MGMT 495- Ch6

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.

The following are pricing options offered by a blue ocean strategy

The firm can charge a lower price than differentiators, the firm can charge a higher price than the cost leader.

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

Value creation and cost.

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 focussing 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 differentation parity.

Cost-leadership

what would justify the use of manufacturing robots by a producer of packaged foods?

an increase in demand from the market.

larger output allows firms to invest in more specialized systems such as...

manufacturing robots and enterprise resource planning software

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

stay the same

in the learning curve, the _____ the learning curve, the more learning takes place.

steeper

A company with a cost-leadership strategy faces significant dificulties when

the focus of competition shifts from price to non-price attributes.

Implementing a blue ocean strategy requires making competition irrelevant and creaing a new market space, otherwise known as

value innovation

Which are questions managers must answer when pursuing vlaue innovation?

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

Why do many firms fail to successfully implement an integration strategy?

Because they end up being "studck in the middle, " unable to increase value and lower cost at the same time.

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

Bring down

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

In order for a firm to successfully implement a business-level strategy, it must limit the impact of

its own internal weaknesses, and external threats.

a producer of consumer headphones that successfully differentiates its products with a patented noise-canceling technology and celebrity endorsements will enjoy which benefits?

less intense competiton from imitators, and the ability to charge a premium price.

The beneficial effect of a differentiation strategy on the power of suppliers in an industry is

protection against an increase in input prices

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

An important requirment for increasing economic value creation under a differentation strategy is to

control costs.

a _____ strategy may fail when the focus of the competition shifts to price rather than unique product features.

differentiation

Furniture retailer IKEA has used the value innovation framework of____________ to successfully implement a blue ocean strategy.

eliminate-reduce-raise-create

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

ensuring that its economic value exceeds that of its competitors.

How can a large retailing firm increase the perceived value of its offerings by focusing on customer service?

offering a "no questions asked" return policy, maintaining a domestic call center that is open 24/hours per day

The most important value drivers that managers can use to create a competitive advantage are

customer service, complements, product features.

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

Scope

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

Strategic position

A ____ is a situation that requires choosing between a cost or value position

Strategic trade-off

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

Focused

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

Business-level strategy

A tablet maufacturer that includes a free stylus with every purchase is using ________ to enhance users' experiences and increase the perceived value of its tablets

Complements

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

Complements

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

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

To formulate an appropriate business-level strategy, managers must answer the "who, what, why and how" questions of competition.

How will we satisfy our customers needs? What customer needs will we satisfy? which customer segments will we serve?

A firms competitive advantage is determined jointly by ____ effects and firm effects.

Industry

The ____ is the range of output needed to minimize the cost per unit as much as possible.

Minimum efficient scale

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

Narrower

The beneficial effect of a differentiation strategy on the power of suppliers in an industry is ...

Protection against an increase in input prices

Which capability is required to create superior product features?

R&D

Products in the affordable "business-casual" clothing market have largely become commoditized, and mot retailers have begun to compete mainly on price rather than product features. in this environment, it is impossible for one etailer to gain market share without anotehr losing it. This is an example of a ____ ocean.

Red

What are significant threats to a firm pursuing a cost-leadership strategy?

Value falling below the acceptable threshold, competitors adopting similar business strategies, and replacement by innovative substitutes.

the following are questions that managers must answer when pursuing value innovation.

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

What are the components of a cost-leadership strategy?

acceptable value, and lowest costs in the industry.

By using a differentiation strategy, a firm aims to

add unique features that will increase the perceived value of a product.

Which business strategies does Jet Blue pursue in order to gain a competitive advantage?

both differentiation and cost-leadership

input factors include:

capital, information technology services, labor, and raw materials

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

diseconomies of scale

The concept of an ____ attempts to combine both learning effects and process improvements.

experience curve

The two factors upon which a sucessful business-level strategy is built are....

external opportunities in the market and the firm's internal strengths.

The benefits of a cost-leadership strategy reagarding the threat of entry in an industry are

protection against entry due to economies of scale.

Different value drivers contribute to competitive advantage if

the increase in perceived value exceeds the corresponding cost increase.

The following are questions that managers must answer when pursuing value innovation....

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