mgt 405

The experience curve is a factor central to an overall cost leadership strategy and refers to how business learns to increase costs as it gains experience with production processes. ⊚ true ⊚ false

false

The five-forces model suggests that with intense competition an overall low-cost position will not enable a firm to achieve above-average returns. ⊚ true ⊚ false

false

The market life cycle should be used for short-run forecasting because it provides a conceptual framework for understanding what changes typically occur over the life of an industry. ⊚ true ⊚ false

false

Zappos sells shoes. Its CEO, Tony Hsieh, considers the core element of its differentiation advantage to be its variety of shoes. ⊚ true ⊚ false

false

A differentiator will always seek out ways of distinguishing itself from similar competitors to justify price premiums greater than the costs incurred by differentiating. ⊚ true ⊚ false

true

A firm can differentiate itself in a support activity by purchasing high-quality components to enhance product image as Apple does with its laptop computers. ⊚ true ⊚ false

true

A pitfall of integrated overall cost leadership and differentiation is underestimating the expenses associated with coordinating value-creating activities in the extended value chain. ⊚ true ⊚ false

true

A platform business is like a matchmaker in that it can bring together buyers and sellers. An example of a successful platform provider is Facebook. By attracting and retaining users through expanding services it differentiates itself from more narrowly-focused competitors such as Twitter. ⊚ true ⊚ false

true

A platform business such as Airbnb leverages data analytics to differentiate its offer from that of competitors such as VRBO. ⊚ true ⊚ false

true

Airlines such as Emirates exploit the profit pool for competitive advantage by adding fees for a variety of services such as access to airport lounges. ⊚ true ⊚ false

true

An example of a firm applying the overall cost leadership generic strategy in a value chain activity would be to automate the production assembly line to reduce scrappage from quality errors. ⊚ true ⊚ false

true

An important advantage of first movers in a market is that they may establish brand recognition that may later serve as an important switching cost. ⊚ true ⊚ false

true

Factors that lead to a low-cost position also provide substantial entry barriers to substitute and new products as is demonstrated by the retailer, Aldi, whose focus on minimizing costs across the entire operation permits it to position well against competitors such as Walmart. ⊚ true ⊚ false

true

If the overall cost leadership strategy is to provide sustainable competitive advantage, all activities in the value-chain need to be evaluated including the relationships among the value chain activities. ⊚ true ⊚ false

true

In the department store industry, sales at Nordstrom are declining but increasing at Nordstrom Rack. This is because Nordstrom is responding to customer expectations for lower costs. ⊚ true ⊚ false

true

Piecemeal productivity improvements can be used by a mature business in need of a turnaround. ⊚ true ⊚ false

true

Hardware chains such as Ace and True Value are losing market share to rivals such as Lowe's and Home Depot in spite of them using a focus strategy. Why? A) Achieving parity on costs for specialty retailers is difficult. B) They have too broad a product line. C) They have equivalent purchasing power as the national chains. D) Their costs are the same as those of the national chains.

A) Achieving parity on costs for specialty retailers is difficult.

Which of the following is a risk (or potential pitfall) of cost leadership? A) Cost cutting in one area of the value chain might increase costs in another. B) Attempts to stay ahead of the competition may lead to gold plating. C) Cost differences increase as the market matures. D) Producers are more able to withstand increases in supplier costs.

A) Cost cutting in one area of the value chain might increase costs in another.

Which of the following is not a potential pitfall of an integrated overall low cost and Differentiation strategy? A) Firms that target too large a market that causes unit costs to increase. B) Firms that underestimate the expenses associated with coordinating value-creating activities in the extended value chain. C) Firms that fail to attain both strategies may end up with neither and become stuck-in-the-middle. D) Firms that miscalculate sources of revenue and profit pools in the company industry.

A) Firms that target too large a market that causes unit costs to increase.

