4490 Ch. 6
differentiation
Home Smart Inc. is a chain of supermarkets that sells its products 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 Home Smart adopted in this scenario? -cost-leadership -differentiation -market penetration -product diversification
innovation
which of the following drivers simultaneously inc value while lowering cost? -economies of scale -superior customer service -availability of complements -innovation
cost-leadership
Bargain Styles Inc. is an apparel company that caters to the 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 Bargain Styles applying? -cost-leadership -differentiation -niche marketing -product diversification
automobile company that sells high-end, premium cars
True Empire Autos Inc. is an automobile company known for its luxury cars and follows a differentiation strategy. In this scenario, True Empire Autos should ideally compare its strategic position with an:
economies of scale
_____ is best descrived as dec. in cost per unit as output inc.
availability of complements
body syn 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 2 health checkups 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 offering. in this case body sync's primary value driver is____
reduce the total cost of ownership
clean machine inc. produces a high-quality dishwashing machine that is reliable and durable. how would this product most likely act as a cost driver?
a higher value gap
handy helper, inc. produces decent-quality woodworking tools at a mid-range price. master tools, inc. produces high-quality tools also at a mid-range price. master tools gained a competitive advantage bc it has ____ than handy helper
higher costs
higher value tends to require____
lowering cost and inc perceived customer benefits
to initiate a strategic move that allows a firm to open up new and uncontested market space through value innovation, managers must address four key questions when formulating a blue ocean business strategy. These questions focus on_____
gain a market share and make up the loss in margin through inc sales
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______
observable product features
which of the following sources of differential appeal is least effective in helping a firm sustain its advantage? -reputation for innovation -reputation for quality -superior customer experience -observable product features
investments in differentiation are complements
when a firm is successful at pursuing a blue ocean strategy, _______
zigzags
a value curve indicates a lack of effectiveness a firm's strategic profile when it_____
economic value creation
what is a value gap?
value drivers
product features, customer service and complements are all examples of important_______
delivers low-cost products and services to a specific, narrow part of the market
In a focused cost-leadership strategy, a firm___
focused differentiation strategy
Organic Eats is a restaurant that caters to the needs of a small percentage of highly health-conscious consumers. It has an all-organic, vegan menu. Since there are very few restaurants that offer the same unique services, customers are willing to pay a premium price for its products and services. In this scenario, Organic Eats is following a _____
an apparel company popular among price conscious customers
Wear Crush Inc. is an apparel company known for its affordable clothes that follows a cost-leadership strategy. In this scenario, Wear Crush should ideally compare its strategic position with:
gains market share from other firms
When a differentiator charges a similar price as its competitors in the same strategic group but offers more perceived value, it
They can be used by any organization independent of industry context
Why are differentiation and cost-leadership strategies referred to as generic business strategies?
minimum efficient scale
____ 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
JL Electronics can charge a premium price on its televisions
`Both Viten Electroncs Inc. and JL Electronics Inc. incure a cost of $400 to manufacture a LED tv. However, the economic calue created by JL Electronics is more than that created by Viten Electronics. What does this indicate?
strategy canvas
a _____ is a graphical depiction of a company's relative performance vis-a-vis its competitors across the indrustry's key success factors
business-level strategy
a ___primarily details the goal-directed actions managers take in their quest for competitive advantage when competing in a single product market
the intent of a blue ocean strategy is not to be the absolute lowest-cost provider b/c a blue ocean must also inc perceived value
a blue ocean strategy differs from a low-cost strategy in that_____
value innovation
a blue ocean strategy tends to be successful only if a firm is able to rely on a ____ that allows it to reconcile trade-offs
economic value created is greater than that of its competitors
a company that uses a differentiation strategy can achieve a competitive advantage as long as its______
economies of scale
a cost-leader is protected from the threat of new entrants primarily due to its_____
fir has intangible resources, is able to pass on inc in supplier cost to the customer, and its differentiation appeal creates customer loyalty
a differentiation strategy works best when a ____
differentiator is able to create a significant difference between perceived value and current market prices
a differentiator is least likely to be threatened by inc in input prices due to powerful supplier when the ____
it creates the same customer value as its competitors
a firm achieves differentiation parity ideally when____
diseconomies of scale
a firm experiences _____ when there are inc in cost per unit as output inc
produces at an output level beyond the min efficient scale
a firm experiences diseconomies of scale when it____
focus its r&d on product technologies to add uniqueness
a firm pursuing a differentiation strategy as opposed to a low-cost strategy will___
perform different activities than its rivals
a firm's business strategy will lead to a competitive advantage if it allows the firm to____
a firm is at an advantage when compared to its competitor
a firm's learning curve is steeper than that of its competitor. what does this imply?
