MGT 301 CH. 6
The goal of the differentiator is to have a smaller value gap than competitors.
false
A value curve that zig-zags across the strategy canvas indicates a focused strategy that is likely to achieve a sustainable competitive advantage.
false
Which of the following is an accurate statement about learning effects? A) Learning effects are captured at one point in time. B) Learning effects occur over time as output accumulates. C) Learning effects are significant in all production processes. D) Learning effects can produce diseconomies.
B
________ is best described as decreases in cost per unit as output increases. A) Economies of scale B) Economies of scope C) Time compression economies D) Economies of replication
A
The primary goal of a firm pursuing a blue ocean strategy should be to A) create the highest perceived value in its respective industry. B) build a reputation of being the lowest-cost producer in its chosen industry. C) offer a differentiated product or service at a low cost. D) achieve a less steep learning curve.
C
Which of the following best describes a strategic tradeoff? A) the tension between innovation and keeping manufacturing costs down B) the tension between maintaining both high-quality products and service C) the tension between value creation and the pressure to keep costs in check D) the tension between raising prices and keeping a loyal clientele
C
When examining all the generic strategies, which of the following below is inherently superior in every industry? A) broad differentiation B) focused differentiation C) blue ocean D) There is no single superior business-level strategy.
D
A cost-leader is the firm most likely to survive a price war.
true
NuLiver Corp. has recently introduced a new production method that will make the production of their medical devices more cost-effective. Which of the following will most likely be the result of this innovation? A) jumps to a steeper learning curve B) destabilizes a steeper learning curve C) stabilizes the existing learning curve D) moves down the existing learning curve
A
In order for a firm to formulate an effective business-level strategy, it is important to remember that competitive advantage is determined by A) the characteristics of both the industry and the firm. B) the characteristics of the firm alone. C) the characteristics of the industry in which a firm competes. D) the amount of market share a firm can gain.
A
Which of the following describes an airline that is most likely stuck in the middle? A) Sky Limit Airline that offers complimentary drinks and meals, coast-to-coast coverage via connecting hubs, plush airport lounges, and high prices. B) Cloud Airline that offers international routes and global coverage, high customer service, high reliability, and high prices. C) Eastern Airlines offers high-quality beverages and meals, plush airport lounges, only a few connections via hubs domestically, poor customer service, and low prices. D) Bubba's Airline that offers no assigned seating, no in-flight amenities, no drinks or meals, no airport lounges, and low prices.
C
When a firm operates at the minimum efficient scale, there is still opportunity for it to further reduce its cost per unit through economies of scale.
false
When pursuing a blue ocean strategy, a firm in a crowded marketplace attempts to out-compete rivals on both cost and product features with the goal of gaining market share at the expense of other competitors in the same industry.
false
A blue ocean strategy differs from a low-cost strategy in that A) the intent of a blue ocean strategy is not to be the absolute lowest-cost provider because a blue ocean must also increase perceived value. B) the focus of a blue ocean strategy is on lowering the economic value created, whereas a cost-leader focuses on increasing the economic value created. C) economies of scale are more important to a blue ocean strategy, while economies of scope are more important to a cost-leader. D) a blue ocean's research and development focus is on process technologies, and a cost-leader's focus is on product technologies.
A
All of the following are questions that managers should ask before crafting a business-level strategy except A) When should we introduce our product/service in the market? B) What customer needs, wishes, and desires will we satisfy? C) Why do we want to satisfy them? D) Who—which customer segments—will we serve?
A
Benny's Closet Inc. is an apparel company that caters to highly price-conscious customers. Through its simple apparel designs, acceptable quality levels, and minimal customer service, the company has been able to sell its merchandise at the lowest prices in the industry. Which of the following generic business strategies is Benny's Closet applying? A) cost-leadership B) differentiation C) niche marketing D) product diversification
A
ConnellInc. has been successful at differentiating itself from competitors by claiming a premium price for its digital cameras based on superior image quality and advanced technology. In this scenario, which of the following is the key value driver? A) product features B) economies of scale C) low-cost input factors D) customer service
A
Customer service and ________ are two of the value drivers that managers can utilize when trying to improve a firm's differentiation strategic position. A) product uniqueness B) experience curve C) cost of input factors D) economies of scale
A
When a blue ocean strategy goes bad, a firm has neither a clear differentiation nor a clear cost-leadership profile. This situation is referred to as A) stuck in the middle. B) buried at the bottom. C) burned at the top. D) caught in the transition.
