Ch 5

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. Differentiation strategy b. Production strategy c. Positioning strategy d. Low-cost strategy

a. Differentiation strategy

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. reducing manufacturing costs and streamlining its supply chain. d. imitating its competitors' business-level strategy and customer segmentation.

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

Which of these strategies represents a company that has selected a differentiation strategy? a. 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 b. A grocery store chain that 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 vehicle 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 that announces a new fast-food chain in which every item on the menu is just $1

b. A grocery store chain that 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 vehicle

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

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

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 mid-sized companies. Which strategy do you recommend the consulting company pursue to market its services? a. Low-cost strategy b. Blue ocean strategy c. Focus differentiation strategy d. Focus low-cost strategy

c. Focus differentiation strategy

Which of these companies pushed the efficiency frontier in their industry with a value innovation? a. K-Mart works to compete in the discount retail industry by adding designer products to its offering. b. Chick-fil-A chooses not to operate its restaurants on Sundays. c. Ikea created a store environment in which customers selected their own flat-packed furniture and assembled it themselves at home. d. GM adds the Chevy Volt, an electric car, to its car line to lower its fleet emissions and appeal to environmentally conscious drivers.

c. Ikea created a store environment in which customers selected their own flat-packed furniture and assembled it themselves at home

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 spend more money on its differentiation, making the brand appear more upscale and attractive to consumers, regardless of the cost. b. It must reduce costs across the board with no functional department spared from the cuts so that it can operate efficiently. c. It should continue operating in its current cost structure and with its current differentiation strategy. d. It must find a way to reduce its costs without sacrificing style and other elements of its differentiation.

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

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

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

Companies that select a differentiation strategy must also recognize: a. that customers are unwilling to pay a premium for products that satisfy the same needs as products from competitor companies. b. that they will have limited pricing options for their products. c. that they will be less profitable than companies that utilize a low-cost strategy. d. the importance of controlling cost to maintain profitability.

d. the importance of controlling cost to maintain profitability.

A low-cost strategy is one in which a company: a. provides a unique product at a premium price that customers are willing to pay. b. offers customers the lowest price, even if it has to sell below its production cost. c. sells a commodity product at the same or nearly the same price as its competitors. d. undercuts its rivals on price to gain market share while still making a profit.

d. undercuts its rivals on price to gain market share while still making a profit.

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

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

Understanding market segmentation is an important step in formulating business-level strategies because: a. companies should ignore differences among customer needs and always offer a single standardized product. b. companies can choose three different kinds of strategies based on their strategy to offer a standard or customized product to customers with different needs. c. it will assist a company in defining the industry and market sector where it will operate. d. companies pursuing a low-cost strategy must also utilize a segmentation strategy to offer different products to different customers.

b. companies can choose three different kinds of strategies based on their strategy to offer a standard or customized product to customers with different needs.

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

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

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 utilize its donated relief supplies to provide support for only the homeless in its communities. b. The relief group could employ a marketing campaign to increase disaster preparedness and awareness. c. 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. d. The relief group could specialize in delivering relief supplies only for storm victims, those affected by floods, tornados, and hurricanes.

c. 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.

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 their competitors negatively in its advertising and promotions.

c. delivering superior functions and features.