405 final practice
Understanding market segmentation is an important step in formulating business-level strategies because: a. companies can choose one of three different kinds of approaches based on their strategy to offer a standard or customized product to customers with different needs. b. companies should ignore differences among customer needs and always offer a single standardized product. c. companies pursuing a low-cost strategy must also utilize a segmentation strategy to offer different products to different customers. d. it will assist a company in defining the industry and market sector where it will operate.
a
A company can achieve value innovation by: a. identifying a process innovation that would be challenging for its rivals to imitate because of their prior strategic commitments. b. segmenting their customer base and creating products to serve each group of customers. c. imitating its competitors' business-level strategy and customer segmentation. d. reducing manufacturing costs and streamlining its supply chain.
a
A company that finds itself "stuck in the middle" between a low-cost strategy and a differentiation strategy can utilize value innovation to push toward or past the efficiency frontier. Consider the example of Eddie Bauer in the text. How might the company introduce a value innovation to move closer to the efficiency frontier? a. It must find a way to reduce its costs without sacrificing style and other elements of its differentiation. b. It must spend more money on its differentiation, making the brand appear more upscale and attractive to consumers, regardless of the cost. c. It must reduce costs across the board with no functional department spared from the cuts so that it can operate efficiently. d. It should continue operating in its current cost structure and with its current differentiation strategy.
a
A jeans company is pursuing a low-cost strategy and has achieved a position in which it is the lowest-cost manufacturer of denim products. One of the ways the company can achieve a competitive advantage against its rivals is to: a. undercut them in a price war to increase volume and drive weaker low-cost rivals out of business. b. add features and cost to the jeans to compete with higher-priced, differentiated brands. c. build brand loyalty through an intense marketing and media blitz. d. focus on selling a wide variety of jean styles and colors to appeal to different market segments.
a
A small HR consulting business is looking to grow. The leadership team—made up of people with training and more than 20 years of experience each in organizational development and training—is deciding whether the company should pursue a low-cost strategy or a differentiation strategy. The team believes they bring together a unique group of experts who can deliver solutions to mid-sized companies. Which strategy do you recommend the consulting company pursue to market its services? a. Focus differentiation strategy b. Low-cost strategy c. Blue ocean strategy d. Focus low-cost strategy
a
An entrepreneur establishes a social justice online retail company. The company purchases authentic artwork, jewelry, and crafts at a fair price from artisans in developing countries and sells them through a website. As a company following a differentiation strategy, which of these functional-level strategies will be important for sustaining the business? a. Developing a robust marketing program to promote the social justice elements of the business and gain insights into consumer purchasing behavior on the website b. Leveraging its purchasing power to pressure artisans into selling their goods at a reduced price c. Adopting a lean manufacturing technique to reduce production costs d. Incentivizing employees with bonuses for cutting costs within the operation
a
Companies that have found the right balance between differentiation and low-cost strategies: a. would be positioned on the efficiency frontier. b. are less profitable than companies that pursue a low-cost strategy. c. tend to be highly innovative companies. d. are constantly using R&D to create new products and fill new markets.
a
Companies that select a differentiation strategy must also recognize: a. the importance of controlling costs to maintain profitability. b. that customers are unwilling to pay a premium for products that satisfy the same needs as products from competitor companies. c. that they will be less profitable than companies that utilize a low-cost strategy. d. that they will have limited pricing options for their products.
a
Companies utilizing a focus differentiation strategy: a. can sell at higher volumes and greater profitability than companies that appeal to a broader market. b. may need to increase their product offerings to achieve a competitive advantage. c. have achieved a low-cost position that can make a profit at lower price points. d. are able to absorb cost increases from their suppliers without passing those costs along to their customers in the form of higher prices.
a
The business-level strategies that support a differentiation strategy are: a. based around ensuring that customers perceive a product to have greater value targeted to the unique needs of a single customer niche. b. focused on reducing cost throughout the value chain of activities. c. based on creating superior efficiency and superior product reliability. d. focused on decreasing customer churn and utilizing economies of scale.
