Strat. MGMT Exam 2
51) ________ is the ability to use organizational structure to facilitate coordination among specific disciplines to conduct research.
A) Architectural competence
46) Which of the following bases of product differentiation attempts to create the perception that a firm's products or services are unusually valuable by focusing directly on the attributes of the products or services a firm sells?
A) Product complexity
41) ________ is a business strategy whereby firms attempt to gain a competitive advantage by increasing the perceived value of their products or services relative to the perceived value of other firms' products or services.
A) Product differentiation
57) Which of the following statements regarding the impact of product differentiation on the threat of new entry is accurate?
A) Product differentiation helps reduce the threat of new entry by forcing potential new entrants to absorb costs associated with overcoming incumbent firms' product-differentiation advantages.
88) Coach's agreement with Lexus to produce automobiles with Coach leather interior is an example of
A) cooperative strategic alliance.
77) While cost leadership requires rewards for cost reduction, product differentiation requires rewards for ________.
A) creative flair
71) The Lockheed Corporation Skunk Works is an example of a(n)
A) cross-divisional or cross-functional team.
62) Which of the following bases of product differentiation is almost always easy to duplicate?
A) product features
85) Which of the following bases of Coach's competitive advantage is likely to be the easiest to duplicate?
A) product features
59) With regard to the threat of suppliers, product differentiation
A) reduces the threat of suppliers because a firm with a highly differentiated product can pass increased costs on to customers.
66) Under which of the following conditions is the product mix advantage as a basis of product differentiation the least difficult to duplicate?
A) when the base of a product mix advantage is a common customer
75) More recent work in the area of strategic management regarding assertions about being stuck in the middle
B) contradicts the argument and finds that firms that successfully pursue cost leadership and product differentiation simultaneously can often expect to gain a sustained competitive advantage.
60) In emerging industries
B) firms that are first movers can gain product-differentiation advantages based on perceived technological leadership.
44) If an individual is considering purchasing a Toyota Camry or a Ferrari and decides that it is worth paying the extra money for the prestige that is associated with the Ferrari, the additional money the customer is willing to pay for the prestige is known as a(n)
B) hedonic price.
82) The price premium that customers are willing to pay for the superior quality and perceived prestige of Coach's products over the prices of similar products are known as
B) hedonic prices.
89) If Coach had an organizational structure that used cross-functional teams, the members of which reported not only to their functional boss (i.e. the head of production) but also to the head of the team, Coach could be said to be using which organizational structure?
B) matrix
56) According to Chamberlin, firms selling differentiated products and facing a downward sloping demand curve are in an industry described as
B) monopolistic competition.
49) In the bicycle industry, the feel of high-end bicycles when they are ridden is important. As a serious rider becomes accustomed to a particular bicycle, it is very difficult for that rider to switch to an alternative supplier. This is an example of product differentiation through which of the following?
B) product customization
64) Which of the following bases of product differentiation is by far the most popular way for firms to try to differentiate their products but is identified as almost always being easy to duplicate?
B) product features
72) Ultimately the ________ of a product differentiation strategy depends on the ability of individual firms to be creative in finding new ways to differentiate their products.
B) rarity
48) A firm's ________ is really no more than a socially complex relationship between a firm and its customers and can serve as a basis for product differentiation.
B) reputation
68) Which of the following bases of product differentiation is generally viewed as the most difficult to duplicate?
B) reputation
53) ________ can be can be a source of product differentiation when a single set of customers purchases several of a firm's products.
C) Product mix
79) Recent research shows that firms can simultaneously implement cost-leadership and product-differentiation strategies if they learn how to manage the ________ inherent in these two strategies.
C) contradictions
54) Product differentiation is ultimately an expression of the ________ of individuals and groups within firms and is limited only by the ________ that exist, or that can be created, in a particular industry.
C) creativity; opportunities
86) The business level strategy Coach is pursuing is likely to
C) decrease the threat of new entrants due to the additional cost they would face to overcome Coach's reputation advantages.
67) Research on architectural competence in pharmaceutical firms suggests that
C) not only do some firms possess this competence, but also that other firms do not and firms without this competence have, on average, been unable to develop it.
69) The U-form structure used to implement a product-differentiation strategy
C) often uses temporary cross-divisional and cross-functional teams to manage the development and implementation of new, innovative, and highly differentiated products.