Atlas Door tightly controlled logistics so that it always shipped only fully complete orders to construction sites. In regard to the five forces model, which of the following is a reason this might give them a competitive advantage? A) It helps to reduce the threat of new entrants. B) It created low entry barriers for new entrants. C) It created a high threat of substitution. D) It gave more power to buyers.

A) It helps to reduce the threat of new entrants.

At one CVS drugstore, a four-pack of Energizer AA batteries was on sale at 2.99 USD compared with a Duracell four-pack at 4.59 USD. The Duracell market share dropped 2 percent in a recent two-year period, and its profits declined over 30 percent. Why did this happen? A) The price differential was too high. B) The market for batteries is saturated. C) The customer perceived the products to be different. D) There are valid alternatives for batteries.

A) The price differential was too high.

Atlas Door created competitive advantage by reducing the time to receive and process an order and through installing a just-in-time logistics operation. Which of the following is not a reason for their favorable position relative to the five forces of industry competition? A) The service was easily imitable. B) It created high entry barriers for new entrants. C) The integration of many company value-chain activities provided causal ambiguity and path dependency. D) It exerted power over its customers.

A) The service was easily imitable.

Waze, a GPS Navigation app, relies on inputs from users to provide information on traffic conditions and uses artificial intelligence to develop algorithms for each user, tailoring the route map for that user at that particular moment. This is an example of A) a focused strategy. B) an overall cost leadership strategy. C) unscaling to create a combination strategy. D) exploiting the profit pool.

A) a focused strategy.

Outright sales or sale and leaseback free up considerable cash and improve returns. This is an example of which turnaround strategy used by successful companies? A) asset and cost surgery B) selective product and market pruning C) piecemeal productivity improvements D) global expansion

A) asset and cost surgery

A risk for a firm that tries to attain both cost and differentiation advantages is that it can be stuck in the middle. An example of this is supermarkets because their ________ structure is ________ than discount retailers, and customers do not value their products and services as being high-end such as those offered by Whole Foods. A) cost; higher B) price; higher C) price; lower D) cost; lower

A) cost; higher

BlackBerry lost its competitive advantage by 2016 because it A) did not deliver innovations to respond to changing market demand. B) developed a highly performant just-in-time delivery system. C) did not reward its employees. D) let suppliers have dominant power.

A) did not deliver innovations to respond to changing market demand.

In evaluating the sustainability of the Atlas Door competitive advantages over the long run, it is important to evaluate the ability of rivals to A) easily imitate its strategy. B) communicate with its customers. C) consistently overprice their products. D) find new suppliers.

A) easily imitate its strategy.

The factors that lead to a low-cost position also provide a substantial ________ barriers position with respect to ________ products introduced by new and existing competitors. A) entry; substitute B) exit; primary C) product; substitute D) entry; primary

A) entry; substitute

Most turnarounds require a firm to carefully analyze its relevant environments. The________ analysis leads to identification of market segments or customer groups that may still find the product attractive. A) external B) internal C) global D) environmental

A) external

Atlas Door relies on technologies that are rather well known and non-proprietary. This opens it up to the potential of A) imitation by rivals. B) customer abandonment. C) increased supplier power. D) government regulation.

A) imitation by rivals.

The growth stage of the industry life cycle is characterized by A) in-kind competition (from the same type of product). B) premium pricing. C) a growing trend to compete on the basis of price. D) retaliation by competitors whose customers are stolen.

A) in-kind competition (from the same type of product).

130) Rivals would find it difficult to challenge Atlas Door in the short run because of A) strong customer loyalty. B) low barriers to entry. C) high threat of substitution. D) low buyer switching costs.

A) strong customer loyalty.

A firm following a focus strategy must focus on A) governmental regulations. B) a market segment or group of segments. C) rising cost of inputs. D) avoiding entering international markets.

B) a market segment or group of segments.