a
Which of these examples represents a company that has selected a differentiation strategy? a. A grocery store chain is converting its local neighborhood stores to warehouses and having customers select items online or through an app and pick them up in a drive-through without having to leave their vehicles. b. A company is reducing the cost of its tablets by removing many of the expensive features of the tablet to provide a lower-priced alternative. c. A tool manufacturer that currently offers the lowest price among its competitors is seeking to increase its profit margin by creating internal efficiencies that will drive its internal cost structure down further. d. A restaurant entrepreneur is opening a new fast-food chain in which every item on the menu is just $1.
a
A company can lower costs through functional-level strategy and organization by: a. customizing the product offering to market to different market segments. b. achieving economies of scale, using information systems to automate business processes, and adopting lean production technologies. c. concentrating on designing products that have more functions and features and higher performance. d. maintaining existing processes and structures.
b
A low-cost strategy is one in which a company: a. offers customers the lowest price, even if it has to sell below its production cost. b. undercuts its rivals on price to gain market share while still making a profit. c. provides a unique product at a premium price that customers are willing to pay. d. sells a commodity product at the same or nearly the same price as its competitors.
b
A nonprofit relief organization decides to take lessons from the world of business to improve its delivery of emergency supplies to those in need. What strategy could it use as a value innovation to make it possible to deliver greater value to the communities it serves? a. The relief group could employ a marketing campaign to increase disaster preparedness and awareness. b. The relief group could utilize information systems to track and manage relief supply inventories and strategically locate them closest to locations most likely to be hit by a natural disaster. c. The relief group could utilize its donated relief supplies to provide support for only the homeless in its communities. d. The relief group could specialize in delivering relief supplies only for storm victims, such as those affected by floods, tornadoes, and hurricanes.
b
Check My Work Which of these functional-level strategies is designed to improve quality in terms of reliability for a company pursuing a low-cost strategy? a. A hotel chain builds a 100-seat call center to manage customer service and after-sales technical support. b. A manufacturer implements a Six Sigma training program with a goal to double the number of Six Sigma black belts within five years. c. An IT company enhances its research and development team through a major recruiting effort from engineering colleges. d. An electronic component supplier develops an information technology system to track inventory as it is being used by its customers to forecast and fulfill future orders
b
Companies competing with a blue ocean strategy can create an advantage because: a. they have created a lower price structure for a product or service that still satisfies the same needs as other companies in their industry. b. they are able to define and set the rules for the new industry segment in which they are operating. c. they are achieving low cost by operating across geographic markets, using the flow of skills between different company subsidiaries. d. they are acquiring companies in their supply chain to deliver greater efficiencies and lower costs
b
Which of the following would NOT be among the assumptions related to an industry's efficiency frontier? a. The efficiency frontier has a convex shape. b. When an enterprise already has significant differentiation built into its product offering, increasing differentiation requires no additional costs. c. A company that already has a low-cost structure must relinquish much differentiation in its product offering to achieve additional cost reductions. d. Internal functions and organizational arrangements are configured efficiently to support a particular position.
b
Which of these companies developed a business concept that included value innovation, allowing it to compete in a blue ocean? a. Target evolved into the "Expect More. Pay Less." brand promise in 1994 with the goal of making designer goods more affordable. b. Uber, founded in 2009, introduced peer-to-peer ride sharing for the first time, redefining the taxi and limousine service industry. c. Shell announced plans to expand its capabilities in natural gas drilling by unlocking shale gas in Pennsylvania in 2014. d. In 2010, Reebok introduced Zig footwear technology, an innovation to the soles of athletic shoes to make them more flexible and lightweight.
b
Which of these companies is pursuing a differentiation strategy to gain a competitive advantage? a. Big Lots! advertises its low prices and revolving offering of products to appeal to value shoppers. b. Starbucks utilizes an upscale customer experience, high-quality coffee drinks, and brand building to charge a premium price for its products. c. Vonage, a supplier of cloud-based communication, offers customers a voice-over IP alternative to traditional home phone service. d. Kroger grocery store's Big K brand soda offers the same flavor options as Coca-Cola and Pepsi brands.
