BUSMHR 4490 Chapter 6 Smartbook
The concept of a(n) ______ attempts to combine both learning effects and process improvements. experience curve minimum efficient scale strategic implementation technological innovation
experience curve
What are the four most important cost drivers that managers can manipulate? experience curve effects economies of scale learning curve effects cost of input factors complement choices diseconomies of scale
experience curve effects economies of scale learning curve effects cost of input factors
What is the relationship between fixed costs and economies of scale? Larger output results in lower labor costs. Larger output illustrates the benefits of a differentiation strategy. The amount of fixed costs allocated to each unit of output decreases as output increases. Larger outputs result in a maximum efficient scale.
The amount of fixed costs allocated to each unit of output decreases as output increases.
What is the relationship between fixed costs and economies of scale? Larger outputs result in a maximum efficient scale. Larger output results in lower labor costs. Larger output illustrates the benefits of a differentiation strategy. The amount of fixed costs allocated to each unit of output decreases as output increases.
The amount of fixed costs allocated to each unit of output decreases as output increases.
The goal of a ______ strategy is to achieve expenses below those of competitors while maintaining similar value. A firm with this strategy could or could not achieve differentiation parity. cost leadership business level integration strategy differentiation
cost leadership
A firm's strategic profile based on value creation and cost is called its ______. strategic trade-offs strategic position strategic control strategic alliance
strategic position
Choosing a business-level strategy helps to define a firm's ______ in a given product market. strategic position industry structure ethical climate mission statement
strategic position
A(n) ______ requires making a choice between a cost position and a value position. strategic trade-off value proposition generic business level strategy industry effect
strategic trade-off
Which capability is required to create superior product features? R&D accounting sales marketing
R&D
In the learning curve, the ______ the learning curve, the more learning has taken place. steeper flatter wider linear
steeper
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
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)B (V - C)A < (V - C)B (V - C)A > (V - C)C
(V - C)A > (V - C)B
Which of the following scenarios would result in strengthening a firm's strategic position? A firm releases a new complementary product that decreases the perceived value of the original product. 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 in a range of new product features that result in an equal increase in costs and value creation. 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 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? The challenge of learning is an uphill battle, leading to decreases in worker morale. A large number of people can learn at the same time, leading to economies of scale. Learning cuts into the amount of time workers have, resulting in decreased productivity. As workers repeatedly engage in an activity, they become more efficient, driving down costs
As workers repeatedly engage in an activity, they become more efficient, driving down costs.
A firm pursuing a blue ocean strategy can increase its profit margins by implementing which of the following pricing options? Charge a lower price than the cost leader. Charge a lower price than the differentiator. Charge a higher price than the cost leader. Charge a higher price than the differentiator.
Charge a lower price than the differentiator. Charge a higher price than the cost leader.
What is one of the benefits of pursuing a differentiation strategy when it comes to the power of suppliers? Differentiation results in the erosion of margins. 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 provides protection against an increase in input prices
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 results in the erosion of margins. Differentiation provides protection against an increase in input prices. Differentiation results in costs that increase above acceptable thresholds.
Differentiation provides protection against an increase in input prices.
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?
To formulate an appropriate business-level strategy, managers must answer the "who-what-why-and-how" questions of competition. Which of the following would be the appropriate questions to answer? How high should our profit be? How will we satisfy our customers' needs? Who are the customer segments will we serve? What customer needs will we satisfy?
How will we satisfy our customers' needs? Who are the customer segments will we serve? What customer needs will we satisfy?
Which of the following competitive forces can result in the erosion of margins for both differentiation and cost-leadership business strategies? Power of suppliers Power of buyers Threat of substitutes Threat of entry
Power of suppliers Power of buyers Threat of entry
Baby Buggy Baby sells high-end baby strollers. In an attempt to maintain its competitive advantage, the firm began adding additional features to its strollers. Customers liked these features and sales increased, but the company's profit margins shrank. Which of the following is the likely reason for this? The firm focused on supply rather than demand. The firm neglected its competition. The firm neglected to control costs. The firm didn't differentiate its products enough from competing products.
The firm neglected to control costs.
Which of the following are pricing options offered by a blue ocean strategy? The firm can charge a lower price than the cost leader. The firm can charge a higher price than the cost leader. The firm can raise its price due to diseconomies of scale. The firm can charge a lower price than differentiators.
The horizontal connection of the points of each value on the strategy canvas is known as
In terms of productivity, which of the following is true of learning curves? They are volatile. They go up. They remain level. They go down.
