MGT 491 Flores- Ch. 9-12 MC

When a firm is able to successfully employ a blue ocean strategy, it will create a competitive advantage by

beating rivals on product attributes while offering a better price.

A differentiation strategy works best when a

firm has intangible resources, is able to pass on increases in supplier cost to the customer, and its differentiation appeal creates customer loyalty.

Value drivers contribute to a firm's competitive advantage only if

the increase in value creation exceeds the increase in costs.

The primary goal of a firm pursuing a blue ocean strategy should be to

offer a differentiated product or service at a low cost.

How does availability of complements act as a value driver?

Complements add value to a product when they are consumed in tandem with it.

________ 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.

Minimum efficient scale

In a successful ________ strategy, the trade-offs between differentiation and low cost are reconciled.

blue ocean

All of the following are generic business-level strategies except

focused marketing strategy.

Trader Joe's successfully used a blue ocean strategy by offering lower-cost food than Whole Foods for the same market of patrons. By doing this, Trader Joe's was able to

gain a market share and make up the loss in margin through increased sales.

Trader Joe's differentiates itself from competitors by offering top-quality foods obtained through sustainable agriculture. This business strategy implies that Trader Joe's focuses on

increasing the perceived value created for customers, which allows it to charge a premium price.

We Cut Corners lawn service initially spent nine man-hours to assemble a lawnmower. But as the production doubled, the number of hours spent on assembling a mower reduced by 20 percent. This increase in productivity reduced the company's cost per unit. What is this phenomenon referred to as?

learning-curve effect

Combining economies of learning with the existing production technology allows a firm to

move down a given learning curve.

When a firm makes choices between a cost or value position to achieve competitive advantage, it is primarily involved in

strategic tradeoffs.

In order for a firm to formulate an effective business-level strategy, it is important to remember that competitive advantage is determined by

the characteristics of both the industry and the firm.

A blue ocean strategy differs from a low-cost strategy in that

the intent of a blue ocean strategy is not to be the absolute lowest-cost provider because a blue ocean must also increase perceived value.

Which of the following best describes a strategic tradeoff?

the tension between value creation and the pressure to keep costs in check

How is differentiation parity different from cost parity?

Differentiation parity deals with value not cost.

Which of the following describes an airline that is most likely stuck in the middle?

Eastern Airlines offers high-quality beverages and meals, plush airport lounges, only a few connections via hubs domestically, poor customer service, and low prices.

What does it mean for a firm to have an 80 percent learning curve?

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

While Eye Windows incurs a cost of $12 for a pair of eyeglasses, Dura Frames, its competitor, manufactures a pair of glasses at $10. Both the companies are able to sell their glasses for a maximum of $30 per pair. Which of the following statements is true in this scenario?

Eye Windows and Dura Frames have achieved differentiation parity.

Both Tom's Car Repair and Fast Engines. incur a cost of $9,000 to manufacture a vehicle. However, the economic value created by Fast Engines. is more than that created by Tom's Car Repair. What does this indicate?

Fast Enginescan charge a premium price on its automobiles.

Evaluate the following statement: Strategic leaders should always try to pursue a blue ocean strategy because it is the most complex, coveted, and most desirable strategy that exists.

I disagree; firms should only pursue this strategy if they are able to reconcile the tradeoff's of each generic strategy.

What must a cost-leadership strategy accomplish to be successful?

It must reduce the firm's cost below that of its competitors while offering adequate value.

Although JetBlue used a blue ocean strategy to achieve an initial competitive advantage, it failed to maintain this advantage. Which of the following provides the best reason for this development?

It failed to refine its strategic position over time.

How did Marriott use economies of scope to achieve greater economic value than its competitors?

Marriott lowered its cost structure by sharing its production assets over several types of hotels, which increased the diversity of its hotel line and thus its differentiated appeal.

Which of the following examples uses a focused differentiation strategy?

a cosmetics brand that offers superior skin lotion for sensitive skin priced at 100 dollars per bottle

A ________ primarily details the goal-directed actions managers take in their quest for competitive advantage when competing in a single product market.

business-level strategy

In a focused cost-leadership strategy, a firm

delivers low-cost products and services to a specific, narrow part of the market.

A differentiator is least likely to be threatened by increases in input prices due to powerful suppliers when the

differentiator is able to create a significant difference between perceived value and current market prices.

Which of the following is a firm effect that has an impact on the competitive advantage of a firm?

the value and the cost position of the firm relative to its competitors

The goal of a strategic position is to create the largest gap possible between the ________ that a firm creates through its offerings and the ________ required to create these offerings.

value; cost

Due to its large sales volume and low-cost structure, Bunny's Lo-Cost enjoys a cost-leadership position. Which of the following scenarios might threaten Bunny's competitive advantage?

A new competitor is perceived to provide similar value, but in addition offers innovative self-checkout that Bunny's doesn't offer.

Which of the following best explains why a blue ocean strategy is difficult to implement?

It requires the reconciliation of fundamentally different strategic positions—differentiation and low cost.

Marriott is able to create greater economic value than its competitors due to their ability to take advantage of ________, which describe the savings that come from producing two (or more) outputs at less cost than producing one output individually, while utilizing the same amount of resources and technology.

economies of scope

A firm experiences diseconomies of scale when it

produces at an output level beyond the minimum efficient scale.

Ticker Inc. is a wristwatch company known for its luxury watches, and it follows a differentiation strategy. In this scenario, Ticker Inc. should ideally compare its strategic position with a

watch maker that sells high-end, premium watches.

A value curve indicates a lack of effectiveness in a firm's strategic profile when it

zig-zags.

