Business Capstone Test 2

Which type of strategy is being used if a company offers a product at a lower cost than its competitors?

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).

Cube square

True or false: Tesla's high stock market valuation is partly justified by the company's learning curve.

True

The perceived value that a company creates for consumers less the company's costs to create the value equals ______.

The economic value created

True or false: Innovation can create value for one firm while destroying value for another. True false question.

True

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.

Complements

Cost of input factors and economies of scale are ______ that managers can manipulate to keep costs in check.

Cost drivers

The goal of a _____________ strategy is to achieve expenses below those of competitors while maintaining similar value. A firm with this strategy could or could not achieve differentiation parity.

Cost leadership

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

When pursuing a differentiation strategy, a firm can achieve a competitive advantage by ______.

Ensuring that its economic value exceeds that of its competitors.

A firm's strategic position is determined by the relationship of which two variables?

Value and creation cost

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

What does the innovation process begin with? Multiple choice question.

An idea

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

An experience-curve effect based on process innovation.

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

An increase in demand from the market.

Which of the following is an example of invention?

Apple combining smart phone and wristwatch technologies to create the Apple Watch

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

Which of the following determine a firm's competitive advantage? (Check all that apply.)

Value position relative to competitors. Cost position relative to competitors.

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 to control costs.

Different value drivers contribute to competitive advantage only if ______.

The increase in perceived value exceeds the corresponding cost increase.

In terms of productivity, which of the following is true of learning curves?

They go down.

Place the four steps of the innovation process in order from first to last. (From top to bottom)

1. Idea 2. Invention 3. Innovation 4. Imitation

Which of the following scenarios would result in strengthening a firm's strategic position?

A firm adds a new product feature that greatly increases the perceived value of the product at a minimal cost to the firm.

Which statement describes the long tail?

A large amount of revenue derived from a small number of units among almost unlimited choices.

A differentiation strategy can be threatened when ______.

A product becomes commoditized, and the focus of the competition shifts to price.

Why does the learning curve go down when productivity is considered?

As workers repeatedly engage in an activity, they become more efficient, driving down costs.

Diseconomies of scale often appear when a firm ______.

Becomes too large and complex to manage efficiently.

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

Bring down

A company's goal-directed plans regarding how to compete for advantage is known as the firm's ______.

Business-level strategy

Unique features and attributes that differentiate a product from competitors' offerings allow the firm to ______.

Charge premium pricing.

Which of the following best exemplifies a company that successfully uses a differentiation strategy?

Company X strengthens its brand by marketing a product with an innovative feature.

Value drivers known as ______ add value to a product or service when they are consumed in tandem with the focal product.

Complements

What are the three most important value drivers that managers can use to create a competitive advantage?

Complements Customer Service Product Features

A firm that hopes to achieve a competitive advantage by maintaining an efficient supply chain and taking advantage of economies of scale and a well-trained staff is focusing on ______.

Cost drivers

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

Managers can increase the perceived value of their firms' product or service offerings by focusing on ______.

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

Economies of scale are ______.

Decreases in cost per unit as output increases.

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.

Differentiation

A ______ strategy attempts to create products with unique and attractive features in order to increase the price that consumers are willing to pay.

Differentiation

A(n) ______ strategy attempts to increase the perceived value of a product while controlling costs.

Differentiation

What is one of the benefits of pursuing a differentiation strategy when it comes to the power of suppliers?

Differentiation provides protection against an increase in input prices.

A firm experiences ______ when an increase in output results in an increase in costs.

Diseconomies of scale

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

Economic value created.

A firm that increases its output of a given product and experiences a simultaneous decrease in per unit costs is taking advantage of ______.

Economies of scale

Larger output allows firms to invest in more specialized systems such as ______. (Check all that apply.)

Enterprise resource planning software Manufacturing robots

The cube-square rule makes it _______ for smaller stores to compete with larger retailers.

Harder

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

Business-level strategy addresses which overarching question?

How should we compete?

Positive adjustments in product features, customer service, and complements may enable managers to ______.

Improve the firm's strategic position.

What drives the learning curve effect?

Increases in cumulative output within the existing technology.

A firm's competitive advantage is determined jointly by _____________ and firm effects. Multiple choice question.

Industry effects

Which of the following are input factors? (Check all that apply.)

Information technology services Raw materials Capital Labor

Which of the following allows a firm to redefine a market in its favor?

Innovation

What is the relationship between innovation and competitive advantage?

Innovation is a powerful weapon for gaining and maintaining competitive advantage.

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 the relationship between per-unit cost and output, the minimum efficient scale ______.

Is where the per-unit cost is lowest.

Which statement best describes the speed of innovation over the past hundred years?

It has accelerated dramatically.

In a focused cost-leadership strategy, a firm provides ______.

Low-cost products to a niche market.

Raoul is starting a new cosmetics company. His focus is on what he believes is a game-changing lipstick. He wants the lipstick to be accessible to everyone, but the manufacturing costs are higher than he had anticipated. If Raoul wants to achieve his desired strategic position of value creation at an affordable cost, he will need to ______.

Make strategic trade-offs.

Which of the following is an example of creative destruction? Multiple choice question.

Mobile phones replacing traditional telephones.

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?

Narrow

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

Narrower

Tesla has an 80% learning curve, which means that ______.

Per-unit cost drops 20% whenever output doubles.

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 ______.

Position

A differentiation strategy is typically associated with ______ pricing.

Premium

Which capability is required to create superior product features?

R&D (Research and Development)

A cost leader can achieve a competitive advantage by ______.

Reducing costs below those of competitors while maintaining a similar value.

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

Scope

Fill in the blanks to complete the sentence. A manufacturer of electronic components can use its manufacturing machines to produce many different components such as semiconductors, sensors, and capacitors. In this case, the firm benefits from an economy of _____, reducing overall production costs by finding multiple uses for its components and facilities.

Scope

The ______ determines whether to pursue a specific narrow part of the market or to go after the broader market.

Scope of competition

Economies of scale present an opportunity to increase profits because as the number of units within the relevant range increases, fixed costs ______.

Stay the same

In the learning curve, the ______ the learning curve, the more learning has taken place.

Steeper

A firm's strategic profile based on value creation and cost is called its ______. Multiple choice question.

Strategic position

Choosing a business-level strategy helps to define a firm's ______ in a given product market.

Strategic position

A(n) ______ requires making a choice between a cost position and a value position. Multiple choice question.

Strategic trade-off

What is the relationship between fixed costs and economies of scale?

The amount of fixed costs allocated to each unit of output decreases as output increases.

A graphical depiction of a firm's relative performance across its industry's factors of competition is known as a(n) ______.

Value curve

Determining the products the customer wants and needs answers the ______ question of competition.

What

In order for a product or service to be considered patentable, it must be ______. (Check all that apply.)

Novel Non-obvious Useful

To formulate an appropriate business-level strategy, managers must answer the ______ questions of competition.

Who, what, why, and how