Primark, an Irish clothing retailer, uses an overall cost leadership strategy. This could fail if it A) maintains parity with competitors on low cost. B) cannot maintain parity on differentiation dimensions requested by customers. C) exceeds customer expectations. D) increases its sales prices while maintaining competitive parity.

B) cannot maintain parity on differentiation dimensions requested by customers.

The text discusses three approaches to combining overall cost leadership and differentiation competitive advantages. Which of the following is not one of these three approaches? A) automated and flexible manufacturing systems B) deriving benefits from highly-focused and high-technology markets C) exploiting the profit pool concept for competitive advantage D) coordinating the extended value chain by way of information technology

B) deriving benefits from highly-focused and high-technology markets

A low-cost position permits buyers to exert power to drive ________ prices only to the level of the next most efficient producer. A) up B) down C) increasing D) decreasing

B) down

Outside the flight experience itself, airlines are generating revenue by charging fees for credit cards, frequent-flier programs, and access to airport lounges. This serves to A) increase competition. B) expand the profit pool. C) provide better customer service. D) satisfy regulators.

B) expand the profit pool.

Overhead costs associated with the number of layers of management in a firm are part of the ________ activities of the value chain. A) human resources management B) firm infrastructure C) operations D) marketing and sales

B) firm infrastructure

Aldi, a discount supermarket retailer, has grown from its German base to the rest of Europe, Australia, and the United States by replicating a simple business format. Aldi limits the number of products in each category to ensure product turn, to ease stocking shelves, and to increase its power over suppliers. This is an example of an overall cost leadership strategy because it A) gives them competitive advantage by decreasing productivity. B) gives them competitive advantage by tight cost and overhead control. C) eliminates the need to compete based on its products. D) requires the customer to recognize its efforts.

B) gives them competitive advantage by tight cost and overhead control.

131) Rivals would find it difficult to challenge Atlas Door in the short run because of A) weak customer loyalty. B) high barriers to entry. C) high threat of substitution. D) low buyer switching costs.

B) high barriers to entry.

Many firms have achieved success by integrating activities throughout the extended value chain by using ________ to link their own value chain with the value chains of their customers and suppliers. A) customization B) information technology C) human resources D) competitive advantage

B) information technology

An overall ________ position enables a firm to achieve above-average returns because it protects firms against powerful buyers. A) differentiation B) low-cost C) focused D) high-cost

B) low-cost

A firm can achieve differentiation through all the following means except A) improving brand image. B) offering lower prices to frequent customers. C) better customer service. D) adding additional product features.

B) offering lower prices to frequent customers.

Primark, a fashion retailer, has found a way to keep its cost structure lower than its rivals by leveraging streamlined logistics, a low marketing budget, and negotiating bargain prices from its suppliers. They are using a(n) ________ strategy. A) differentiation B) overall cost leadership C) focus D) broad differentiation

B) overall cost leadership

Which type of competitive strategy is characterized by convincing rivals not to enter a price war, protection from customer pressure to lower prices, and the ability to better withstand cost increases from suppliers? A) differentiation B) overall low-cost leadership C) differentiation focus D) cost leadership focus

B) overall low-cost leadership

Zulily protects itself from buyer power and intense rivalry from competitors by A) increasing the bargaining power of its customers. B) paying close attention to costs. C) increasing costs. D) increasing the buyer power.

B) paying close attention to costs.

Underestimating expenses associated with coordinating value-creating activities in the extended value chain can be a result of ________ integration of cost leadership and differentiation. A) good B) poor C) intentional D) structured

B) poor

Proctor and Gamble announced that it would sell off or close down up to 100 of its brands. This is an example of which turnaround strategy used by successful companies? A) asset and cost surgery B) selective product and market pruning C) piecemeal productivity improvements D) global expansion

B) selective product and market pruning

Indochino is a retailer of male clothing that sells custom-made suits online and in brick and-mortar stores. They use ________ operations to outcompete traditional retailers. A) traditional B) unscaled C) scaled D) reverse

B) unscaled

Which of the following is most often true of mature markets? A) Some competitors enjoy a significant operating advantage due to increasing experience effects. B) The market supports premium pricing, which attracts additional competitors. C) Advantages that cannot be duplicated by other competitors are difficult to achieve. D) The magnitude of pricing differences and product differentiation is larger than in the growth stage.

