Policy Ch.6
The concept of a(n) ______ attempts to combine both learning effects and process improvements. technological innovation experience curve minimum efficient scale strategic implementation
experience curve
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 (V - C)A > (V - C)C (V - C)A = (V - C)B (V - C)A < (V - C)B
(V - C)A > (V - C)B
Why do many firms fail to successfully implement a blue ocean strategy? because too many other companies already try to implement a blue ocean strategy, making it hard to compete that way because they become involved in situations involving ethical dilemmas because they merge with international competitors for value creation because they end up being "stuck in the middle," unable to increase value and lower costs at the same time
because they end up being "stuck in the middle," unable to increase value and lower costs at the same time
A ______ outlines the steps a manager will take to achieve competitive advantage in a single product market. business-level strategy corporate-level strategy competitive position financial analysis
business-level strategy`
Which type of strategy is being used if a company offers a product at a lower cost than its competitors? blue ocean strategy cost-leadership strategy focused differentiation strategy differentiation strategy
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). minimum efficient maximum effective cube square superstore
cube square
How to compete on a business level is defined by the variables value and cost. Together they define the ______. perceived economic value potential economic value the strategic fit economic value created
economic value created
How to compete on a business level is defined by the variables value and cost. Together they define the ______. potential economic value perceived economic value economic value created the strategic fit
economic value created
A firm's strategic position is determined by the relationship of which two variables? number of products sold and price of the product supply and demand value creation and cost number of different products in the firm's portfolio and countries in which they are sold
value creation and cost
Which capability is required to create superior product features? accounting sales marketing R&D
R&D
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. Larger output results in lower labor costs. Larger output illustrates the benefits of a differentiation strategy. Larger outputs result in a maximum efficient scale.
The amount of fixed costs allocated to each unit of output decreases as output increases.
A ______ strategy requires achieving the lowest costs in the industry while maintaining a level of value that is acceptable to customers. minimally efficient cost-leadership proposition differentiation
cost-leadership
Which of the following are considered the two generic business-level strategies? value gap cost-leadership oligopoly differentiation monopolistic competition
cost-leadership differentiation
Business-level strategy addresses which overarching question? What should we sell? What should we produce? How should we compete? How should we treat our employees?
How should we compete?
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. A firm invests a significant amount of money into a new customer service call center, resulting in a minimal increase in perceived value. A firm releases a new complementary product that decreases the perceived value of the original product. A firm invests in a range of new product features that result in an equal increase in costs and value creation.
A firm adds a new product feature that greatly increases the perceived value of the product at a minimal cost to the firm.
Why does the learning curve go down when productivity is considered? Learning cuts into the amount of time workers have, resulting in decreased productivity. A large number of people can learn at the same time, leading to economies of scale. As workers repeatedly engage in an activity, they become more efficient, driving down costs. The challenge of learning is an uphill battle, leading to decreases in worker morale.
As workers repeatedly engage in an activity, they become more efficient, driving down costs.
Which of the following best exemplifies a company that successfully uses a differentiation strategy? Company W introduces a new product in a market that has no competitors. Company Y offers a product similar to the products of its competitors but at a much lower cost. Company X strengthens its brand by marketing a product with an innovative feature. Company Z sells a product at a much higher price than similar products sold by its competitors.
Company X strengthens its brand by marketing a product with an innovative feature.
What is one of the benefits of pursuing a differentiation strategy when it comes to the power of suppliers? Differentiation provides protection against substitute products by lowering prices. Differentiation provides protection against an increase in input prices. Differentiation results in costs that increase above acceptable thresholds. Differentiation results in the erosion of margins.
Differentiation provides protection against an increase in input prices.
Which of the following competitive forces can result in the erosion of margins for both differentiation and cost-leadership business strategies? Power of suppliers Threat of entry Power of buyers Threat of substitutes
Power of suppliers Threat of entry Power of buyers
In terms of productivity, which of the following is true of learning curves? They go down. They go up. They are volatile. They remain level.
They go down.
What must strategic leaders keep in mind if they are going to achieve successful strategic positioning? To achieve strategic positioning, firms must make important trade-offs. A business strategy will only work if it already has superior performance. Although understanding their firm is crucial, understanding the industry is optional. They must work within existing areas of competition rather than trying to open new ones.