They go down.
Which of the following competitive forces can result in the erosion of margins for both differentiation and cost-leadership business strategies? Threat of entry Power of suppliers Power of buyers Threat of substitutes
Threat of entry Power of suppliers Power of buyers
True or false: A company that achieves differentiation parity at a lower cost has implemented a successful cost-leadership strategy.
True
True or false: Tesla's high stock market valuation is partly justified by the company's learning curve.
True
A differentiation strategy can be threatened when ______. a product becomes commoditized, and the focus of the competition shifts to price the perceived quality of cost leadership diminishes the focus of competition shifts to non-price attributes the firm leverages opportunities on competitive efforts
a product becomes commoditized, and the focus of the competition shifts to price
Which of the following are components of a cost-leadership strategy? acceptable value lowest costs in the industry unique product features highest prices in the industry
acceptable value lowest costs in the industry
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 minimize its opportunity cost provide a product that is similar to successful products already on the market
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 ______. a learning curve effect based on output differential value driver advantages based on product features an experience-curve effect based on process innovation creative destruction
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 the cost of raw materials a decline in consumer demand an increase in demand from the market several new competitors entering the market
an increase in demand from the market
Why do many firms fail to successfully implement a blue ocean strategy? because they merge with international competitors for value creation because too many other companies already try to implement a blue ocean strategy, making it hard to compete that way because they end up being "stuck in the middle," unable to increase value and lower costs at the same time because they become involved in situations involving ethical dilemmas
because they end up being "stuck in the middle," unable to increase value and lower costs at the same time
Diseconomies of scale often appear when a firm ______. decides to use specialized production equipment reduces its output places too much emphasis on the minimum efficient scale becomes too large and complex to manage efficiently
becomes too large and complex to manage efficiently
The minimum efficient scale indicates the level of output needed to ______ the cost per unit as much as possible. increase bring down inflate keep steady
bring down
A company's goal-directed plans regarding how to compete for advantage is known as the firm's ______. sustainable competitive advantage industry effects blue ocean strategy business-level strategy
business-level strategy
Which of the following are input factors? marketing and sales capital information technology services raw materials distribution labor
capital information technology services raw materials labor
Which of the following are input factors? capital labor marketing and sales distribution raw materials information technology services
capital labor raw materials information technology services
Unique features and attributes that differentiate a product from competitors' offerings allow the firm to ______. Multiple choice question. reduce the cost of raw materials charge premium pricing hire employees away from competitor charge only as much as the competition charges for its product
charge premium pricing
Which of the following are significant threats to a firm pursuing a cost-leadership strategy? competitors adopting similar business strategies replacement by innovative substitutes value falling below the acceptable threshold suppliers increasing input prices
competitors adopting similar business strategies replacement by innovative substitutes value falling below the acceptable threshold
Bundling of products and services that are consumed in tandem to create value is an example of ______. complements premium pricing strategic trade-offs economies of scope
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
A firm that pursues a differentiation strategy will often find that the added expense of offering new or unique product features offsets the increase in perceived value, and profit margins begin to erode. This underscores the importance of ___________ control for firms pursuing a differentiation strategy.