C) Advantages that cannot be duplicated by other competitors are difficult to achieve.

Which of the following is not a potential pitfall of a differentiation strategy? A) Uniqueness that is not valuable. B) The price premium is too high. C) All rivals share a common input or raw material. D) Perceptions of differentiation may vary between buyers and sellers.

C) All rivals share a common input or raw material.

Which statement regarding competitive advantages is true? A) With an overall cost leadership strategy, firms need not be concerned with parity on differentiation. B) In the long run, a business with one or more competitive advantages is probably destined to earn normal profits. C) If several competitors pursue similar differentiation tactics, they may all be perceived as equals in the mind of the consumer. D) Attaining multiple types of competitive advantage is a recipe for failure.

C) If several competitors pursue similar differentiation tactics, they may all be perceived

124) Barnes and Noble lost its market share in book retailing to Amazon. It tried to regain market share by offering a similar electronic reader, the Nook, to the Amazon Kindle series. This demonstrates that Barnes and Noble lacked A) a short-term strategy. B) a company-wide strategy. C) a sustainable competitive advantage. D) good suppliers.

C) a sustainable competitive advantage.

A business that strives for a low-cost advantage must attain a(n) ________ cost advantage over rivals. A) relative B) evolutionary C) absolute D) potential

C) absolute

The primary aim of strategic management at the business level is A) maximizing risk to return trade-offs through diversification. B) maximizing differentiation of products and/or services. C) achieving competitive advantage. D) achieving a low-cost position.

C) achieving competitive advantage.

In the ________ stage of the industry life cycle, there are few segments, the emphasis on process design is low, and the major functional areas of concern are general management and finance. A) introduction B) growth C) decline D) maturity

C) decline

Value-chain support activities that involve excellent applications engineering support (technology development) and facilities that promote a positive firm image (firm infrastructure) characterize which generic strategy? A) overall cost leadership B) differentiation focus C) differentiation D) stuck-in-the middle

C) differentiation

Early pioneer in online education, University of Phoenix, has faced increasing challenges from traditional university online programs who are able to offer their programs at the same cost. Which generic strategy has gone wrong? A) differentiation B) overall cost leadership C) focus strategy D) low cost leadership

C) focus strategy

Marlin Steel Wire Products is a manufacturer of commodity wire products out of Baltimore, MD. Marlin has many rivals based in China and other emerging markets. The company cannot compete on labor costs so it used a ________ strategy to automate its production and now specializes in high-end products. A) differentiation B) overall cost leadership C) focus strategy D) low cost leadership

C) focus strategy

Research has consistently shown that firms that achieve both cost leadership and differentiation advantages tend to perform A) at about the same level as firms that achieve either cost or differentiation advantages. B) about the same as firms that are stuck-in-the-middle. C) higher than firms that achieve either a cost or a differentiation advantage. D) lower than firms that achieve differentiation advantages but higher than firms that achieve cost advantages.

C) higher than firms that achieve either a cost or a differentiation advantage.

In the ________ stage of the industry life cycle, the emphasis on product design is very high, the intensity of competition is low, and the market growth rate is low. A) growth B) maturity C) introduction D) decline

C) introduction

Porsche has enhanced power over buyers because its strong reputation makes buyers more willing to pay a premium price. This ________ rivalry, since buyers become ________ price-sensitive. A) increases; more B) lessens; more C) lessens; less D) increases; less

C) lessens; less

An overall low-cost position protects a firm against rivalry from competitors because________ allow a firm to earn returns even if its competitors eroded their profits through intense rivalry. A) higher costs B) higher prices C) lower costs D) lower prices

