MGT 6890 Chapter 5

Which generic business-level strategy is pursued by a shoe store that sells only flip-flops and strives to make them the cheapest flip-flops anyone can find anywhere?

Focus low-cost

Which of the following accurately describes the relationship between business-level strategies and the threat of substitute goods and services?

Differentiated and low-cost companies both enjoy protection from substitute goods and services.

Which of the following accurately describes the relationship between business-level strategies and brand building?

Differentiated companies invest significant effort in brand building, but low-cost companies do not.

A company such as Mercedes Benz enjoys significant competitive advantage based on differentiation. If it were to try to increase its level of differentiation from its rivals, it would encounter significant additional costs. This concept is known as:

Diminishing returns

Which of the following is an example of a focus strategy?

ESPN offers sports-related programming 24/7.

A glove company produces golf gloves only. The gloves come in black, white, and green. Which market segmentation strategy should the company pursue?

Focus

One approach to market segmentation is to acknowledge it, target only a limited number of market segments (or just one), and become the very best at serving that particular segment. This strategy is known as:

Focus

Which generic business-level strategy is pursued by a shoe store that sells only flip-flops and strives to make them the best flip-flops anyone has ever worn?

Focus differentiation

Allegiant Airlines focuses on direct flights between smaller cities with limited in-flight and ground services. Allegiant uses a _____ strategy.

Focus low costs

Which of the following companies pursues standardization as its market segmentation strategy?

Wal-Mart

Which of the following is an example of a retail company that has implemented a low-cost strategy similar to those used in commodity markets?

Wal-mart

Organizational arrangements that favor a low-cost strategy include all of the following EXCEPT:

a culture that budgets generously to pursue innovations in product offerings.

The success of General Motors at capturing market share from Ford in the 1920s illustrates how:

a segmentation strategy can attain a competitive advantage against a standardization strategy.

One of the two primary advantages of differentiation is that it:

allows the company to charge a premium price for its products.

With regard to efficiency, a company pursuing a differentiation strategy should

be as efficient as possible.

Segmentation strategy is the most effective at:

capturing incremental revenues from groups of customers with varying needs.`

Being the low-cost leader in a commodities market can provide all of the following benefits to a company EXCEPT:

providing a higher-quality product.

A defining feature of value innovation is that it:

redefines what is possible in an industry.

One approach to market segmentation is to acknowledge it and create different product offerings for each band of customers. This strategy is known as:

segmentation.

The relationship between low cost and differentiation is subtle. Strategy is not so much about making discrete choices as it is about achieving the right balance between differentiation and low costs. This is reflected in the concept of:

the efficiency frontier.

Business-level strategy defines each of the following EXCEPT:

why a company serves the market segments that it does.

When companies that all follow a differentiation strategy compete in a market niche, which of the following is likely to happen within that niche?

A company following a focus strategy will have an advantage over a company following a broad strategy.

When companies that all follow a low-cost strategy compete in a market niche, which of the following is likely to happen within that niche?

A company following a focus strategy will have an advantage over a company following a broad strategy.

Which of the following is a valid comparison between standardization and segmentation strategies?

A standardization strategy typically incurs lower costs than a segmentation strategy.

Which of the following functional-level strategies is important to a company pursuing a low-cost strategy?

Achieving economies of scale and learning effects

Which of the following scenarios exemplifies a company pursuing a focus strategy?

Airstream's reputation and image is "retro" luxury recreational vehicles.

Which of the following statements regarding the efficiency frontier is NOT true?

All companies eventually reach the efficiency frontier.

A company that successfully executes a low-cost strategy creates a _____ in its market.

Barrier to entry

With regard to differentiation, a company pursuing a low-cost strategy should:

Be jus good enough

Why is the impact on cost structure more difficult to evaluate for a focus strategy than for the other market segmentation strategies?

Because the impact depends on whether the focus strategy targets high-end or low-end consumers

A company that uses value innovation to carve out a new market space for itself is said to compete in a:

Blue ocean

Which feature of a successfully differentiated company serves as an entry barrier to its industry?

Brand loyalty

Companies that pursue a standardized strategy target a _____ market.

Broad

Which business-level strategy targets a wide market with products that stand out from the competition due to superior quality or customized features?

Broad differentiation

Which generic business-level strategy is pursued by a shoe store that sells many different types of high-quality shoes?

Broad differentitation

Famous Footwear sells many different types of shoes with an emphasis on price over quality. What type of generic business-level strategy does Famous Footwear pursue?

Broad low-cost

If Fareway Foods takes a wide approach to the market and its place on the efficiency frontier is far to the right, what type of generic business-level strategy is it pursuing?