b
Which of these companies pushed the efficiency frontier in its industry with a value innovation? a. Chick-fil-A chooses not to operate its restaurants on Sundays. b. Ikea created a store environment in which customers select their own flat-packed furniture and assemble it themselves at home. c. K-Mart competes in the discount retail industry by adding designer products to its offering. d. GM adds the Chevy Volt, an electric car, to its car line to lower its fleet emissions and appeal to environmentally conscious drivers.
b
If a company's strategy is to deliver products with superior functions and features, it is using a: a. low-cost strategy. b. standardization strategy. c. differentiation strategy. d. price war strategy.
c
The four generic business-level strategies include the dimensions of broad and narrow approaches to a market. What are the other two dimensions? a. Segmentation and differentiation b. Customization and innovation c. Low-cost and differentiation d. Horizontal and vertical
c
To develop a blue ocean strategy a company should consider four actions: eliminate, reduce, raise, and create. A start-up video game company is considering how it can operate in a blue ocean. What action might it take? a. Collaborate with game makers to ensure the most popular games are compatible with its platform. b. Reduce the cost of games for its platform by reverting to retro graphics. c. Develop a video game platform that seriously reduces the manufacturing cost, and therefore the price, of the console without limiting technology. d. Add motion-detection capabilities to the game platform, similar to those used by the Wii.
c
When a company redefines its product offering through value innovation to create a new market space, it has implemented: a. a retreat from the efficiency frontier. b. a price war with competitors. c. a blue ocean strategy. d. a low-cost strategy that ignores differentiation.
c
Which of these companies is achieving a competitive advantage through a low-cost strategy? a. A car company with the largest-volume sales in North America but a profit margin below the industry average b. An electronics company with the highest consumer-rated features and most advanced technology c. A high-volume, quick-serve restaurant chain that is controlling costs through centralized food production and a streamlined supply chain d. A retail store offering high commissions to its sales teams to ensure they provide superior customer service while driving sales on high-profit items
c
A restaurant conducted an internal review of its resources and distinctive competencies. It concluded that customers perceive the company's dessert menu to be more delicious and of greater value than that of the competitors. Which business-level strategy should the company consider? a. Positioning strategy b. Low-cost strategy c. Production strategy d. Differentiation strategy
d
A software firm has chosen to implement a differentiation strategy, offering its products in a software as a service (SaaS) platform with a monthly subscription in the cloud. Most of the firm's competitors are selling their products as a one-time purchase on a disc in a retail store. Which of these functional-level strategies will be critical to implementing this strategy? a. Discounting the product to gain large volumes quickly to achieve economies of scale b. Implementing supply chain coordination for IT infrastructure components for the company's data warehouse c. Collaborating with a distribution network of retail stores to ensure just-in-time inventory management of the product d. Instituting a 24/7 technical support hotline with a team that is knowledgeable about the product and business goals of the company's customers
d
Superior quality is an important functional-level strategy for both low-cost and differentiation strategies. Strategic managers for a company pursuing a low-cost strategy should focus on: a. increasing quality as excellence to add perceived value by the customer. b. research and development to launch innovative products and open new markets. c. enhancing its global presence by opening manufacturing plants in regions with the largest numbers of customers. d. improving the ability to manufacture products by reducing production inputs to lower costs.
d
The incentive structure and organization of a company can be an important part of a business-level strategy. Flat organizations can be a structure used by companies pursuing a: a. differentiation strategy. b. blue ocean strategy. c. integration strategy. d. low-cost strategy.
d
When a company offers a product or service that provides greater value through superior differentiation at a lower cost than was previously thought possible, it is presenting: a. a new market space. b. market segmentation. c. customer responsiveness. d. value innovation.
d