C) lower costs

140) The size of pricing and differentiation advantages between competitors decreases in which stage of the market life cycle? A) introduction B) growth C) maturity D) decline

C) maturity

A market that mainly competes on the basis of price and has stagnant growth is characteristic of what life cycle stage? A) introduction B) growth C) maturity D) decline

C) maturity

In a given market, key technology no longer has patent protection, experience is not an advantage, and there is a growing need to compete on price. What stage of its life cycle is the market in? A) introduction B) growth C) maturity D) decline

C) maturity

A low-cost position provides ________ flexibility to cope with demands from powerful suppliers for input cost increases. A) less B) decreasing C) more D) no

C) more

A firm typically achieves an absolute cost advantage by offering a ________ product or service to a ________ target market using standardization to derive the greatest benefits from economies of scale and experience. A) no frills; narrow B) complex; narrow C) no frills; broad D) complex; diverse

C) no frills; broad

With experience, unit costs of production decline as ________ increases in most industries. A) costs B) volume C) output D) price

C) output

Improving business processes by reengineering them, benchmarking specific activities against industry leaders, encouraging employee input to identify excess costs, increasing capacity utilization, and improving employee productivity lead to a significant overall gain. These are examples of which turnaround strategy is used by successful companies? A) asset and cost surgery B) selective product and market pruning C) piecemeal productivity improvements D) global expansion

C) piecemeal productivity improvements

A ________ can be defined as the total profits in an industry at all points along the industry value chain. A) profit maximizer B) revenue enhancer C) profit pool D) profit outsourcing

C) profit pool

A differentiation strategy enables a business to address the five competitive forces by A) having brand-loyal customers become more sensitive to prices. B) increasing economies of scale. C) providing protection against rivalry. D) serving a broader market segment.

C) providing protection against rivalry.

76) One aspect of using a cost leadership strategy is that experience effects may lead to lower costs. Experience effects are achieved by A) spreading out a given expense or investment over a greater volume. B) hiring more experienced personnel. C) repeating a process until a task becomes easier. D) competing in an industry for a long time.

C) repeating a process until a task becomes easier.

Which of the following is not a potential pitfall of a focus strategy? A) Erosion of cost advantages can arise within the narrow segment. B) Product/service offerings that are highly focused are subject to competition from new entrants. C) Focusers can become too focused to satisfy buyer needs. D) All rivals share a common input or raw material.

D) All rivals share a common input or raw material.

129) Which of the following reasons is not a reason that Atlas Door could lose competitive advantage? A) Its technologies are non-proprietary. B) A rival could easily hire away its talented employees. C) A new rival with a strong resource base could undercut its prices. D) It has strong power over its distributors.

D) It has strong power over its distributors.

Which of these statements regarding the industry life cycle is true? A) Partial power of the market life cycle is its ability to serve as a short-run forecasting device. B) Trends suggested by the market life cycle model are generally not reversible or repeatable. C) It points out the need to maintain a differentiation advantage and a low cost advantage. D) It is important for company generic strategies, functional areas, value-creating activities, and overall objectives.

D) It is important for company generic strategies, functional areas, value-creating activities, and overall objectives.

Which of the following is false regarding how a differentiation strategy can help a firm to improve its competitive position relative to the Porter five-forces model? A) Firms will enjoy high customer loyalty. B) By increasing firm margins, it avoids the need for a low-cost position. C) It reduces buyer power because buyers lack comparable alternatives. D) Supplier power is increased, because suppliers will be able to charge higher prices for their inputs.

D) Supplier power is increased, because suppliers will be able to charge higher prices for their inputs.

An overall low-cost position enables a firm to achieve ________ returns despite strong competition. A) below average B) average C) no D) above average

D) above average

Company competitive advantages can be eroded by all the following except A) rapid changes in technology. B) globalization. C) actions by rivals within the industry. D) actions by workers outside of the industry.

D) actions by workers outside of the industry.