A
When a firm combines experience-based learning and process innovation, the firm A) jumps to a steeper learning curve. B) experiences an increase in per-unit cost. C) loses its competitive advantage .D) moves down the existing learning curve.
A
When pursuing a cost-leadership strategy, a business must remember that A) buyers will be reluctant to pay for a product unless the quality is acceptable. B) buyers will be reluctant to pay for a product unless the quality is superior. C) buyers will be reluctant to pay for the product unless it is customized. D) product quality is more important in a broad market than in a narrow one.
A
Which of the following provides an example of a firm in a red ocean? A) Cool Apparel offered clothing at a low price but failed to differentiate its product as being exclusive. B) Clothes 'R Us Apparel offered clothing at a price matching that of its competitors and, as a result, it had lower profit margins. C) Nadia Apparel offered clothing at a mid-range price but failed to differentiate its product as being of decent quality. D) XYZ Apparel offered clothing at a higher price than competitors and, as a result, failed to make a profit.
A
According to the five forces model, which of the following is viewed as a major risk to a business pursuing a cost-leadership strategy? A) competition switching from non-price attributes to pricing B) innovation that allows competitors to emerge with more economical replacements C) new entrants with small production scale D) suppliers requesting a 2 percent price increase across the industry
B
Combining economies of learning with the existing production technology allows a firm to A) move up a given experience curve. B) move down a given learning curve. C) jump to a less steeper learning curve. D) jump to a flatter experience curve.
B
Gr8t Food is a chain of "fast casual" restaurants that sells its menu items at higher prices than its competitors. The restaurant has a large customer base due to its wide product portfolio and superior customer service. Which of the following generic business strategies has Gr8t Food adopted in this scenario? A) cost-leadership B) differentiation C) market penetration D) product diversification
B
Marriott is able to create greater economic value than its competitors due to their ability to take advantage of ________, which describe the savings that come from producing two (or more) outputs at less cost than producing one output individually, while utilizing the same amount of resources and technology. A) diseconomies of scale B) economies of scope C) economies of scale D) cost of input factors
B
What must a cost-leadership strategy accomplish to be successful? A) It must increase the firm's cost above that of its competitors while offering adequate value. B) It must reduce the firm's cost below that of its competitors while offering adequate value. C) It must increase the firm's cost above that of its competitors while offering superior value. D) It must reduce the firm's cost below that of its competitors while offering superior value.
B
Which of the following best explains why a blue ocean strategy is difficult to implement? A) It combines the benefits of similar strategic positions—differentiation and low cost. B) It requires the reconciliation of fundamentally different strategic positions—differentiation and low cost. C) It requires the combination of fundamentally similar strategic positions—differentiation and strategic innovation. D) It requires the reconciliation of fundamentally different strategic positions—differentiation and strategic innovation.
B
All of the following are generic business-level strategies except A) board differentiation. B) focused cost-leadership. C) focused marketing strategy. D) broad cost-leadership.
C
In a focused cost-leadership strategy, a firm A) caters to the segment of the market that is least cost sensitive. B) provides high-priced products for many different segments of the mass market. C) delivers low-cost products and services to a specific, narrow part of the market. D) focuses on reducing the economic value created to drive down costs.
C
One of the risks of pursuing a blue ocean strategy is that a firm can find itself A) losing sight of its mission and vision. B) competing with only a differentiation strategy. C) "stuck in the middle." D) ineffective when competing on an international scale.
C
Tough Guy's Inc. is a chain of gyms. It offers a fitness package that allows its members to use the gym facilities for 12 months by paying only for 10 months. Included in the package are two health check-ups and a gym kit. These add-ons by themselves are not very valuable, but as a package they can enhance the perceived value of the service offerings. In this case, Tough Guy's primary value driver is A) economies of scale. B) learning-curve effects. C) availability of complements. D) experience-curve effects.
C
Trader Joe's differentiates itself from competitors by offering top-quality foods obtained through sustainable agriculture. This business strategy implies that Trader Joe's focuses on A) decreasing the existing value gap by providing luxury goods to customers. B) maintaining a less steeper learning curve as compared to its competitors. C) increasing the perceived value created for customers, which allows it to charge a premium price. D) lowering its costs compared to its competitors, while offering adequate value for its products and services.
