499 Test 1 - CH 5 Questions

While there are many routes to competitive advantage, they all involve

delivering superior value to a broad or narrow market of buyers in ways rivals cannot readily match.

Best-cost provider strategies are appealing in those market situations where

diverse buyer preferences make product differentiation the norm and where a large number of value-conscious buyers can be induced to purchase mid-range products.

Easy-to-copy differentiating features

do not offer the promise of sustainable competitive advantage.

A company's competitive strategy deals with

management's game plan for securing a competitive advantage relative to rivals.

A differentiation-based competitive advantage

often hinges on incorporating features that: (1) raise the performance of the product, (2) lower the buyer's overall costs of using the company's product, (3) enhance buyer satisfaction in intangible or noneconomic ways, or (4) deliver value to customers by exploiting competitive capabilities that rivals cannot match.

Achieving a cost advantage over its rivals entails

performing value chain activities more cost-effectively than its rivals and finding ways to eliminate or bypass some cost-producing activities.

A competitive strategy of striving to be the low-cost provider is particularly attractive when

price competition is especially vigorous, buyers have low switching costs, and the majority of industry sales are made to a few large-volume buyers.

The advantages of focusing a company's entire competitive effort on a single market niche allows for

scaling operations to serve the customer market segment.

A firm pursuing a best-cost provider strategy

seeks to offer more value-adding features than the industry's low-cost providers and lower prices than those pursuing differentiation.

A focused low-cost strategy seeks to achieve competitive advantage by

serving buyers in the target market niche at a lower cost and lower price than rivals.

The most appealing approaches to differentiation are those that

are hard or expensive for rivals to duplicate and have considerable buyer appeal.

A company's competitive strategy should

be well matched to its internal situation and be predicated on leveraging its collection of competitively valuable resources and competencies.

A boutique hotel chain provides upscale rooms and superior customer service at value prices. What strategy is the hotelier using to gain competitive advantage?

Best-cost provider strategy

Domino's Pizza has a well-known slogan: "We'll deliver in 30 minutes or less, or it's free!" By using this slogan, what has the pizza maker achieved?

Built a unique customer value proposition

The objective of competitive strategy is to

build a competitive advantage in the marketplace by giving buyers superior value relative to the offerings of rival sellers.

Which of the following is not one of the five generic types of competitive strategy? A) Best-cost provider strategy B) Broad low-cost provider strategy C) Focused differentiation provider strategy D) Focused low-cost provider strategy E) Focused best-cost provider strategy

Focused best-cost provider strategy

Which of the following is not one of the ways that a company can achieve a cost advantage by revamping its value chain? A) Eliminating distributors and dealers by selling direct to customers B) Replacing certain value chain activities with faster and cheaper online technology C) Increasing production capacity and then striving hard to operate at full capacity D) Relocating facilities so as to curb the need for shipping and handling activities E) Streamlining operations by eliminating low value-added or unnecessary work steps and activities

Increasing production capacity and then striving hard to operate at full capacity

Which of the following are not distinguishing features of a company's successful best-cost provider strategy? A) It develops core competencies that allow differentiating attributes to be incorporated at a low cost. B) It has unmatched efficiency in managing essential value chain activities. C) It seeks to deliver superior value to buyers by satisfying their expectations on key quality/service/features/performance attributes and beating their expectations on price (given what rivals are charging for much the same attributes). D) It seeks to be the low-cost provider in the largest and fastest-growing (or best) market segment. E) It enjoys a competitive advantage based on more value for the money.

It seeks to be the low-cost provider in the largest and fastest-growing (or best) market segment.

Which of the following is not an action that a company can take to do a better job than its rivals of performing value chain activities more cost-effectively? A) Striving to capture all available economies of scale B) Trying to operate facilities at full capacity C) Taking full advantage of experience and learning curve effects D) Improving supply chain efficiency E) Redesigning products to eliminate features that might have market appeal, but excessively increase production costs

Redesigning products to eliminate features that might have market appeal, but excessively increase production costs

A fast-food restaurant stocks bread, meat, sauces, and other main ingredients, but does not assemble and cook its burgers and sandwiches until a customer places an order. Which cost driver is the restaurant efficiently using to cut costs?