Which of the following is not a reason for the possible erosion of company competitive advantage? A) rapid change in technology B) globalization C) actions by rivals from within and outside of the industry D) company commitment to innovation

D) company commitment to innovation

143) The most likely time to pursue a harvest strategy is in a situation of A) high growth. B) strong competitive advantage. C) mergers and acquisitions. D) decline.

D) decline.

Piecemeal productivity improvements during a turnaround typically do not involve A) business process reengineering. B) increased capacity utilization. C) benchmarking. D) expansion of company product market scope.

D) expansion of company product market scope.

Research shows that which one of the following is not a strategy used by firms engaged in successful turnarounds? A) asset and cost surgery B) selective product and market pruning C) piecemeal productivity improvements D) global expansion

D) global expansion

Zulily, an online retailer, competes with Amazon and other online retailers by A) maintaining a large inventory of products. B) running a labor-intensive distribution system. C) ordering products from vendors to keep in stock until a customer order comes in. D) keeping little inventory and ordering only when customers purchase a product.

D) keeping little inventory and ordering only when customers purchase a product.

Atlas Door created competitive advantages in overall low cost and differentiation by creating ________ among value-chain activities. A) substitutes B) advantages C) disadvantages D) linkages

D) linkages

In the ________ stage of the industry life cycle, there are many segments, competition is very intense, and the emphasis on process design is high. A) growth B) introduction C) decline D) maturity

D) maturity

Primary value chain activities that involve the effective layout of receiving dock operations (inbound logistics) and support value chain activities that include expertise in process engineering (technology development) characterize which generic strategy? A) differentiation B) differentiation focus C) stuck-in-the-middle D) overall cost leadership

D) overall cost leadership

A manufacturing business pursuing cost leadership is likely to A) focus on a narrow market segment. B) use advertising to build brand image. C) put heavy emphasis on product engineering. D) rely on experience effects to raise efficiency.

D) rely on experience effects to raise efficiency.

Mass customization permits companies to manufacture unique products in relatively________ quantities at ________ costs. A) large; higher B) large; lower C) small; higher D) small; lower

D) small; lower

As markets mature, A) costs continue to increase. B) application for patents increases. C) differentiation opportunities increase. D) there is increasing emphasis on efficiency.

D) there is increasing emphasis on efficiency.

Which of the following statements about the introduction stage of the market life cycle is true? A) It produces relatively large, positive cash flows. B) Strong brand recognition seldom serves as an important switching cost. C) Market share gains by pioneers are usually easily sustained for many years. D) Products offered by pioneers may be perceived as differentiated because they are new.

Products offered by pioneers may be perceived as differentiated because they are new.

High product differentiation is generally accompanied by A) higher market share. B) higher profit margins and lower costs. C) significant economies of scale. D) decreased emphasis on competition based on price.

decreased emphasis on competition based on price.

12) Once established, competitive advantages last forever whether the firm is in a high technology environment or not. ⊚ true ⊚ false

false

A need for turnaround occurs only during the maturity or declining stage of the life cycle. ⊚ true ⊚ false

false

Combination strategies, such as integrating overall low cost and differentiation, makes it easier for rivals to duplicate or imitate because it is harder for the primary firm to provide value. ⊚ true ⊚ false

false

Few turnarounds require firms to analyze both the external and internal environments relevant to their firm. ⊚ true ⊚ false

false

Firms achieve and sustain differentiation advantages and attain above-average performance when their price premiums do not exceed the extra costs incurred in being unique. ⊚ true ⊚ false

false

Given the attractiveness of premium pricing during the growth stage of the market life cycle, managers should emphasize short-term results to increase profits. ⊚ true ⊚ false

false

In declining industries, competition is fierce and profit margins are always low. ⊚ true ⊚ false

false

Overall cost leadership is a generic strategy unlike others that does not require a tight set of interrelated tactics. ⊚ true ⊚ false

false