Broad low-cost

Which business-level strategy targets a wide market and tries to make a profit at the minimum price level?

Broad low-cost

In addition to choosing whether it will take a strategic emphasis of low cost or differentiation, a company's business-level strategy will approach the market in one of two ways:

Broad or focus

_____-level strategy refers to the overarching competitive theme of a company in a given market.

Business

Which of the following companies pursues segmentation as its market segmentation strategy? a.ABC News

Coca-Cola

According to Porter, which of the following is true of the four generic business-level strategies?

Companies must choose one of the four strategies or else suffer relatively poor performance.

Which of the following companies uses a focus low-cost strategy?

Costco

By flying between smaller, downtown airports whenever possible, Southwest Airlines executed which component of Kim and Mauborgne's strategy for finding a blue ocean?

Create

Which of the following functional-level strategies is important to a company pursuing a differentiation strategy?

Customization of the product offering and marketing mix to different market segments

In which of the following ways does successful value innovation contribute to a company's competitive advantage?

It catches rivals off guard and makes it difficult for them to catch up.

According to Porter, which of the following accurately reflects the relationship between cost leadership and differentiation?

It is impossible to be both a differentiated and a low-cost company.

Which of the following statements about a successfully differentiated company is true?

It is protected from price wars by non-price factors that are important to its customers.

What effect does innovation have upon the efficiency frontier?

It pushes the frontier outward.

_____ refers to the process of subdividing a market into clearly identifiable groups of customers with similar needs, desires, and demand characteristics.

Market segmentation

Which of the following is an accurate assessment of the efficiency frontier?

Multiple positions on the efficiency frontier may be viable.

Which of the following companies uses a focus differentiation strategy?

Nordstrom

Which of the following businesses pursues a broad differentiation strategy?

PepsiCo

Amazon and Wal-Mart both follow a low-cost strategy. Their efforts to grow their volume has driven weaker rivals out of the industry. Which of the following best describes this situation?

Price war

By flying point to point, Southwest Airlines executed which component of Kim and Mauborgne's strategy for finding a blue ocean?

Raise

A successful differentiation strategy can occasionally lower a firm's cost structure through the acquisition of:

Scale of economies

A glove company produces five different types of gloves: gloves for general use in cold weather, gloves especially suited for skiing, gardening gloves, work gloves, and golf gloves. All of the gloves are only available in the company's signature green color. Which market segmentation strategy should the company pursue?

Segmentation

A company produces gloves in several colors and styles. The purpose of all of the company's gloves is to keep the hands warm in cold weather. Which market segmentation strategy should the company pursue?

Standardization

A(n) _____ is used to map out how value innovators differ from their rivals.

Strategy canvas

_____ innovation happens when innovation pushes out the efficiency frontier in an industry, allowing for greater value to be offered through superior differentiation at a lower cost than was previously thought possible.

Value

Which of the following observations provides the strongest rebuttal to Porter's framework of generic business-level strategies?

Value innovation permits a company to push the efficiency frontier outward and deliver more differentiation at a lower cost than its rivals.

Southwest Airlines delivers more value to its customer set and does so at a lower cost than its rivals, enabling the company to offer lower prices than its competitors and still make a profit. In this regard, Southwest is considered to be a:

Value innovator

Which of the following businesses pursues a broad low-cost strategy?

Wal-Mart

A company that produces aluminum and steel can generally achieve a competitive advantage only by:

cutting its costss

Fundamentally, a company can attain a competitive advantage by lowering its costs relative to rivals or by:

differentiating its products from those of rivals.

To successfully execute a low-cost strategy, companies should pursue functional-level strategies that result in superior:

efficiency and product reliability.

The best position for a company is _____ the efficiency frontier.

exactly on

A company that cannot offer a superior product relative to its rivals must _____ if it wants to achieve a sustained competitive advantage.

find a way to cut its costs

In order for a company to execute a strategy that translates into a competitive advantage, which of the following components must be in alignment?

functional strategy, business-level strategy, and organizational arrangements

One of the two primary advantages of differentiation is that it:

helps the company grow overall demand and capture market share from its rivals.

A company can incorporate differentiation as a path to competitive advantage in all of the following ways EXCEPT:

higher prices to reflect the superior quality of the commodity.

A disadvantage of differentiation is that it usually:

increases the cost structure of the firm.

If a manager wants to take advantage of differentiation, the best option is to:

maintain or modestly increase the price, sell more, and boost profitability through the attainment of scale economies.

Because there is no one best way to compete in an industry, all of these factors are important to the success of a strategy EXCEPT:

managers must focus on both low cost and differentiation.

Mass customization can:

minimize one of the disadvantages of a segmentation strategy.