cost
A firm that hopes to achieve a competitive advantage by maintaining an efficient supply chain and taking advantage of economies of scale and a well-trained staff is focusing on ______. value drivers product features cost drivers customer service
cost drivers
The goal of a ______ strategy is to achieve expenses below those of competitors while maintaining similar value. A firm with this strategy could or could not achieve differentiation parity. integration strategy differentiation cost leadership business level
cost leadership
Which of the following determine a firm's competitive advantage? cost position relative to competitors size of the company number of products produced by the firm value position relative to competitors
cost position relative to competitors value position relative to competitors
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 differentiation proposition
cost-leadership
Which of the following are considered the two generic business-level strategies? value gap oligopoly cost-leadership monopolistic competition differentiation
cost-leadership differentiation
Which type of strategy is being used if a company offers a product at a lower cost than its competitors? focused differentiation strategy blue ocean strategy cost-leadership 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). maximum effective superstore minimum efficient cube square
cube square
A firm that offers a liberal return policy and free shipping on goods ordered online hopes to increase its perceived value by focusing on ______. complements production costs customer service advertising
customer service
Managers can increase the perceived value of their firms' product or service offerings by focusing on ______. strategic contributions salient costs supply chains customer service
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. product features marketing customer service good value
customer service
A struggling retailer seeking to implement a blue ocean strategy is likely to experience difficulty with ______. cutting costs and increasing value at the same time locating products that satisfy customer needs communicating the plan to lower-level employees maintaining high quality customer service
cutting costs and increasing value at the same time
Economies of scale are _____. decreases in cost per unit as output increases increases in cost-leadership business level strategy decreases in economic value due to competitive parity increases in minimum efficiencies of scale
decreases in cost per unit as output increases
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 premium market differentiation
differentiation
A(n) ______ strategy attempts to increase the perceived value of a product while controlling costs. integrated balanced approach differentiation cost-leadership competitive implementation
differentiation
A(n) ______ strategy may fail when the focus of the competition shifts to price rather than unique product features. differentiation cost-leadership economies of scale experience curve
differentiation
A successful blue ocean strategy requires strategists to reconcile the trade-offs between ______. number of employees and high wages profit margins and sales volume differentiation and low cost private and public investment
differentiation and low cost
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 the strategic fit economic value created
economic value created
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? economies of scale customer service complements product features
economies of scale
Furniture retailer IKEA has used the value innovation framework of ______ to successfully implement a blue ocean strategy. eliminate-reduce-raise-create analyze-decide-accomplish-restart reduce-reuse-recycle-repurpose understand-acknowledge-attempt-achieve
eliminate-reduce-raise-create
When pursuing a differentiation strategy, a firm can achieve a competitive advantage by ______. equipping customers with generic and lower priced products increasing perceived value regardless of cost increases making sure the firm's costs are the lowest ensuring that its economic value exceeds that of its competitors
ensuring that its economic value exceeds that of its competitors
What are the two factors upon which the success of strategy of either cost leadership or differentiation is built? the regulatory environment consumer needs external opportunities in the market the firm's internal strengths
external opportunities in the market the firm's internal strengths
In order for a firm to successfully implement a business-level strategy, it must limit the impact of which of the following? external threats technological advancements its own internal weaknesses consumer demand
external threats its own internal weaknesses
The cube-square rule makes it ______ for smaller stores to compete with larger retailers. just as difficult easier harder useless
harder
Marriott offers different hotels that cater to different types of travelers (e.g., Residence Inn, Marriott Courtyard, Marriott Fairfield Inn). What is this an example of? how a firm can compete by offering more perceived value at a similar price how a differentiation strategy has to always be associated with premium pricing how a differentiation strategy does not work how a firm can be overwhelmed by too many assets
how a firm can compete by offering more perceived value at a similar price
Positive adjustments in product features, customer service, and complements may enable managers to ______. improve the firm's strategic position weaken the firm's strategic position make themselves look good attract new employees
improve the firm's strategic position
What drives the learning curve effect? a reduction in the cost of supplies and other inputs increases in cumulative output within the existing technology the introduction of new technology to increase output regular training sessions for employees to teach them how to perform new processes
increases in cumulative output within the existing technology
A firm's competitive advantage is determined jointly by ______ and firm effects. value position cost position industry effects strategic groups
industry effects
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. experience-curve input learning-curve scaling
input
In the relationship between per-unit cost and output, the minimum efficient scale ______. is where the per-unit cost is lowest demonstrates that smaller is better is where the per-unit cost is highest is the same as economies of scale
is where the per-unit cost is lowest
In a focused cost-leadership strategy, a firm provides ______. low-cost products to a niche market differentiated products to a niche market differentiated products to a wide market low-cost products to a wide market
low-cost products to a niche market
Which of the following are examples of ways that a large retailing firm can increase the perceived value of its offerings by focusing on customer service? offering an improved version of a product at the same price maintaining a domestic call center that is open 24 hours per day by utilizing set scripts for customer service representatives to use with all customers offering a "no questions asked" return policy
maintaining a domestic call center that is open 24 hours per day offering a "no questions asked" return policy