C
Bath & Chill is a spa that caters to the needs of a small percentage of highly health-conscious consumers. It offers state-of-the-art treatments in a luxurious setting. Since there are very few spas that offer the same unique services, customers are willing to pay a premium price for its products and services. In this scenario, Bath & Chill is following a A) product diversification strategy. B) liquidation strategy .C) broad differentiation strategy. D) focused differentiation strategy.
D
How is differentiation parity different from cost parity? A) Differentiation parity deals with pricing not innovation. B) Differentiation parity deals with innovation not value. C) Differentiation parity deals with pricing not value. D) Differentiation parity deals with value not cost.
D
The question that business-level strategy answers is ________ the firm will compete. A) when B) where C) who D) how
D
What does it mean for a firm to have an 80 percent learning curve? A) Every time the cumulative output increases by 80 percent, the cost per unit will decline by 20 percent. B) Every time the cumulative output is doubled, the cost per unit will decline by 80 percent. C) Every time the cumulative output goes up by 20 percent, the cost per unit will decline by 80 percent. D) Every time the cumulative output is doubled, the cost per unit will decline by 20 percent.
D
When a firm is able to successfully employ a blue ocean strategy, it will create a competitive advantage by A) combining high quality and product features to provide service that customers truly value. B) using a first-mover advantage to be the lowest price in the market. C) winning market share with a highly differentiated product. D) beating rivals on product attributes while offering a better price.
D
When wireless service providers offer free or discounted mobile phones for subscriptions to their wireless voice and data service, the perceived value of the service offering increases. In this case, the value driver would be A) economies of scale. B) learning-curve effects. C) experience-curve effects. D) availability of complements.
D
Which of the following examples uses a focused differentiation strategy? A) a tennis pro shop that sells low-quality racquets priced at 150 dollars per racquet B) a coffee shop that offers mediocre lattes at a price of five dollars for a small latte C) a hotel chain that offers high-quality furnishings and service with room rates of under 75 dollars per night D) a cosmetics brand that offers superior skin lotion for sensitive skin priced at 100 dollars per bottle
D
Which of the following is a firm effect that has an impact on the competitive advantage of a firm? A) the exit barriers within the industry in which the firm operates B) the number of companies operating in the industry in which the firm operates C) the intensity of rivalry among existing companies in the firm's chosen industry D) the value and the cost position of the firm relative to its competitors
D
Which of the following is primarily a value driver? A) cost of input factors B) economies of scope C) experience-curve effects D) complements
D
Applying the five forces model to business-level strategy allows managers to assess the benefits and risks of both cost-leadership and differentiation strategies.
true
Differentiators tend to score highly on most competitive elements on a strategy canvas, while cost leaders tend to hover near the bottom of the strategy canvas.
true
A ________ primarily details the goal-directed actions managers take in their quest for competitive advantage when competing in a single product market. A) business-level strategy B) code of ethics C) mission statement D) functional-level strategy
A
Power Juice is the owner of a firm that produces sports drinks. Since there are a number of firms in the industry competing on cost, Power Juice has decided to pursue a differentiation strategy. In this case, she should A) focus on adding unique features to her product that customers will value. B) concentrate on improving process technologies to achieve economies of scale. C) enforce strict budget controls at all levels of the organization. D) devote all resources to reducing the value gap.
A
The goal of a strategic position is to create the largest gap possible between the ________ that a firm creates through its offerings and the ________ required to create these offerings. A) value; cost B) marketing; innovation process C) market share; defensive strategy D) gap; ROIC
A
We Cut Corners lawn service initially spent nine man-hours to assemble a lawnmower. But as the production doubled, the number of hours spent on assembling a mower reduced by 20 percent. This increase in productivity reduced the company's cost per unit. What is this phenomenon referred to as? A) learning-curve effect B) network effect C) black-swan event D) time compression diseconomies
A
A differentiation strategy works best when a A) firm has tangible resources, its focus of competition shifts to price, and equivalent substitutes are readily available. B) firm's focus of competition shifts to price, and when increasing differentiation of product features do not create additional value. C) firm's differentiated products are commoditized, and costs of providing uniqueness do not rise above the customer's willingness to pay. D) firm has intangible resources, is able to pass on increases in supplier cost to the customer, and its differentiation appeal creates customer loyalty.
D
Differentiation and cost-leadership strategies are only effective in manufacturing industries.
false
Due to the dynamic nature of business competition, a firm's strategic position should remain fixed over time.
false
A firm operating on a 70 percent learning curve will achieve lower per-unit costs after doubling its output than a firm operating on an 80 percent learning curve will.
true