47) The ability of companies that produce complex software packages to tailor these packages to the specific needs of their customers is an example of product differentiation through
C) product customization.
81) Which generic business level strategy is Coach pursuing?
C) product differentiation
80) Cross-functional product development teams are suitable for a firm pursuing a ________ strategy.
C) product-differentiation
63) Which of the following bases of product differentiation is usually costly to duplicate?
C) reputation
83) Which of the following bases of product differentiation does Coach appear to be employing?
C) reputation, consumer marketing, and product features
90) One feature of Coach's compensation policies is likely to be
C) rewards for creative flair.
74) In developing a compensation policy used to implement a product-differentiation strategy, firms will
C) simultaneously use multiple dimensions to examine employee performance.
45) The most obvious way that firms can try to differentiate their products is by
D) altering the features of the products they sell.
50) Through which bases of competitive advantage do firms attempt to alter the perceptions of current and potential customers, whether or not specific attributes of a firm's products or services are altered?
D) consumer marketing
55) In general, firms selling differentiated products face a demand curve that is
D) downward sloping.
61) In a declining industry
D) highly differentiated firms may be able to discover a viable market niche that will enable them to survive despite the overall decline in the market.
70) A ________ structure exists when individuals in a firm have two or more bosses simultaneously.
D) matrix
76) Firms that are stuck in the middle attempt to sell
D) medium-priced products and gain medium market share.
43) While firms often alter the ________ of their products or services in order to implement a product-differentiation strategy, the existence of product differentiation, in the end, is always a matter of ________.
D) objective properties; customer perception
73) A ________ exists when firms are committed to engage in several related product-differentiation strategies simultaneously.
D) policy of experimentation
52) Which of the following bases of product differentiation attempts to create the perception that a firm's products or services are unusually valuable by focusing on links within and between firms?
D) product mix
78) Recent research suggests that ________ firms must have competitive levels of cost to survive.
D) product-differentiation
58) When considering the impact of product differentiation on the threat of rivalry, product differentiation
D) reduces the threat of rivalry because each firm in an industry attempts to carve out its own unique product niche.
87) Given that the leather handbag market that Coach largely competes in can be considered a mature market, Coach should focus its product-differentiation efforts on
D) refining products as a basis of product differentiation.
84) Which of the following bases of Coach's competitive advantage is likely to be the most difficult to duplicate?
D) reputation
65) Product features, by themselves, are
D) usually not a source of sustained competitive advantage, but they can be a source of a temporary competitive advantage.
11) If one of a firm's exchange partners behaves opportunistically, this reduces the economic value of the firm. Answer
TRUE
11) Products can be differentiated by the extent to which they are customized for particular customer applications. Answer
TRUE
13) Once developed, a firm's reputation can last a long time, even if the basis for that reputation no longer exists. Answer
TRUE
14) A transaction-specific investment is any investment in an exchange that has significantly more value in the current exchange than it does in alternative exchanges. Answer
TRUE
14) The ability to use organization structure to facilitate coordination among scientific disciplines to conduct research is known as architectural competence Answer
TRUE
15) Linkages between firms that differentiate their products are examples of cooperative strategic alliance strategies. Answer
TRUE
15) Transaction-specific investments make parties to an exchange vulnerable to opportunism, and vertical integration solves this vulnerability problem Answer
TRUE
17) Firms should not vertically integrate into business activities where they do not possess the resources necessary to gain competitive advantages. Answer
TRUE
17) Product differentiation is ultimately an expression of the creativity of individuals and groups within firms and is limited only by the opportunities that exist, or that can be created, in a particular industry and by the willingness and ability of firms to creatively explore ways to take advantage of those opportunities. Answer
TRUE
18) If a firm engages in vertical integration into a business activity where it does not possess any of the valuable, rare, or costly-to-imitate resources it needs to gain a competitive advantage, it may find itself at a competitive disadvantage to the extent that some firms already have competitive advantages in these business activities. Answer
TRUE
19) One of the biggest uncertainties in providing customer service through call centers is the question of whether the people staffing the phones actually help a firm's customers. Answer
TRUE
2) Decisions about whether or not to vertically integrate often determine whether or not a firm is operating in a single business or industry or multiple businesses or industries. Answer
TRUE
2) Product differentiation is a business strategy whereby firms attempt to gain a competitive advantage by increasing the perceived value of their products and services relative to the perceived value of other firms' products or services.
