Chapter 5

C. profit pool

A __________ can be defined as the total profits in an industry at all points along the industry's value chain. A. profit maximizer B. revenue enhancer C. profit pool D. profit outsourcing

A. lessening competitive rivalry by distinguishing itself.

A differentiation strategy enables a business to address the five competitive forces by A. lessening competitive rivalry by distinguishing itself. B. having brand-loyal customers become more sensitive to prices. C. increasing economies of scale. D. serving a broader market segment.

B. all rivals share a common input or raw material.

All of the following are potential pitfalls of a focus strategy EXCEPT A. erosion of cost advantages within the narrow segment. B. all rivals share a common input or raw material. C. even product and service offerings that are highly focused are subject to competition from new entrants and from imitation. D. focusers can become too focused to satisfy buyer needs.

B. targeting too large a market that causes unit costs to increase.

All of the following are potential pitfalls of an integrated overall low cost and differentiation strategy EXCEPT: A. firms that fail to attain both strategies may end up with neither and become "stuck-in-the-middle." B. targeting too large a market that causes unit costs to increase. C. underestimating the challenges and expenses associated with coordinating value-creating activities in the extended value chain. D. miscalculating sources of revenue and profit pools in the firm's industry.

D. there is increasing emphasis on efficiency.

As markets mature, A. costs continue to increase. B. application for patents increase. C. differentiation opportunities increase. D. there is increasing emphasis on efficiency.

A. Overall cost leadership.

Convincing rivals not to enter a price war, protection from customer pressure to lower prices, and the ability to better withstand cost increases from suppliers characterize which type of competitive strategy? A. Overall cost leadership. B. Differentiation. C. Differentiation focus. D. Cost leadership focus.

D. mass customization.

Dell Computer has an online ordering system that allows consumers to configure their own computers before Dell builds them. This capability is an example of A. electronic data interchange. B. knowledge management. C. collaborative design. D. mass customization.

B. harvesting

During the decline stage of the industry life cycle, __________ refers to obtaining as much profit as possible and requires that costs be decreased quickly. A. maintaining B. harvesting C. exiting D. consolidating

B. decreased emphasis on competition based on price.

High product differentiation is generally accompanied by A. higher market share. B. decreased emphasis on competition based on price. C. higher profit margins and lower costs. D. significant economies of scale.

C. maturity

In a given market, key technology no longer has patent protection, experience is not an advantage, and there is a growing need to compete on price. What stage of its life cycle is the market in? A. introduction B. growth C. maturity D. decline

A. introduction

In the __________ stage of the industry life cycle, the emphasis on product design is very high, the intensity of competition is low, and the market growth rate is low. A. introduction B. growth C. maturity D. decline

C. maturity

In the __________ stage of the industry life cycle, there are many segments, competition is very intense, and the emphasis on process design is high. A. introduction B. growth C. maturity D. decline

B. repeating a process until a task becomes easier.

One aspect of using a cost leadership strategy is that experience effects may lead to lower costs. Experience effects are achieved by A. hiring more experienced personnel. B. repeating a process until a task becomes easier. C. spreading out a given expense or investment over a greater volume. D. competing in an industry for a long time.

B. nearly all competitors will have greater access to tools for managing costs making it hard for any one to achieve an advantage.

One of the reasons the Internet is eroding sustainable competitive advantages is A. incumbent firms are entering market segments that they previously considered to be too small. B. nearly all competitors will have greater access to tools for managing costs making it hard for any one to achieve an advantage. C. differentiators have been able to preserve the unique advantages that have always been the hallmark of their success. D. firms are ignoring opportunities to offer high-end services in niche markets.

A. Differentiation.

Support value chain activities that involve excellent applications engineering support (technology development) and facilities that promote a positive firm image (firm infrastructure) characterize what generic strategy? A. Differentiation. B. Overall cost leadership. C. Differentiation focus. D. Stuck-in-the middle.

D. achieving competitive advantage(s).

The primary aim of strategic management at the business level is A. maximizing risk-return tradeoffs through diversification. B. achieving a low cost position. C. maximizing differentiation of products and/or services. D. achieving competitive advantage(s).

C. maturity

The size of pricing and differentiation advantages between competitors decreases in which stage of the market life cycle? A. introduction B. growth C. maturity D. decline

B. evaluating employee performance

Which of the following is NOT one of the ways the Internet is lowering transaction costs? A. eliminating supply chain intermediaries B. evaluating employee performance C. minimizing office expenses D. reducing business travel

C. Advantages that cannot be duplicated by other competitors are difficult to achieve.

Which of the following is most often true of mature markets? A. Some competitors enjoy a significant operating advantage due to increasing experience effects. B. The market supports premium pricing, which attracts additional competitors. C. Advantages that cannot be duplicated by other competitors are difficult to achieve. D. The magnitude of pricing differences and product differentiation is larger than in the growth stage.

D. mass customization

Which of the following methods of implementing a differentiation strategy has been greatly enhanced because of Internet technologies? A. celebrity endorsements B. prestige packaging C. exceptional service D. mass customization

D. access niche markets in a highly specialized fashion.

Which of the following phrases best completes this sentence: Because of the Internet, firms that use a focus strategy have new opportunities to A. respond quickly to customer requests. B. provide more services and features. C. access markets less expensively. D. access niche markets in a highly specialized fashion.

C. offering lower prices to frequent customers.

A firm can achieve differentiation through all of the following means EXCEPT A. improving brand image. B. better customer service. C. offering lower prices to frequent customers. D. adding additional product features.

B. must focus on a market segment or group of segments.

A firm following a focus strategy A. must focus on governmental regulations. B. must focus on a market segment or group of segments. C. must focus on the rising cost of inputs. D. must avoid entering international markets.