Raoul is starting a new cosmetics company. His focus is on what he believes is a game-changing lipstick. He wants the lipstick to be accessible to everyone, but the manufacturing costs are higher than he had anticipated. If Raoul wants to achieve his desired strategic position of value creation at an affordable cost, he will need to ______. make sure the economic value created is low hold firm on keeping the prices low and see what happens focus instead on a different product make strategic trade-offs
make strategic trade-offs
Larger output allows firms to invest in more specialized systems such as which of the following? a general accountant big box retail stores manufacturing robots enterprise resource planning software
manufacturing robots enterprise resource planning software
High-end pen manufacturer Mont Blanc pursues a differentiation strategy pursuing only those who need or want an expensive writing instrument. What scope of competition does this represent? narrow differentiation even broad
narrow
Whereas the firm's strategic position can be considered either differentiated or cost-focused, the scope of competition is considered ______. active or inactive narrow or broad comparative or contrasting thin or wide
narrow or broad
In a focused differentiation strategy, the competitive scope is ______ than in a traditional differentiation strategy. narrower less cost-focused more value perceived broader
narrower
If Tesla has an 80% learning curve, ______. per-unit cost drops 20% whenever output doubles workers need to spend 80% of their time learning 20% of workers will never fully learn their jobs company efficiency has risen by 80%
per-unit cost drops 20% whenever output doubles
Rodney is making decisions about his newly formed business. He wants to focus on producing the highest-quality product in the market so he can maximize the product's value to customers. This will cause his product to have higher costs than others already in the market, but Rodney believes customers will pay more for the higher-quality product. Rodney's choice to use a differentiation business-level strategy is determining his company's strategic ______. industry position alliances liabilities
position
A differentiation strategy is typically associated with ______ pricing. virtual excessive premium disadvantaged
premium
What are the three most important value drivers that managers can use to create a competitive advantage? product features complements customer service cost savings availability
product features complements customer service
Two important features that managers can adjust in an effort to improve the firm's strategic position are ______. planned emergence and product features customer service and investment value investment value and planned emergence product features and customer service
product features and customer 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 black blue green
red
A manufacturer of electronic components can use its manufacturing machines to produce many different components such as semiconductors, sensors, and capacitors. In this case, the firm benefits from an economy of ___________, reducing overall production costs by finding multiple uses for its components and facilities.
scope
Economies of ______ are the savings that come from producing two or more different outputs at a lower cost than producing each output individually. integration regulation scale scope
scope
Economies of scale present an opportunity to increase profits because as the number of units within the relevant range increases, fixed costs ______. stay the same decrease dramatically increase only slightly 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 ______. vary only depending on the number of units produced increase only slightly stay the same decrease dramatically
stay the same
One way that a company can try to avoid problems resulting from diseconomies of scale is to ______. take a slower, more regimented approach to making decisions structure the company into smaller units grow larger and more hierarchical increase bureaucratic controls
structure the company into smaller units
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 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 less intense competition from imitators
The perceived value that a company creates for consumers less the company's costs to create the value equals ______. a differentiation strategy industry attractiveness a strategic trade-off the economic value created
the economic value created
A company with a cost-leadership strategy faces significant difficulties when ______. the focus of competition shifts from price to non-price attributes no valuable substitutes exist the focus of competition shifts from non-price to price attributes suppliers agree to charge less for their supplies
the focus of competition shifts from price to non-price attributes
Different value drivers contribute to competitive advantage only if ______. the company also offers product customization the increase in perceived value exceeds the corresponding cost increase customer service prices exceeds the cost of product features premium pricing is used
the increase in perceived value exceeds the corresponding cost increase
The horizontal connection of the points of each value on the strategy canvas is known as ______. differentiation the value curve the generic approach the competitive factor
the value curve
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 number of different products in the firm's portfolio and countries in which they are sold value creation and cost
value creation and cost
The ______ is simply a graphic representation of a firm's relative performance across different competitive factors in an industry.
value curve
A firm that manages to avoid competition entirely by offering a product or service that creates an uncontested market space is engaging in ______ economies of scale a red ocean strategy value innovation cost leadership
value innovation
Implementing a blue ocean strategy requires making competition irrelevant and creating a new market space, otherwise known as ______. value innovation market definition economies of scope asset attainment
value innovation
Which of the following determine a firm's competitive advantage? number of products produced by the firm value position relative to competitors size of the company cost position relative to competitors
value position relative to competitors cost position relative to competitors
Which of the following are questions that managers must answer when pursuing value innovation? which product factors to reduce below the industry standard which product factors to raise above the industry standard which product factors to eliminate which new product factors to create which market segments to avoid
which product factors to reduce below the industry standard which product factors to raise above the industry standard which product factors to eliminate which new product factors to create
To formulate an appropriate business-level strategy, managers must answer the ______ questions of competition. who, what, when, and where what, when, why, and how much who, what, why, and how who, what, why, and where
who, what, why, and how