Jonathan is the owner of a landscaping company that caters to a very wealthy clientele. His company has struggled to differentiate itself from the other high-end landscapers in the area, but because he has hired several expensive but highly qualified team members, Jonathan is unable to shift to a cost-leadership strategy. Which strategy is most likely to achieve a competitive advantage?

Narrow the scope of competition and focus on unique features such as the use of organic materials.

In order to achieve a competitive advantage, the Heavenly Hotels, a chain of luxury beach resorts, wants to increase its market share. Which of the following strategies is most likely to do so?

Take advantage of economies of scale and scope by opening a chain of lower-priced economy hotels that leverage the Heavenly Hotels brand image.

Tindel Inc. competes on cost with Nirvana Sites in the web design industry. Both firms operate on a 90 percent learning curve, and neither firm is capable of increasing its cumulative output any further. How might Tindel Inc. achieve a cost-leadership position while maintaining customer satisfaction?

by incorporating new programming techniques to take advantage of experience-curve effects

Which of the following is primarily a value driver?

complements

ComfySeat Furniture is a brand reputed for its wide variants of sofas that introduced a new range of mattresses and bed frames 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 ComfySeat applying?

economies of scope

Finger Lickin' BBQ is a chain of casual restaurants that promises affordable barbecue using top-quality local ingredients. However, the company has struggled to achieve a competitive advantage because of its high overhead costs. Which of the following scenarios is most likely to result in a competitive advantage?

eliminating brick-and-mortar locations and offering delivery from a central kitchen

Bath & Chill is a spa that caters to the needs of a small percentage of highly health-conscious consumers. It offers state-of-the-art treatments in a luxurious setting. Since there are very few spas that offer the same unique services, customers are willing to pay a premium price for its products and services. In this scenario, Bath & Chill is following a

focused differentiation strategy.

Which of the following drivers simultaneously increases value while lowering cost?

innovation

Golden Soles has been successful at differentiating itself from competitors by claiming a premium price for its athletic footwear based on superior design and high-quality materials. In this scenario, which of the following is the key value driver?

product features

________ is best described as decreases in cost per unit as output increases.

Economies of scale

Mohawk is a leader in sustainable and innovative carpeting and floorings, as evidenced by its signature product, the world's first organic cotton carpet. Its product is unique and has appealing customer attributes. If Mohawk's raw material costs increased by 12 percent this year, what would be the likely outcome?

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

Spotless Inc. outsources its production to contract manufacturers located in underdeveloped nations where unskilled labor is at very low wages is plentiful. This has helped the company become a price leader in the chemicals industry. Which of the following is the key driver behind Spotless Inc.'s strategic position?

low-cost input factors

Pete's Bikes enjoys a competitive advantage as a cost-leader because high demand for its products has allowed it to operate at the minimum efficient scale. Which of the following scenarios would be most concerning to the managers of Pete's Bikes?

A major winter storm shuts down Pete's production for several days.

Louis's Secondhand Store offers slightly lower quality merchandise than competitors at a much lower price. What strategy is Louis's Secondhand Store using?

cost-leadership

When Total Semiconductors was operating at the minimum efficient scale of 10,000-12,000 units per month, the firm's cost per unit was $45. However, when the output level was increased beyond 12,000 units, the cost per unit increased to $47. This increase was attributed to the wear-and-tear of the machinery, and complexities of managing and coordinating. What is this phenomenon known as?

diseconomies of scale

Tough Guy's 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, Tough Guy's primary value driver is

availability of complements.

When wireless service providers offer free or discounted mobile phones for subscriptions to their wireless voice and data service, the perceived value of the service offering increases. In this case, the value driver would be

availability of complements.

Benny's Closet Inc. is an apparel company that caters to 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 Benny's Closet applying?

cost-leadership

NuLiver Corp. has recently introduced a new production method that will make the production of their medical devices more cost-effective. Which of the following will most likely be the result of this innovation?

jumps to a steeper learning curve

When a firm combines experience-based learning and process innovation, the firm

jumps to a steeper learning curve.

Both Acme Inc. and Farma & Farma Corp. have discovered similar vaccines to prevent cancer. While Farma & Farma Corp.'s vaccine sells at $100 per unit, Acme sells its vaccine at $90 per unit. This price differentiation has mainly been attributed to the companies' capital decisions. While Acme used its retained earnings to develop the vaccine, Farma & Farma Corp. borrowed funds from banks to develop the vaccine. Thus, Farma & Farma Corp. pays a higher interest on its capital, which makes it necessary to price its vaccine higher. Thus, the key driver for Acme's competitive advantage is

low-cost input factors.

One of the reasons that big box retailers like Home Depot are able to achieve economies of scale is that

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

Tablette Corp. is a consumer electronics company known for its affordable mobile devices that follows a cost-leadership strategy. In this scenario, Tablette Corp. should ideally compare its strategic position with

a consumer electronics company popular among price-conscious customers.

In the multiplex industry, Home Again Movies Inc. is an upscale multiplex that focuses on superior customer experience. The firm charges premium prices for its movie tickets and services. Movies-for-less Inc., in contrast, charges the lowest price in the industry with its no-frills approach. In between these two segments is Just Right Films Inc., which offers a customer experience comparable to that of Home Again Movies at a price almost as low as that of Movies-for-less. What strategy is Just Right Films pursuing in this scenario?

blue ocean strategy

When pursuing a cost-leadership strategy, a business must remember that

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

Power Juice is the owner of a firm that produces sports drinks. Since there are a number of firms in the industry competing on cost, Power Juice has decided to pursue a differentiation strategy. In this case, she should

focus on adding unique features to her product that customers will value.

The fact that both Whole Foods (a high-end grocery store) and Aldi (an inexpensive grocery store) have a competitive advantage in the grocery store industry is an indication that

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