Chapter 6 - Business Strategy: Differentiation, Cost Leadership, and Blue Oceans

What best exemplifies a company that uses differentiation?

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

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

Two important features managers can adjust in an effort to improve the firm's strategic position are

Customer service and product features

What are questions that managers must answer when pursuing value innovation?

Which product factors to raise above the industry standard, which product factors to eliminate, which new product factors to create, and which product factors to reduce below the industry standard.

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

an increase in demand from the market

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

bring down

A firm pursing a blue ocean strategy can increase its profit margins by implementing what pricing options?

charge a lower price than the differentiator but higher than the cost leader.

Unique features and attributes that differentiate a product from comptetitors' offerings allow the firm to

charge premium pricing

Bundling of products and services that are consumed in tandem to create value is an example of

complements

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

cost drivers

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

cost leader

What are considered the two generic business-level strategies?

cost-leadership and differentiation

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

ensuring that its economic value exceed that of its competitors

The concept of a(n) __________ attempt to combine both learning effects and process improvements.

experience curve

High-end pen manufacturer Mont Blanc pursues a differentiation strategy with a ___________ scope of competition, pursuing only those who need or want an expensive writing instrument.

focused

In terms of business strategy, blue oceans represent what?

increased demand and untapped market space

A firm's competitive advantage is determined jointly by ___________ effects and firm effects.

industry

What are input factors?

information technology services, raw materials, capital and labor

When pursuing value innovation, managers must answer questions focused on which of the following.

lowering costs and increasing perceived consumer benefits.

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

narrower

What determines a firm's competitive advantage?

value position relative to competitors and cost pisition relative to competitors

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

who, what, why, and how

A differentiation strategy is typically associated with ___________ pricing

premium

the most significant challenge JetBlue faced in implementing its business strategy was

reconciling the trade-offs between cutting costs and providing superior service

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

value creation 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

value innovation

What scenario 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.

A ___________ outlines the steps a manager will take to achieve a competitive advantage in a single product market.

Business-level strategy

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

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

What best defines economies of scope?

They are the savings that come from producing two or more outputs at less cost than producing each output individually.

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

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

economic value created

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

stay the same

In the learning curve, the ___________ the learning curve, the more learning takes place.

steeper

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

strategic position