MGT 409 Ch 1 - 3

An overall cost leadership strategy helps companies erect substantial industry entry barriers through ______.

cost advantages gained from high productivity

One component of asset and cost surgery for a mature company is to outsource production when market prices are less than in-house production costs.

true

A(n) ______ strategy involves reversing a decline in a company's performance and returning it to growth and profitability.

turnaround

Which of the following are potential pitfalls of using a focus strategy?

- An erosion of cost advantages within the narrow segment as competitors copy the value-chain - Competition from new entrants due to low barriers to entry - A product or service that becomes too narrow to satisfy buyer needs

Which of the following are ways that companies can combine overall cost leadership and differentiation?

- By exploiting the profit pool - By using information technology - By adopting mass customization

One component of asset and cost surgery for a mature company is to outsource production when market prices are less than in-house production costs

True

Companies that use a _____ positioning strategy offer products with fewer product attributes and lower prices, in contrast to the industry tendency to continuously augment products as part of the product life cycle.

reverse

JK Industries is a diversified company that has been in business for decades. Its healthcare division has been profitable, but its line of prestige beauty products has been losing money. JK decides to discontinue its line of prestige beauty products and focus its efforts on the healthcare lines that have been most promising. Which strategy is JK using?

selective product and market pruning

Salvamoser Steel fabricates widgets. When the company first began production, it had high unit costs because it was trying to figure out the most efficient manufacturing method. After a few years, Salvamoser Steel had ironed out its production issues, and unit costs of production declined, even as cumulative output increased. This is known as______

the experience curve

The breadth of the target market refers to _______.

the range between industrywide and narrow market segments

Which of the following are reasons a differentiation strategy may not succeed?

- Companies may erode their quality brand image if they sell other lines of products or services at lower prices and quality. - Other companies may be able to imitate the differentiation of the product or service. - The product's or service's price is too high for the value customers receive.

Which of the following are characteristics of products that are in the decline stage?

- Competitors often cut their prices. - Declining products often take a large share of time and financial resources relative to their worth. - Changes in customer tastes or technology decrease product demand.

Which of the following statements regarding maintaining cost parity are true?

- Cost parity can be partially addressed by maintaining close ties with suppliers. - Even differentiators cannot ignore cost. - Differentiators maintain cost parity by lowering costs in features that customers care less about.

Which of the following are potential pitfalls of using a differentiation strategy?

- Customers do not find value in the product's or service's uniqueness. - Perceptions of differentiation may vary between buyers and sellers. - The company's differentiation may be easily imitated.

Which of the following are pitfalls of using a combination strategy?

- Firms may underestimate the challenges and costs associated with coordinating value-creating activities in the extended value chain. - Firms may miscalculate sources of revenue and profit pools in their industry. - Firms that are not able to attain both strategies may become "stuck in the middle."

Which of the following are ways that a combination strategy can improve a company's position vis-a-vis Porter's forces?

- Integrating value-chain activities lowers costs so the company can better withstand increases by suppliers. - Potential entrants may face high barriers if they do not have the financial or physical resources to compete head-to-head. - Low pricing and a wide product selection reduces buyer bargaining power due to the lack of competitors that can provide comparable cost/value.

Which of the following are ways an overall cost leadership strategy can improve a company's position vis-a-vis Porter's forces?

- Low-cost leaders can earn returns even when intense rivalry erodes profits. - Powerful buyers can only drive down prices to the level of the next most efficient producer. - Low-cost leaders are in a better position to absorb supplier price increases due to their margins.

Which of the following are goals of reverse positioning?

- Move a product from maturity backward into a growth position. - Allow a product to assume a new competitive position in its category.

Which of the following are pitfalls of using a focus strategy?

- New competitors may enter lucrative niche markets. - Cost advantages for the focus segment may become eroded over time. - Companies may become too focused on satisfying buyer needs.

Firms that sell products in a declining industry are often affected by which of the following competitor actions?

- Prospects are limited if all competitors remain. - Sales and profits may increase if one or more competitors exit the industry. - A company's market power may decrease if some of their rivals merge.

Revenues grow during the growth stage due to which of the following?

- The number of repeat customers is increasing. - New consumers are purchasing the product.

A differentiation strategy can improve a company's position vis-a-vis Porter's forces due to which of the following?

- The threat of substitutes is decreased due to customer loyalty. - Customer loyalty results in increased barriers to entry for potential competitors. - Rivalry is decreased because brand loyalty lowers customer sensitivity to price.

Which of the following are benefits when companies successfully integrate cost and differentiation advantages create an enviable position?

- They decrease supplier and buyer power. - They decrease industry rivalry. - They are able to erect significant barriers to entry

Which of the following are two requirements for successfully introducing a new product?

- an emphasis on marketing activities to create product awareness - an emphasis on research and development

Which of the following are strategies that are available in the decline phase?

- exiting - maintaining - harvesting - consolidating

Which of the following are characteristics of the decline stage of the industry life cycle?

- falling sales and profits - industry consolidation - increasing price competition

Which of the following are Michael Porter's three generic strategies?

- focus - overall cost leadership -differentiation

Which of the following are potential pitfalls of using an overall cost leadership strategy?