To achieve strategic positioning, firms must make important trade-offs.
In addition to having the lowest cost, a low-cost leader is likely to have ______. high overhead a small but loyal customer base a large market share unique product offerings
a large market share
By using a differentiation strategy, a firm aims to ______. pursue a broad segment of customers add unique features that will increase the perceived value of a product provide a product that is similar to successful products already on the market minimize its opportunity cost
add unique features that will increase the perceived value of a product
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 Blank______. value driver advantages based on product features creative destruction an experience-curve effect based on process innovation a learning curve effect based on output differential
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 an increase in the cost of raw materials a decline in consumer demand several new competitors entering the market
an increase in demand from the market
For a differentiation strategy to strengthen a company's strategic position and boost its competitive advantage, ______. any increase in value creation must not be more than the increase in costs an increase in value creation must exceed the increase in costs any increase in costs is unacceptable an increase in costs must exceed the increase in value creation
an increase in value creation must exceed the increase in costs
Unique features and attributes that differentiate a product from competitors' offerings allow the firm to ______. charge only as much as the competition charges for its product reduce the cost of raw materials charge premium pricing hire employees away from competitor
charge premium pricing
Unique features and attributes that differentiate a product from competitors' offerings allow the firm to ______. reduce the cost of raw materials charge only as much as the competition charges for its product charge premium pricing hire employees away from competitor
charge premium pricing
Bundling of products and services that are consumed in tandem to create value is an example of ______. strategic trade-offs economies of scope complements premium pricing
complements
Value drivers known as ______ add value to a product or service when they are consumed in tandem with the focal product. citations constructs complements customizations
complements
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 product features good value
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. good value marketing product features customer service
customer service
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? profits product features customer service complements
customer service
What are the three most important value drivers that managers can use to create a competitive advantage? customer service availability complements product features cost savings
customer service complements product features
A struggling retailer seeking to implement a blue ocean strategy is likely to experience difficulty with ______. communicating the plan to lower-level employees cutting costs and increasing value at the same time locating products that satisfy customer needs maintaining high quality customer service
cutting costs and increasing value at the same time
Economies of scale are ______. increases in cost-leadership business level strategy increases in minimum efficiencies of scale decreases in cost per unit as output increases decreases in economic value due to competitive parity
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. cost-leadership differentiation focused trade-off competitive industry
differentiation
A ______ strategy attempts to create products with unique and attractive features in order to increase the price that consumers are willing to pay. monopolistic cost-leadership differentiation premium market
differentiation
A(n) ______ strategy attempts to increase the perceived value of a product while controlling costs. competitive implementation differentiation cost-leadership integrated balanced approach
differentiation
A successful blue ocean strategy requires strategists to reconcile the trade-offs between ______. differentiation and cost-leadership profit margins and sales volume private and public investment number of employees and high wages
differentiation and cost-leadership
Which of the following are business strategies JetBlue pursued in order to gain a competitive advantage? differentiation and cost-leadership cost-leadership and economies of scale differentiation, cost-leadership, and economies of scale economies of scale and differentiation
differentiation and cost-leadership
A firm that increases its output of a given product and experiences a simultaneous decrease in per unit costs is taking advantage of ______. complements diseconomies of scale competitive parity economies of scale
economies of scale
Patti's Potato Chips is a national potato-chip manufacturer. Calpurnia's Crisps is a small-batch gourmet potato-chip maker. Based on just this information, which of the following is the greatest advantage Patti's has over Calpurnia's? customer service economies of scale product features complements
economies of scale
When pursuing a differentiation strategy, a firm can achieve a competitive advantage by ______. making sure the firm's costs are the lowest equipping customers with generic and lower priced products increasing perceived value regardless of cost increases ensuring that its economic value exceeds that of its competitors
ensuring that its economic value exceeds that of its competitors
Larger output allows firms to invest in more specialized systems such as which of the following? enterprise resource planning software big box retail stores a general accountant manufacturing robots
enterprise resource planning software manufacturing robots
Larger output allows firms to invest in more specialized systems such as which of the following? enterprise resource planning software manufacturing robots big box retail stores a general accountant