charge a higher price than the cost-leader in the industry
a successfully implemented blue ocean strategy allows a firm to____
innovation that allows competitors to emerge with more economical replacements
according to the five forces model, which of the following is viewed as a major risk to a business pursuing a cost-leadership strategy
accurodisk creates a greater economic value than td storage
accurodisk inc manufactures external hard disks for $32 per unit, and the maximum price customers are willing to pay is $47 per unit. td storage inc. is a competitor of accurodisk inc. that produces external hard disks for $37 per unit, and customers are willing to pay a max price of $50 per unit. What does this imply?
it appeals to the price-conscious buyers
allure is a cosmetic brand that pursues a cost-leader strategy. which of the following statements is true of the cosmetic brand? -it appeals to the price-conscious buyers -its primary value driver is product uniqueness -it charges a premium price for its products -it directly competes against luxury cosmetic brands that charge premium prices
it failed to refine its strategic position over time
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?
go down
as it takes less and less time to produce the same output, learning curves usually_____
learning effects
as the cumulative output in a firm inc, managers learn how to optimize the production process and improve workers' performance through repetition. this drives down the per-unit cost. which of the following phenomena is best described here? -learning effects -network effects -diseconomies of scale -productivity frontier
$4
at a certain output level, the per-unit cost incurred by a firm to manufacture a product is $5. other factors remaining constant, what will be the new per-unit cost if the cumulative output is doubled, and the firm is able to achieve an 80% learning curve?
90 percent learning curve
at a certain output level, the per-unit cost incurred by a firm to manufacture a product was $60. once the cumulative output doubled, the cost per unit reduced to $54. all other factors remaining constant, the firm has been able to achieve a ___________
learning-curve effect
bass watches inc. initially spent eight man-hrs. to assemble a wristwatch. but as the production doubled, the number of hours spent on assembling a watch reduced by 20%. this inc. in productivity reduced the company's cost per unit. what is this phenomenon referred to as?
low-cost input factors
both biothink inc and gd pharma inc. have discovered similar vaccines to prevent cancer. while gd pharma's vaccine sells at $100 per unit, biothink sells its vaccine at $90 per unit. this price differentiation has mainly been attributed to the companies' capital decisions. while biothink used its RE to develop the vaccine, gd pharma borrowed funds from banks to develop the vaccine. thus, gd pharma pays a higher interest on its capital, which makes it necessary to price its vaccine higher. thus, the key driver for biothink's competitive advantage is ____
create greater perceived economic value than CLR
both blue horizons electronics inc. and CLR inc. have achieved cost parity in the television market. To gain and sustain a competitve advantage against CLR, blue horizons electronics should____-
create higher customer perceived value than the value that competitors create.
firms pursuing a differentiation strategy primarily seek to____
move down a given learning curve
combining economies of learning with the existing production technology allows a firm to___
the loyalty of its customers
cool cat inc has dominated the high-end refrigerator market by producing a reliable refrigerator with many bonus features that appeal to customers. recently, a competitor has developed a refrigerator that offers many of the same features as cool cat's refridgerator. what will most likely help cool cat keep its competitive advantage?