Supply chain efficiencies

Which of the following is not one of the pitfalls of pursuing a differentiation strategy? A) Trying to strongly differentiate the company's product from those of rivals rather than be content with weak product differentiation B) Overdifferentiating so that the features and attributes incorporated exceed buyer needs and requirements C) Trying to charge too high a price premium for the differentiating features D) Differentiating on features or attributes that rivals can easily copy E) Overspending on efforts to differentiate the company's product offering

Trying to strongly differentiate the company's product from those of rivals rather than be content with weak product differentiation

Which of the following is not one of the pitfalls of a low-cost provider strategy? A) Overly aggressive price cutting B) Using a cost-based advantage to improve the company's bargaining position with high-volume buyers C) Using approaches to reducing costs that can be easily copied by rivals D) Cutting prices more than the size of a company's cost advantage E) Becoming so fixated on cost reductions that products become too features-poor

Using a cost-based advantage to improve the company's bargaining position with high-volume buyers

Which of the following is not a value driver of a broad differentiation strategy? A) Seeking out the highest quality inputs B) Utilizing just-in-time inventories and made-to-order products when customer demand rises C) Emphasizing human resource management activities that improve the skills, expertise, and knowledge of company personnel D) Improving customer service or add extra services E) Creating product features that appeal to a wide range of buyers

Utilizing just-in-time inventories and made-to-order products when customer demand rises

In which one of the following market circumstances is a broad differentiation strategy generally not well suited? A) When buyer needs and preferences are diverse B) When few rivals are pursuing a similar differentiation approach C) When buyers are homogeneous in their needs and preferences, and are generally satisfied with standardized product D) When there are many ways to differentiate the product or service and many buyers perceive these differences as having value E) When technological change is fast-paced and competition revolves around rapidly evolving product features

When buyers are homogeneous in their needs and preferences, and are generally satisfied with standardized product

Broad differentiation strategies generally work best in market circumstances where

buyer needs and preferences are too diverse to be fully satisfied by a standardized product.

Which one of the following does not represent market circumstances that make a focused low-cost or focused differentiation strategy attractive? A) When it is costly or difficult for multisegment competitors to meet the specialized needs of the target market niche and at the same time satisfy the expectations of their mainstream customers B) When the industry has many different segments and market niches, thereby allowing a focuser to pick an attractive niche suited to its resource strengths and capabilities C) When industry leaders have chosen not to compete in the niche D) When the target market niche is big enough to be profitable and offers good growth potential E) When buyers are not strongly brand loyal and a large number of other rivals are attempting to specialize in the same target segment

When buyers are not strongly brand loyal and a large number of other rivals are attempting to specialize in the same target segment

In which of the following circumstances is a strategy to be the industry's overall low-cost provider not particularly well matched to the market situation? A) When the offerings of rival firms are essentially identical, standardized, commodity-like products B) When there are few ways to achieve differentiation that have value to buyers C) When price competition is especially vigorous D) When buyers have widely varying needs and special requirements, and when the costs of switching purchases from one seller to another are relatively high E) When industry newcomers use introductory prices to build a customer base

When buyers have widely varying needs and special requirements, and when the costs of switching purchases from one seller to another are relatively high

Success with a best-cost provider strategy designed to outcompete high-end differentiators requires.

achieving significantly lower costs in providing the upscale features.

A focused differentiation strategy can lead to attractive competitive advantage when

buyers are not strongly loyal to a brand and a large number of other rivals are attempting to specialize in the same target segment.

Opportunities to differentiate a company's product offering

can exist in supply chain activities, R&D, manufacturing activities, distribution and shipping, or marketing, sales, and customer service.

Successful differentiation allows a firm to

command a premium price for its product and/or increase unit sales and/or gain buyer loyalty to its brand.