TRUE
20) Edward Chamberlin described firms selling differentiated products and facing a downward-sloping demand curve as being in an industry characterized by monopolistic competition. Answer
TRUE
20) Flexibility refers to how costly it is for a firm to alter its strategic and organizational decisions. Answer
TRUE
21) Product differentiation helps reduce the threat of new entry by forcing potential entrants to an industry to absorb not only the standard costs of beginning business but also the additional costs associated with overcoming incumbent firms' product-differentiation advantages. Answer
TRUE
24) Firms with highly differentiated products may have loyal customers, or customers who are unable to purchase similar products or services from other firms and are therefore more likely to accept increased prices due to a firm passing on increased costs by a powerful supplier. Answer
TRUE
25) Flexibility is only valuable when the decision-making setting a firm is facing is uncertain. Answer
TRUE
25) When a firm sells a highly differentiated product, it enjoys a quasi-monopoly in that segment of the market. Answer
TRUE
26) A decision-making setting is uncertain when the future value of an exchange cannot be known when investments in that exchange are being made. Answer
TRUE
26) In fragmented industries firms can use product differentiation to help consolidate a market. Answer
TRUE
27) The use of budgets in a vertically integrated U-form organization can lead functional managers to overemphasize short-term behavior that is easy to measure and underemphasize longer-term behavior that is more difficult to measure. Answer
TRUE
28) A flexibility-based approach to vertical integration suggests that when the decision-making setting regarding a business activity is highly uncertain, firms should form a strategic alliance to enter this activity instead of vertically integrating. Answer
TRUE
28) The concept of product differentiation generally assumes that the number of firms that have been able to differentiate their products in a particular way is, at some point in time, less than the number of firms needed to generate perfect competition dynamics. Answer
TRUE
3) A firm's level of vertical integration is the number of steps in its value chain that the firm accomplishes within its boundaries. Answer
TRUE
30) A firm's vertical integration strategy is rare when few competing firms are able to create value by vertically integrating in the same way. Answer
TRUE
32) While product features, by themselves, are usually not a source of sustained competitive advantage, they can be a source of a temporary competitive advantage. Answer
TRUE
35) While the U-form structure for a firm pursuing cost leadership is relatively simple, the U-form structure for a firm implementing a product-differentiation strategy can be somewhat more complex. Answer
TRUE
36) Firms pursuing a differentiation strategy often use temporary cross-divisional and cross-functional teams to manage the development and implementation of new, innovative and highly differentiated products. Answer
TRUE
37) More recent work contradicts the argument about being "stuck in the middle" and suggests that firms that are successful in both cost leadership and product differentiation often can expect to gain a sustained competitive advantage. Answer
TRUE
38) McDonald's is an excellent example of a firm that simultaneously employs both a product-differentiation and a cost-leadership strategy since their product differentiation based on cleanliness, consistency and fun in its fast food outlets allowed the company to become the market share leader in the industry and to reduce its costs. Answer
TRUE
4) While firms often alter the objective properties of their products or services in order to implement a product-differentiation strategy, the existence of product differentiation is always a matter of customer perception. Answer
TRUE
40) Product differentiation can lead to high market share and low costs. Answer
TRUE
5) A firm engages in backward vertical integration when it incorporates more stages of the value chain within its boundaries and those stages bring it closer to gaining access to raw materials.Answer
TRUE
5) If products or services are perceived as being different in a way that is valued by customers, even if there is no physical differentiation, then product differentiation exists. Answer
TRUE
7) Chryslers' introduction of the "cab forward" design was an attempt at differentiation through product features. Answer
TRUE
8) A firm with a high ratio between value added and sales has brought many of the value-creating activities associated with its business inside its boundaries, consistent with a high level of vertical integration. Answer
TRUE
8) To the extent that differences in product complexity lead customers to conclude that the products of some firms are more valuable than the product of other firms, then product complexity can be a basis of product differentiation. Answer
TRUE
9) Opportunism exists when a firm is unfairly exploited in an exchange. Answer
TRUE
42) By increasing the perceived value of a firm's products or services, a firm will be able to
charge a higher price than it would otherwise be able to do.