quality
dfs electronics inc ensures that all its products are highly durable and reliable by using techniques like zero-defect and lean manufacturing systems. these efforts ot only add to the products' differential appeal, but also help the company save costs during production and avoid expenses due to after-sales services. thus, the common value and cost driver responsible for dfs electronics strategic position as an integrator is the____
economies of scale
discount haven inc. is a large chain of hypermarkets. it has cost benefits due to its extensive operation. the company's marketing and sales, logistics, admin and other such related costs get divided between a large number of product units stocked in its stores. this makes it difficult for smaller retail stores and supermarkets to compete against discount haven's low prices. thus, discount haven has a competitive advantage due to its ____
inc in cost as output inc
diseconomies of scale refer to____
spread their variable costs over a larger output
economies of scale do not allow firms to______
economic value create exceeds that of its competitors
even w/o differentiation parity, a firm pursuing a cost-leadership strategy can still gain a competitive advantage as long as its____
archer cycles has created a greater economic value than evia cycles
evia cycles inc. inucrs $400 to manufacture a bicycle, and the max price customers are willing to pay is $550 per unit. archers cycles inc., its competitor, incurs $450 to manufacture a similar bicycle, and customers are willing to pay a max price of $620 for it. what does this indicate?
jumps to a steeper learning curve
gotta get chocolates inc has recently introduced a new production method that will make the production of their chocolates more cost-effective. which of the following will most likely be the result of this innovation? -jumps to a steeper learning curve -destablizes a steeper learning curve -stabilizes the existing learning curve -moves down the existing learning curve
it has exploited external opportunities
help yourself inc. publishes many types self-help books. recently , the consumer demand for winter gardening books has inc significantly. although help yourself has limited production facilities, it has inc the production of these books to meet this demand. it hopes to get books to the market faster than its closest competitor, who is also inc the production of winter gardening books. which of the following aspects of business-level strategy has help yourself accomplished?
marriott lowered its cost structure by sharing its production assets over a several types of hotels, which inc its menu and thus its differentiated appeal
how did marriott use economies of scope to achieve greater economic value than its competitors?
complements add value to a product when they are consuming in tandem with it
how does availability of complements act as a value driver?
it is more able to absorb price inc through accepting lower profit margins
how is a cost-leader protected from threats from powerful buyers?
differentiation parity deals with value not pricing
how is differentiation parity different from cost parity?
blue ocean
in a successful _________ strategy, the trade-offs between differentiation and low cost are reconciled
focus its r&d on process technologies to improve efficiency
in contrast to a differentiator, a cost-leader will___
blue ocean strategy
in the multiplex industry, vibrant movies inc. is an upscale multiplex that focuses on superior customer experience. the firm charges premium prices for its movie tickets and services. global cine inc., in contrast, charges the lowest price in the industry with its no-frills approach. in between these two segments is true movies inc., which offers a customer experience comparable to that of vibrant movies at a price almost as low as that of global cline. what strategy is true moveies pursuing in this scenario?
low-cost input factors
juanita apparels inc. outsources its production to contract manufacturers located in underdeveloped nations where unskilled labor is available in plenty for very low wages. this has helped the apparel brand become a price leader in the industry. which of the following is the key driver behind juanita apparael's strategic position -network effects -superior customer service -availability of complements -low-cost input factors
economies of scale
kitching things inc. is a company that manufactures plastic kitchenware. it operates at an output level that allows it to keep its unit cost per output to the lowest in the industry. this in turn allows kitchenthings to be the price leader. other competing companies cannot operate at the same level due to a lack of consumer demand for their products. this puts them at a competitive disadvantage. in this scenario, the cost driver behind kitchen things strategic position is____
superior customer service
lush roses is a chain of premium hotels around the globe that charges higher prices for its rooms and suits when compared to the average industry standards. yet, the hotel enjoys the largest market share in the industry. this is mainly due to its highly responsive staff that has a strong commitment toward achieving a 100% guest satisfaction. In this scenario, which of the following is the key value driver? -superior customer service -low cost of input factors -availability of complements -economies of scale
product features
oviyo inc. has been successful at differentiating itself from competitors by claiming a premium price for its digital cameras based on superior image quality and advanced technology. in this scenario, which of the following is the key value driver? -economies of scale -low-cost input factors -product features -premium prices
economies of scope
pure rinse inc. is a brand reputed for its wide variants of body was that introduced its range of shampoos and skin moisturizers 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 pure rinse applying?
