BUS 495 chapter 5

Which of these strategies represents a company that has selected a differentiation strategy? a. A grocery store chain that is converting their 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 vehicle. b. A company that is selling low-cost tablets and removing many of the expensive features of the tablet to provide access to customers who previously couldn't afford a tablet. 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 farther. d. A restaurant entrepreneur that announces a new fast-food chain where every item on the menu is just $1.

a. A grocery store chain that is converting their 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 vehicle.

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 then 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. Developing a robust marketing program to promote the social justice elements of the business and gain insights into consumer purchasing behavior on the website

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 if it will pursue a low cost strategy or a differentiation strategy. The team feels that they bring together a unique group of experts to deliver solutions to a mid-sized companies. Which strategy do you recommend the consulting company pursue to market their services? a. Focused differentiation strategy b. Low cost strategy c. Blue Ocean strategy d. Focused low cost strategy

a. Focused differentiation strategy

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. It must find a way to reduce its costs without sacrificing style and other elements of its differentiation.

The efficiency frontier represents: a. a position where companies have found the right balance between differentiation and low cost strategies. b. the point in which a company adopting a low cost strategy can be profitable. c. a company strategy to push the limits of innovation to achieve a superior differentiation. d. a firm that redefines their product offering through value innovation to create a new market space.

a. a position where companies have found the right balance between differentiation and low cost strategies.

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 a single customer niche and its unique needs. 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. based around ensuring that customers perceive a product to have greater value targeted to a single customer niche and its unique needs.

Companies utilizing a focused differentiation strategy: a. can sell at higher volumes and greater profitability than companies that appeal to a broader market. b. may need to increase its product offering to achieve a competitive advantage. c. have achieved a low cost position that can make profit at lower price points. d. are able to absorb cost increases from their suppliers without passing those costs along to their customers in terms or higher prices.

a. can sell at higher volumes and greater profitability than companies that appeal to a broader market.

Understanding market segmentation is an important step in formulating business-level strategies because: a. companies can choose three different kinds of strategies 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. companies can choose three different kinds of strategies based on their strategy to offer a standard or customized product to customers with different needs.

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. identifying a process innovation that would be challenging for its rivals to imitate because of their prior strategic commitments.

Companies that select a differentiation strategy must also recognize: a. the importance of controlling cost 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. the importance of controlling cost to maintain profitability.

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 volumes 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. undercut them in a price war to increase volumes and drive weaker low cost rivals out of business.

Which of these functional-level strategies is designed to improve quality as 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 5 years. c. An IT company enhances its research & 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. A manufacturer implements a Six Sigma training program with a goal to double the number of Six Sigma black belts within 5 years.

Which of these companies pushed the efficiency frontier in their industry with a value innovation? a. Chick-fil-A chooses not to operate its restaurants on Sundays. b. Ikea created a store environment where customers selected their own flat-packed furniture and assembled it themselves at home. c. Kmart works to compete 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. Ikea created a store environment where customers selected their own flat-packed furniture and assembled it themselves at home.

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 Big K brand soda offers the same flavor options as Coca-Cola and Pepsi brands.

b. Starbucks utilizes an upscale customer experience, high-quality coffee drinks and brand building to charge a premium price for its products.

A non-profit 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 that makes 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 the areas 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, those affected by floods, tornados and hurricanes

b. The relief group could utilize information systems to track and manage relief supply inventories and strategically locate them closest to the areas most likely to be hit by a natural disaster.

Which of these companies developed a business concept that included value innovation allowing it to compete in a blue ocean: a. Target evolves 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 announces plans to expand its capabilities in natural gas drilling by unlocking shale gas in Pennsylvania in 2014. d. In 2010, Reebok introduces Zig footwear technology, an innovation to the soles of athletic shoes to make them more flexible and lightweight.

b. Uber, founded in 2009, introduced peer-to-peer ride sharing for the first time, redefining the taxi and limousine service industry.

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. achieving economies of scale, using information systems to automate business processes and adopting lean production technologies.

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 where 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 their costs.

b. they are able to define and set the rules for the new industry segment where they are operating.

A low cost strategy is one where 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. undercuts its rivals on price to gain market share while still making a profit.

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 high volume quick-serve restaurant chain that is controlling costs through centralized food production and a streamlined supply chain.

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 your platform. b. Reduce the cost of games for your 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. Develop a video game platform that seriously reduces the manufacturing cost, and therefore the price, of the console without limiting technology.

There are four generic business-level strategies, including: a. segmented low-cost strategy, broad low-cost strategy, segmented differentiation strategy and broad differentiation strategy. b. customization strategy, positioning strategy, innovation strategy and quality strategy. c. broad low-cost strategy, focus low-cost strategy, broad differentiation strategy and focus differentiation strategy. d. horizontal integration strategy, vertical integration strategy, strategic outsourcing strategy and cooperative relationship strategy.

c. broad low-cost strategy, focus low-cost strategy, broad differentiation strategy and focus differentiation strategy.

In a differentiation strategy, a company can distinguish itself from its rivals by: a. offering its product or service at a lower price. b. providing similar or equal service or products. c. delivering superior functions and features. d. portraying them negatively in its advertising and promotions.

c. delivering superior functions and features.

A blue ocean strategy is when a company: a. pursues a globalization strategy by opening new facilities and sales offices abroad. b. outperforms rivals through higher sales volume, either through a low cost or a differentiation strategy. c. redefines the product offering through value innovation to create a new market space. d. chooses both a differentiation and a low-cost strategy for its business-level strategy.

c. redefines the product offering through value innovation to create a new market space.

The president of a software firm has chosen to implement a differentiation strategy, offering his product in a Software as a Service (SaaS) platform with a monthly subscription in the cloud. Most of his 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 his plan? a. Discounting the product to gain large volumes quickly to achieve economies of scale. b. Implement supply chain coordination for IT infrastructure components for the company's data warehouse. c. Collaborate with a distribution network of retail stores to ensure just-in-time inventory management of the product. d. A 24/7 technical support hotline with a team that is knowledgeable about the product and business goals of the company's customers.

d. A 24/7 technical support hotline with a team that is knowledgeable about the product and business goals of the company's customers.

A restaurant company has 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. The company should consider which business-level strategy? a. Positioning strategy b. Low cost strategy c. Production strategy d. Differentiation strategy

d. Differentiation strategy

A Blue Ocean strategy encourages strategic leaders to consider four questions, including "what factors can we create that rivals do not offer, thereby increasing value?" Which of these might be an answer to this question for a company operating in the legal services industry? a. We can do all of our legal work by attorneys, without assistance from paralegals. b. We can flatten our hierarchy and get rid of the associate-to-partner promotion path to pay our attorneys less. c. We can raise our hourly fee to the same level as our nearest competitor. d. We can offer our customers project pricing instead of hourly pricing so that they have predictability for their legal expenses.

d. We can offer our customers project pricing instead of hourly pricing so that they have predictability for their legal expenses.

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 cost.

d. improving the ability to manufacture products by reducing production inputs to lower cost.

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. low cost strategy.

Value innovation is when a company: a. creates a new market space with an entirely new kind of product offering. b. utilizes a superior R&D department to enhance its product reliability in form, function, style, durability, and performance. c. decides what group of customers it will pursue in its business-level strategy, detailing a segmentation strategy. d. offers an innovation that allows for greater value to be offered through superior differentiation at a lower cost than was previously thought possible.

d. offers an innovation that allows for greater value to be offered through superior differentiation at a lower cost than was previously thought possible.