- focusing too much on one value-chain activity - increases in costs of raw materials due to suppliers' rising costs - ready imitation by competitors

Which of the following are two challenges of the introduction stage of the industry life cycle?

- generating enough exposure so the product emerges as the "standard" by which all rivals' products are evaluated - developing the product and finding a way to get users to try it

Companies that exit markets need to be aware of Blank______.

- how the exit will affect employees skilled in producing the product - how dropping the product may affect their brand name

Which of the following are examples of piecemeal productivity improvements?

- improving employee productivity - reengineering business processes increasing capacity utilization benchmarking specific activities against industry leaders

Companies that use a consolidation strategy in a declining industry Blank______.

- purchase the best of the surviving firms to enhance their market power, acquire valuable assets, and buy market share

The introduction stage of the industry life cycle is characterized by which of the following characteristics?

- rapid technological change and operating losses - unspecified product features and low sales growth - poorly defined market segments - new products that are not known to customers

Which of the following are characteristics of the industry life cycle's maturity stage?

- slowing demand growth and saturated markets - strategic emphasis on efficient operations and company exiting industry - direct and price competition

A firm experiences competitive parity with competing firms when they capture so much of its market share that it is left with no profits.

False

Which of the following statements about platform markets is true?

Firms in platform markets act as intermediaries between buyers and sellers.

______ involves obtaining as much profit as possible and requires that costs be reduced quickly.

Harvesting

Which of the following is a firm able to do when it successfully enters a new category with a breakaway product?

It is able to redefine its competition.

______ refers to keeping a product going without significantly reducing marketing support, technological development, or other investments, in the hope that competitors will eventually exit the market.

Maintaining

______ is a generic strategy based on appeal to the industrywide market using a competitive advantage based on _______.

Overall cost leadership; low cost

_ is when firms in a turnaround situation seek to eliminate costs and improve productivity through small gains that accumulate over a period of time.

Piecemeal productivity improvements

______ is when firms in a turnaround situation seek to eliminate costs and improve productivity through small gains that accumulate over a period of time

Piecemeal productivity improvements

A successful overall cost leadership strategy requires a tight set of interrelated tactics that include which of the following?

- Aggressive construction of efficient-scale facilities - Vigorous pursuit of cost reductions from experience - Tight cost and overhead controls

Which of the following are examples of piecemeal productivity improvements? (

- increasing capacity utilization - reengineering business processes - improving employee productivity - benchmarking specific activities against industry leaders

Which of the following are characteristics of the growth stage?

- increasing sales revenues - developing brand recognition - growing competition - financing complementary value-chain activities

The ability of some firms to manufacture unique products in relatively small quantities at lower costs is due to advances in Blank______ technologies.

- manufacturing - information

A turnaround strategy is most likely to occur during which of the following industry stages?

- maturity - decline

Companies that use differentiation strategies may use which of the following to differentiate their products or services?

- prestige - technology - features

______ is to offer a product in a different category to create the perception that the product is altogether different.

Breakaway positioning

______ is a firm's achievement of similarity, or being "on par," with competitors with respect to low cost, differentiation, or other strategic product characteristics

Competitive parity

The Blank______ stage is the fourth stage of the industry life cycle and is characterized by falling sales and profits.

decline

Which type of strategy is based on creating differences in the firm's product or service offering by creating something that is perceived industrywide as unique and valued by customers?

differentiation

One reason for a company to use a harvesting strategy for a declining product is to Blank______.

earn as much profit as possible by quickly reducing costs in the value chain's primary and support activities

One reason for a company to use a harvesting strategy for a declining product is to______.

earn as much profit as possible by quickly reducing costs in the value chain's primary and support activities

A ______ strategy is a firm's generic strategy based on appeal to a narrow market segment within an industry.

focus

Companies can use combination strategies with technology to ______.

link their value chain with the value chains of their customers and suppliers

When referring to competitive advantage, what does "type" refers to?

low cost versus uniqueness

A firm's ability to manufacture unique products in small quantities at low cost is known as Blank______.

mass customization

An industry's Blank______ is the total profits at all points along its value chain.

profit pool

Focus strategies exploit Blank______.

one or more specific segments by tailoring specific strategies to serve them

A firm that follows a differentiation strategy for competitive advantage still needs to be mindful of maintaining cost___________ relative to competitors by lowering costs in features that customers care less about.

parity

An industry's profit pool is the total profits at all points along its value chain

true

firms that use a differentiation strategy may be able to decrease buyer power ______.

since buyers lack comparable alternatives and are less price-sensitive

research has found that companies that .

use multiple forms of competitive advantage (e.g., cost leadership and differentiation) to outperform those that do not

A common pitfall of using a cost-leadership strategy is that

value-creating activities are easily imitated

A common pitfall of using a cost-leadership strategy is that ______.

value-creating activities are easily imitated

______ is the decline in unit costs of production as cumulative output increases.

Experience curve

________ is when firms are in a turnaround situation and aggressively cut administrative expenses and inventories and speed up receivable collections.

Asset and cost surgery

One reason a company would use a maintaining strategy for a declining stage product would be Blank______.

because the potential exists to continue to earn revenues and profits.

Companies that cannot identify any type of competitive advantage are classified as ______.

being stuck in the middle