cost-leadership
tangles costume jewlery offers slightly lower quality merchandise than competitors at a much lower price. what strategy is Tangles using?
experience curve
the concept of a ____ attempts to capture both learning effects and process improvements at firms
offer a differentiated product or service at a low cost
the primary goal of a firm pursuing a blue ocean strategy should be to______
value innovation
the pursuit of both differentiation and low cost at the same time in a way that creates a leap in value for both the firm and consumers is called____
operate at the min. efficient scale
to be cost-competitive, a firm should____
the increase in value creation exceeds the increase in cost
value drivers contribute to a firm's competitive advantage only if_____
the conflicting requirements of two generic strategies
what does blue ocean strategy attempt to reconcile?
every time the cumulative output is doubled, the cost per unit will decline by 20%
what does it mean for a firm to have an 80% learning curve?
it must reduce the firm's cost below that of its competitors while offering adequate value
what must a cost-leadership strategy accomplish to be successful?
stuck in the middle
when a blue ocean strategy goes bad, a firm has neither a clear differentiation nor a clear cost-leadership profile. this situation is referred to as_____
jumps to a steeper learning curve
when a firm combines experience based learning and process innovation, the firm______
strategic trade-offs
when a firm makes choices between a cost or value position to achieve competitive advantage, it is primarily involved in____
3000-4000 units
when a firm manufactures 2000-3000 units of a product, it incurs an average cost of $10 per unit. when it manufactures 3000-4000 units of the same product, the average cost per unit reduces to $7. however, manufacturing beyond 4000 units will raise the average cost per unit to $9. What is the firm's minimum efficient scale?
11000 units
when a firm operates at an output level of 9000 units, the per-unit cost is $5. when the production is between 10000-12000 units, the per-unit cost is $4. at a production level of 13000 units, the production cost is again $5 per unit. at 14000 units and above, the production cost inc. further. at what output level does the firm experience economies of scale?
returns to scale are constant
when a firm operates at the min. efficient scale, the____
availability of complements
when internet service providers offer free routers for subscriptions to their wireless Internet packs, the perceived value of the service offer inc. in this case, the value driver would be_____
diseconomies of scale
when jean cult inc. was operating at the min. efficient scale of 10000-12000 units per month, the firm's cost per units was $20. however, when the output level was inc beyond 12000 the cost per unit inc to $22. this inc was attributed to the wear-and-tear of the machinery and complexities of managing and coordinating. what is this phenomenon known as?
the tension between value creation and the pressure to keep cost in check
which of the following best describes a strategic trade-off? -a tension between innovation and keeping manufacturing costs down -the tension between maintaining both high-quality products and service -the tension between value creation and the pressure to keep cost in check -the tension between raising prices and keeping a loyal clientele
it requires the reconciliation of fundamentally different strategic positions---differentiation and low cost
which of the following best explains why a blue ocean strategy is difficult to implement?
failure to combine a cost-leadership position with a differentiation position
which of the following contributed the most to jcpennys failed blue ocean strategy? -failture to win legal battles against its closest competitors -failture to conduct an accurate pretest in the market -failure to apply the strategy to enough stores at the same time -failure to combine a cost-leadership position with a differentiation postition
inc. the perceived value created for customers, which allows it to charge a premium price
whole foods differentiates itself from competitors by offering top-quality foods obtained through sustainable agriculture. this business strategy implies that whole food focuses on_____
just right airline offers high-quality beverages and meals, plush airport lounges, only a few connections via hubs domestically, poor customer service, and low prices
which of the following describes an airline that is most likely stuck in the middle? -Red carpet airline that offers complimentary drinks and meals, coast-to-coast coverage via connecting hubs, plush airport lounges, and high prices -plush airline that offers international routes and global coverage, high customer service, high reliability and high prices -just right airline offers high-quality beverages and meals, plush airport lounges, only a few connections via hubs domestically, poor customer service, and low prices -bottom line airline that offers no assigned seating, no in-flight amenities, no drinks or meals, no airport lounges and low prices
a cosmetics brand that offers superior-quality skin lotion priced at 100 dollars per bottle
which of the following examples uses a focused differentiation strategy? -a tennis pro shop that sells low-quality racquet priced at 150 dollars per racquet -a coffee shop that offers mediocre lattees at a price of five dollars for a small latte -a hotel chain that offers high-quality service with room rates of under 75 dollars per night -a cosmetics brand that offers superior-quality skin lotion priced at 100 dollars per bottle
the value and the cost position of the firm relative to its competitors
which of the following is a firm effect that has an impact on the competitive advantage of a firm? -the exit barriers within the industry in which the firm operates -the number of companies operating the in industry in which the firm operates -the intensity of rivalry among existing companies in the firm's chosen industry -the value and the cost position of the firm relative to its competitors
how will we satisfy our customer needs?