enterprise resource planning software manufacturing robots
True or false: Formulating a business strategy is a relatively easy task because only a few strategic options are available. True false
false
The cube-square rule makes it _______ for smaller stores to compete with larger retailers. harder useless just as difficult easier
harder
In terms of business strategy, blue oceans represent which of the following? increased competition increased demand untapped market space a crowded market space
increased demand untapped market space
In terms of business strategy, blue oceans represent which of the following? increased demand increased competition a crowded market space untapped market space
increased demand untapped market space
Which of the following are input factors? distribution marketing and sales information technology services capital raw materials labor
information technology services capital raw materials labor
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 scaling learning-curve experience-curve
input
A producer of consumer headphones that successfully differentiates its products with a patented noise-canceling technology and celebrity endorsements will enjoy which of the following benefits? reduced per unit costs less intense competition from imitators an increased exposure to the threat of price wars the ability to charge a premium price
less intense competition from imitators the ability to charge a premium price
Which of the following are components of a cost-leadership strategy? highest prices in the industry lowest costs in the industry acceptable value unique product features
lowest costs in the industry acceptable value
Tesla has an 80% learning curve, which means that ______. per-unit cost drops 20% whenever output doubles 20% of workers will never fully learn their jobs workers need to spend 80% of their time learning company efficiency has risen by 80%
per-unit cost drops 20% whenever output doubles
Two important features that managers can adjust in an effort to improve the firm's strategic position are ______. customer service and investment value planned emergence and product features investment value and planned emergence product features and customer service
product features and customer service
Which of the following are input factors? distribution raw materials information technology services labor marketing and sales capital
raw materials information technology services labor capital
The most significant challenge JetBlue faced in implementing its business strategy was _____. overwhelming consumer demand justifying its higher-than-average prices to budget-conscious consumers keeping up with new technological developments reconciling the trade-offs between cutting costs and providing superior service
reconciling the trade-offs between cutting costs and providing superior service
Products in the affordable "business-casual" clothing market have largely become commoditized, and most retailers have begun to compete mainly on price rather than product features. In this environment, it is impossible for one retailer to gain market share without another losing it. This is an example of a ______ ocean. red blue green black
red
A cost leader can achieve a competitive advantage by ______. focusing on reducing cost without considering the effect on value choosing a differentiation strategy ignoring diseconomies of scale reducing costs below those of competitors while maintaining a similar value allowing people to customize their products
reducing costs below those of competitors while maintaining a similar value
Which of the following are significant threats to a firm pursuing a cost-leadership strategy? replacement by innovative substitutes competitors adopting similar business strategies value falling below the acceptable threshold suppliers increasing input prices
replacement by innovative substitutes competitors adopting similar business strategies value falling below the acceptable threshold
Economies of ______ are the savings that come from producing two or more different outputs at a lower cost than producing each output individually. scale regulation integration scope
scope
Economies of scale present an opportunity to increase profits because as the number of units within the relevant range increases, fixed costs ______. increase only slightly stay the same decrease dramatically vary only depending on the number of units produced
stay the same
Economies of scale present an opportunity to increase profits because as the number of units within the relevant range increases, fixed costs ______. increase only slightly vary only depending on the number of units produced stay the same decrease dramatically
stay the same
A firm's strategic profile based on value creation and cost is called its ______. strategic alliance strategic control strategic position strategic trade-offs
strategic position
The perceived value that a company creates for consumers less the company's costs to create the value equals ______. a strategic trade-off the economic value created a differentiation strategy industry attractiveness
the economic value created
A company with a cost-leadership strategy faces significant difficulties when _____. the focus of competition shifts from non-price to price attributes suppliers agree to charge less for their supplies no valuable substitutes exist the focus of competition shifts from price to non-price attributes
the focus of competition shifts from price to non-price attributes
Which two of the following variables can managers primarily manipulate in order to answer the question, "How should we compete?" cost price value size style
value cost
True or false: A company that achieves differentiation parity at a lower cost has implemented a successful cost-leadership strategy. True false
true
True or false: Tesla's high stock market valuation is partly justified by the company's learning curve. True false
true
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 a red ocean strategy economies of scale cost leadership
value innovation