B. rely on experience effects to raise efficiency.

A manufacturing business pursuing cost leadership will likely A. focus on a narrow market segment. B. rely on experience effects to raise efficiency. C. use advertising to build brand image. D. put heavy emphasis on product engineering.

C. maturity

A market that mainly competes on the basis of price and has stagnant growth is characteristic of what life cycle stage? A. introduction B. growth C. maturity D. decline

A. broadly-defined target market is to a cost leadership strategy.

A narrow market focus is to a differentiation-based strategy as a A. broadly-defined target market is to a cost leadership strategy. B. growth market is to a differentiation-based strategy. C. growth market is to a cost-based strategy. D. technological innovation is to a cost-based strategy.

C. all rivals share a common input or raw material.

All of the following are potential pitfalls of a differentiation strategy EXCEPT: A. uniqueness that is not valuable. B. too high a price premium. C. all rivals share a common input or raw material. D. perceptions of differentiation may vary between buyers and sellers.

D. decline

In the __________ stage of the industry life cycle, there are few segments, the emphasis on process design is low, and the major functional areas of concern are general management and finance. A. introduction B. growth C. maturity D. decline

D. expansion of a firm's product market scope.

Piecemeal productivity improvements during a turnaround typically does NOT involve A. business process reengineering. B. increased capacity utilization. C. benchmarking. D. expansion of a firm's product market scope.

B. overall cost leadership

Primary value chain activities that involve the effective layout of receiving dock operations (inbound logistics) and support value chain activities that include expertise in process engineering (technology development) characterize what generic strategy? A. differentiation B. overall cost leadership C. differentiation focus D. stuck-in-the-middle

D. higher than firms that achieve either a cost or a differentiation advantage.

Research has consistently shown that firms that achieve both cost leadership and differentiation advantages tend to perform A. at about the same level as firms that achieve either cost or differentiation advantages. B. about the same as firms that are "stuck-in-the-middle." C. lower than firms that achieve differentiation advantages but higher than firms that achieve cost advantages. D. higher than firms that achieve either a cost or a differentiation advantage.

A. if it can induce greater demand and thereby help a firm travel down the experience curve faster.

The experience curve suggests that cutting prices is a good strategy A. if it can induce greater demand and thereby help a firm travel down the experience curve faster. B. in industries characterized by high economies of scale. C. in the maturity stage of the industry life cycle. D. in the decline stage of the industry life cycle.

A. "in-kind" competition (from the same type of product).

The growth stage of the industry life cycle is characterized by A. "in-kind" competition (from the same type of product). B. premium pricing. C. a growing trend to compete on the basis of price. D. retaliation by competitors whose customers are stolen.

D. decline in the market life cycle.

The most likely time to pursue a harvest strategy is in a situation of A. high growth. B. strong competitive advantage. C. mergers and acquisitions. D. decline in the market life cycle.

D. deriving benefits from highly focused and high technology markets.

The text discusses three approaches to combining overall cost leadership and differentiation competitive advantages. These are the following EXCEPT A. automated and flexible manufacturing systems. B. exploiting the profit pool concept for competitive advantage. C. coordinating the "extended" value chain by way of information technology. D. deriving benefits from highly focused and high technology markets.

A. If several competitors pursue similar differentiation tactics, they may all be perceived as equals in the mind of the consumer.

Which statement regarding competitive advantages is true? A. If several competitors pursue similar differentiation tactics, they may all be perceived as equals in the mind of the consumer. B. With an overall cost leadership strategy, firms need not be concerned with parity on differentiation. C. In the long run, a business with one or more competitive advantages is probably destined to earn normal profits. D. Attaining multiple types of competitive advantage is a recipe for failure.

C. global expansion.

Research shows that the following are all strategies used by firms engaged in successful turnarounds EXCEPT A. asset and cost surgery. B. selective product and market pruning. C. global expansion. D. piecemeal productivity improvements.

C. Supplier power is increased because suppliers will be able to charge higher prices for their inputs.

Which of the following is FALSE regarding how a differentiation strategy can help a firm to improve its competitive position vis-à-vis Porter's five forces? A. By increasing a firm's margins, it avoids the need for a low cost position. B. It helps a firm to deal with supplier power and reduces buyer power since buyers lack comparable alternatives. C. Supplier power is increased because suppliers will be able to charge higher prices for their inputs. D. Firms will enjoy high customer loyalty, thus experiencing less threat from substitutes than its competitors.

A. Cost cutting may lead to the loss of desirable features.

Which of the following is a risk (or potential pitfall) of cost leadership? A. Cost cutting may lead to the loss of desirable features. B. Attempts to stay ahead of the competition may lead to gold plating. C. Cost differences increase as the market matures. D. Producers are more able to withstand increases in suppliers' cost.

D. Products or services offered by pioneers may be perceived as differentiated simply because they are new.

Which of the following statements about the introduction stage of the market life cycle is TRUE? A. It produces relatively large, positive cash flows. B. Strong brand recognition seldom serves as an important switching cost. C. Market share gains by pioneers are usually easily sustained for many years. D. Products or services offered by pioneers may be perceived as differentiated simply because they are new.

C. It has important implications for a firm's generic strategies, functional areas, value-creating activities, and overall objectives.

Which of these statements regarding the industry life cycle is correct? A. Part of the power of the market life cycle is its ability to serve as a short-run forecasting device. B. Trends suggested by the market life cycle model are generally not reversible or repeatable. C. It has important implications for a firm's generic strategies, functional areas, value-creating activities, and overall objectives. D. It points out the need to maintain a differentiation advantage and a low cost advantage simultaneously.