomies of scale - economies of scope - diseconomies of scope - economies of scale
Diseconomies of scale
When pursuing a differentiation strategy, a firm can achieve a competitive advantage by ______. - equipping customers with generic and lower priced products - making sure the firm's costs are the lowest - ensuring that its economic value exceeds that of its competitors - increasing perceived value regardless of cost increases
Ensuring that its economic value exceeds that of its competitors
The concept of a(n) ______ attempts to combine both learning effects and process improvements. - minimum efficient scale - strategic implementation - experience curve - technological innovation
Experience curve
Marriott offers different hotels that cater to different types of travelers (e.g., Residence Inn, Marriott Courtyard, Marriott Fairfield Inn). What is this an example of? - how a differentiation strategy has to always be associated with premium pricing - how a firm can compete by offering more perceived value at a similar price - how a firm can be overwhelmed by too many assets - how a differentiation strategy does not work
How a firm can compete by offering more perceived value at a similar price
Business-level strategy addresses which overarching question? - how should we compete? - what should we produce? - how should we treat our employees? - what should we sell?
How should we compete?
A firm's competitive advantage is determined jointly by _____________ and firm effects. - value position - cost position - industry effects - strategic group
Industry effects
In the relationship between per-unit cost and output, the minimum efficient scale ______. - demonstrates that smaller is better - is where the per-unit cost is lowest - is where the per-unit cost is highest - is the same as economies of scale
Is where the per-unit cost is lowest
Which of the following statements accurately brings out the difference between economies of scale and learning effects? - while there are no diseconomies to scale, there are diseconomies to learning - learning effects occur over time, whereas economies of scale are captured at one point in time when output is increased - firms experience economies of scale when output increases, and they experience learning effects when output decreases - economies of scale reduce cost per unit, whereas learning effects increase cost per unit
Learning effects occur over time, whereas economies of scale are captured at one point in time when output is increased
In a focused cost-leadership strategy, a firm provides ______. - low-cost products to a niche market - differentiated products to a wide market - low-cost products to a wide market - differentiated products to a niche market
Low-cost products to a niche market
The ______ is the range of output needed to minimize the cost per unit as much as possible. - economies of scale - diseconomies of scale - minimum efficient scale - cube square rule
Minimum efficient scale
High-end pen manufacturer Mont Blanc pursues a differentiation strategy pursuing only those who need or want an expensive writing instrument. What scope of competition does this represent? - differentiation - narrow - even - broad
Narrow
A blue ocean strategy typically allows a firm to - provide unique product or service features at a premium price - add product features that raise costs without raising the perceived value - reduce the value gap created by their products - offer a differentiated product or service at low cost
Offer a differentiated product or service at low cost
The cost-leadership strategy helps a firm achieve competitive advantage when it does which one of the following? - helps a firm create as large a gap as possible between the differential value created and the cost required - permits a firm to perform similar activities than its rivals with greater costs or lower value creation - permits a firm to perform different activities than its rivals with greater value creation - permits a firm to perform similar activities differently than its rivals with resulting lower costs
Permits a firm to perform similar activities differently than its rivals with resulting lower costs
Rodney is making decisions about his newly formed business. He wants to focus on producing the highest-quality product in the market so he can maximize the product's value to customers. This will cause his product to have higher costs than others already in the market, but Rodney believes customers will pay more for the higher-quality product. Rodney's choice to use a differentiation business-level strategy is determining his company's strategic ______. - industry - liabilities - position - alliances
Position
There exist important trade-offs between value creation and low cost because value creation and cost tend to be - negatively correlated - positively correlated - independent of each other - inversely related
Positively correlated
A differentiation strategy is typically associated with ______ pricing. - premium - virtual - excessive - disadvantages
Premium
Dr. Shetty is able to drive down the cost of complex medical procedures from $100,000 to $2,000 not by doing one big thing, but rather by doing a thousand small things. This approach focuses on driving down the cost of health care through - value of input factors - cost of input factors - process innovation - product innovation
Process innovation
As differentiation and cost-leadership are distinct strategic positions that require important trade-offs, it is - easy to build an ambidextrous organization - best for firms to avoid pursuing a generic business-level strategy - quite difficult to translate a blue ocean strategy into reality - easy to increase value and lower cost at the same time
Quite difficult to translate a blue ocean strategy into reality
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. - black - blue - green - red
Red
A firm that follows the differentiation strategy is protected from the threat of new entrants primarily due to its - diseconomies of scale - reputation for quality - low pricing - low cost per unit
Reputation for quality
Fones Inc. and Speed Dial Corp. are two competitors in the mobile phone market. The cost incurred by each company to manufacture smartphones is $200 per unit. Although both the companies sell their smartphones at the same price, Speed Dial Corp. has a larger market share in the smartphone industry. What does this imply? - Speed Dial Corp. has a cost advantage over Fones Inc. - Fones Inc. has a competitive advantage over Speed Dial Corp. - Speed Dial Corp. has been able to offer more perceived value than Fones Inc. - Fones Inc. has created a higher value gap than Speed Dial Corp.
Speed Dial Corp. has been able to offer more perceived value than Fones Inc.
A firm's strategic profile based on value creation and cost is called its ______. - strategic trade-offs - strategic position - strategic control - strategic alliance
Strategic position
When a blue ocean strategy is successfully formulated and implemented, investments in differentiation and low costs are not - value drivers but cost drivers - cost drivers but value drivers - complements but substitutes - substitutes but complements
Substitutes but complements
GiftBasket.com has successfully created a higher perceived value in the e-commerce industry, though it offers the same products at slightly higher prices than the competitors. This has been mainly attributed to the company's easy-to-navigate website, simple return procedures, fast delivery, and cash on delivery option. Thus, the value driver for GiftBasket.com is its - lower value gap - superior customer service - economies of scale - availability of complements
Superior customer service
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 its competition - the firm neglected to control costs - the firm didn't differentiate its products enough from competing products - the firm focused on supply rather than demand
The firm neglected to control costs
A company with a cost-leadership strategy faces significant difficulties when ______. - no valuable substitutes exist - suppliers agree to charge less for their supplies - the focus of competition shifts from non-price to price attributes - the focus of competition shifts from price to non-price attributes
The focus of competition shifts from price to non-price attributes
Different value drivers contribute to competitive advantage only if ______. - premium pricing is used - customer service prices exceeds the cost of product features - the company also offers product customization - the increase in perceived value exceeds the corresponding cost increase
The increase in perceived value exceeds the corresponding cost increase
The two primary competitive levers that managers can use in order to answer the question of how to compete are - accounting profitability and shareholder returns - profit and loss - core competencies and competitive advantage - value and cost
Value and cost
A firm that manages to avoid competition entirely by offering a product or service that creates an uncontested market space is engaging in ______. - a red ocean strategy - economies of scale - cost leadership - value innovation
Value innovation
Implementing a blue ocean strategy requires making competition irrelevant and creating a new market space, otherwise known as ______. - economies of scope - value innovation - market definition - asset attainment
Value innovation