which of the following is a key question managers must answer to formulate an appropriate business-level strategy? -When will we satisfy our customer needs? -how will we satisfy our customer needs? -where will we satisfy our customer needs? -can we satisfy our customer needs?
learning effects involve the accumulation of output over time
which of the following is an accurate statement about learning effects? -learning effects involve the dilution of output over time -learning effects involve the accumulation of output over time -learning effects involve the inc of output at a point in time -learning effects involve the dec of output at a point in time
superior customer service
which of the following is more of a value driver than a cost driver? -superior customer service -economies of scale -learning-curve effects -experience-curve effects
economies of scale
which of the following is primarily a cost driver?
complements
which of the following is primarily a value driver? -cost of input factors -economies of scope -experience-curve effects -complements
chique apparel offered clothing at a low price but failed to differentiate its product as being exclusive
which of the following provides an example of a firm in a red ocean? -chique apparel offered clothing at a low price but failed to differentiate its product as being exclusive -cheap apparel offered clothing at a price matching that of its competitors and, as a result, it had lower profit margins -goode apparel offered clothing at a mid-range price but failed to differentiate its product as being decent quality -top drawer apparel offered clothing at a higher price than competitors and, as a result, failed to make a profit
the firm's focus shifts to price rather than value-creating features
which of the following scenarios would threaten a firm that uses a differentiation strategy? -the firm inc the uniqueness of its product w/o inc its price -the firm adds product features that raise cost and perceived value -the firm's focus shifts to price rather than value-creating features -the firm's product has not established an acceptable standard of quality
when mass manufacturing pens
which of the following situations will have greater effects from economies of scale than from learning effects? -when conducting surgeries -when practicing corporate law -when mass manufacturing pens -when making business decisions
economies of scope are the savings that come from producing two or more outputs from the same resources, whereas economies of scale are dec in per-unit cost with inc in output
which of the following statements accurately brings out the difference between economies of scale and economies of scope?
while there are no diseconomies to learning, there are diseconomies to scale
which of the following statements accurately brings out the difference between economies of scale and learning effects?
choosing a strategic position requires making important trade-offs between value and cost positions
which of the following statements is true of a strategic position? -choosing a strategic position requires making important trade-offs between value and cost positions -strategic positions are fixed; they do not change like the environment -differentiation and cost leadership require similar strategic positions -a firm is said to have a competitive advantage when it ends up with strategic positions below the productivity frontier
learning curves can be observed in manufacturing processes and professional services
which of the following statements is true of learning curves? -learning curves are captured at one point in time when output is inc. -learning curve can be observed in manufacturing processes and professional services -as cumulative output inc, the learning curve becomes less steep -the steeper the learning curve, the lesser the learning effects
lower value gap
which of the following will hamper a differentiator's ability to achieve a competitive advantage? -lower production costs -premium prices -lower value gap -customized goods
shoes cult has a competitive advantage over aros
while aros inc. incurs a cost of $20 for a pair of shoes, shoes cult inc., its competitor, manufactures a pair of shoes at $22. Both the companies are able to sell their shoes for a maximum of $30 per pair. Which of the following statements is not true in this scenario? -both aros and shoes cult have achieved differentiation parity -aros is a cost-leader when compared to shoes cult -aros has created a greater economic value than shoes cult -shoes cult has a competitve advantage over aros