Examples of important cost drivers in a company's value chain do not include A) input costs. B) capacity utilization. C) learning and experience. D) production technology and design. E) customer service.

customer service.

The major avenues for achieving a cost advantage over its rivals include

eliminating or curbing nonessential cost-producing activities and performing essential value chain activities more cost-effectively than its rivals.

A competitive strategy to be the low-cost provider in an industry typically does not work well when

emergent strategies are required to respond to changes in competitor power.

A broad differentiation strategy works best in situations characterized by

fast-paced technological change and rapidly evolving product features that drive competition.

A broad differentiation strategy generally produces the best results in situations where

few rivals are following a similar differentiation approach.

A company's biggest vulnerability in employing a best-cost provider strategy is

getting squeezed between firms employing low-cost provider strategies and those using high-end differentiation strategies.

Low-cost leaders who have the lowest industry costs are likely to

have outmanaged its rivals in finding ways to perform value chain activities more cost-effectively

The aim of the best-cost provider strategy is to create a competitive advantage by

incorporating attractive or upscale product attributes at a lower cost than rivals.

A route to take in developing a differentiation advantage includes

incorporating tangible features that add functionality, increase customer satisfaction with the product specifications, functions, and styling.

Companies can pursue differentiation from many angles except

investing in managerial productivity and enjoying experience curve effects.

The generic types of competitive strategies include

low-cost provider, broad differentiation, focused low-cost, focused differentiation, and best-cost provider strategies.

A low-cost leader's basis for competitive advantage is

lower overall costs than competitors.

The greatest and most important differences among the competitive strategies of different companies are essentially

whether a company's market target is broad or narrow and whether the company is pursuing a competitive advantage linked to low cost or differentiation.

A low-cost leader can translate its low-cost advantage over its rivals into superior profit performance by

sing its low-cost edge to underprice competitors and attract price-sensitive buyers in large enough numbers to increase total profits or refraining from price cutting and using the low-cost advantage to earn a higher profit margin on each unit sold.

A differentiation strategy works best when

technological change is fast-paced and competition revolves around rapidly evolving product features.

The greatest danger or risk of an unsound best-cost provider strategy is

that low-cost leaders will be able to steal away some customers on the basis of a lower price, and high-end differentiators will be able to steal away customers with the appeal of better product attributes.

For a best-cost provider strategy to be successful, a company must have

the capability to incorporate upscale attributes at lower costs than its rivals whose products have similar upscale attributes.

Although there are many routes to competitive advantage, the two biggest factors that distinguish one competitive strategy from another are

whether a company's target market is broad or narrow and whether the company is pursuing a low cost or differentiation strategy.

The value to a company of pursuing a low-cost provider strategy is contingent upon

whether or not it is easy or inexpensive for rivals to copy the low-cost leader's methods or otherwise match its low costs.

A strategy to be the industry's overall low-cost provider tends to be more appealing than a differentiation or focus strategy when

the offerings of rival firms are essentially identical, standardized, commodity-like products.

Focusing provides the ability to secure a competitive edge, but it also carries some risks that will be detrimental to the focused firm, such as

the potential for the preferences and needs of niche members to shift over time toward mainstream provider product attributes.

The chief difference between a low-cost leader strategy and a focused low-cost strategy is

the size of the buyer group that a company is trying to appeal to.

What sets focused (or market niche) strategies apart from low-cost leadership and broad differentiation strategies is

their concentrated attention on a narrow piece of the overall market.

Broad differentiation strategies are well-suited for market conditions where

there are many ways to differentiate the product or service and many buyers perceive these differences as having value.

A pitfall to avoid in pursuing a differentiation strategy is

trying to differentiate on the basis of attributes or features that are easily copied.

The target market of a best-cost provider is

value-conscious buyers.

A low-cost provider strategy can defeat a differentiation strategy

when customers are basically satisfied and do not think extra attributes are worth a higher price feature.

A focused differentiation strategy aims at securing competitive advantage

with a product or service offering carefully designed to appeal to the unique preferences and needs of a narrow, well-defined group of buyers.