Policy Ch 6
When a differentiator charges a similar price as its competitors in the same strategic group but offers more perceived value, it A) loses its competitive advantage. B) gains market share from other firms. C) lowers the economic value created. D) results in diseconomies of scale.
B) gains market share from other firms.
When a firm makes choices between a cost or value position to achieve competitive advantage, it is primarily involved in A) collective bargaining. B) strategic tradeoffs. C) arbitration. D) mediation.
B) strategic tradeoffs.
AcerWare Inc. manufactures external hard disks for $32 per unit, and the maximum price customers are willing to pay is $47 per unit. Data Driver Inc. is a competitor of AcerWare Inc. that produces external hard disks for $37 per unit, and customers are willing to pay a maximum price of $50 per unit. What does this imply? A) AcerWare and Data Driver share differentiation parity. B) Data Driver has a competitive advantage over AcerWare in terms of perceived value. C) AcerWare creates a greater economic value than Data Driver. D) Data Driver is a cost-leader when compared to AcerWare.
C) AcerWare creates a greater economic value than Data Driver.
Bestie Toys faces stiff competition from FunGadgets Inc., a rival firm with which Bestie Toys has achieved differentiation parity. Both firms have invested in state-of-the art production facilities and have similar learning curves of 85 percent. Assuming neither firm can reduce the cost of its input factors, how can Bestie Toys achieve a competitive advantage as a cost leader? A) Reduce the manufacturing staff by half to save on labor costs. B) Increase spending on product features. C) Have a cumulative output that is greater than FunGadgets Inc.'s. D) Eliminate several features that customers value to cut costs.
C) Have a cumulative output that is greater than FunGadgets Inc.'s.
In order to achieve a competitive advantage, the Heavenly Hotels, a chain of luxury beach resorts, wants to increase its market share. Which of the following strategies is most likely to do so? A) Maintain prices but significantly increase spending on customer service and other amenities. B) Lower prices but eliminate several of the features that have come to define Heavenly Hotels properties for consumers, such as complimentary meals and in-room massages. C) Take advantage of economies of scale and scope by opening a chain of lower-priced economy hotels that leverage the Heavenly Hotels brand image. D) Raise prices without increasing spending on customer service or resort features.
C) Take advantage of economies of scale and scope by opening a chain of lower-priced economy hotels that leverage the Heavenly Hotels brand image.
A firm's business strategy can lead to a competitive advantage if it allows the firm to A) execute the same activities performed by the rivals in a similar manner. B) reduce the value gap. C) perform different activities than its rivals. D) position itself below the productivity frontier.
C) perform different activities than its rivals.
A firm experiences diseconomies of scale when it A) has a constant return to scale. B) moves down the experience curve. C) produces at an output level beyond the minimum efficient scale. D) has a steep learning curve when compared to its competitors.
C) produces at an output level beyond the minimum efficient scale.
Golden Soles has been successful at differentiating itself from competitors by claiming a premium price for its athletic footwear based on superior design and high-quality materials. In this scenario, which of the following is the key value driver? A) economies of scale B) low-cost input factors C) product features D) premium prices
C) product features
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) product uniqueness
At a certain output level, the per-unit cost incurred by a firm to manufacture a product was $70. Once the cumulative output doubled, the cost per unit reduced to $63. All other factors remaining constant, the firm has been able to achieve a(n) A) 80 percent learning curve. B) 90 percent learning curve. C) 60 percent learning curve. D) 54 percent learning curve.
B) 90 percent learning curve.
CooCoo Cola has successfully achieved a competitive advantage in the soft drink industry as a differentiator. Which of the following scenarios would undermine CooCoo's position? A) CooCoo improves the recipe for its most popular soda without increasing the price. B) CooCoo introduces a new biodegradable bottle that raises cost and perceived value. C) CooCoo's customers start to consider soda a commodity. D) CooCoo's product has not established an acceptable standard of quality.
C) CooCoo's customers start to consider soda a commodity.
Both Tom's Car Repair and Fast Engines. incur a cost of $9,000 to manufacture a vehicle. However, the economic value created by Fast Engines. is more than that created by Tom's Car Repair. What does this indicate? A) Tom's Car Repair has a competitive advantage over Fast Engines. B) Both Tom's Car Repair and Fast Engines. have achieved competitive parity. C) Fast Engines can charge a premium price on its automobiles. D) Tom's Car Repair has created a higher value gap than Fast Engines.
C) Fast Engines can charge a premium price on its automobiles.
How is a cost-leader protected from threats from powerful suppliers? A) It is more able to absorb price increases through accepting lower profit margins. B) It is more able to absorb price increases through generating higher profit margins. C) It is able to create a significant difference between perceived value and current market prices. D) It is able to create a significant difference between actual value and future market prices.
A) It is more able to absorb price increases through accepting lower profit margins.
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) jumps to a steeper learning curve.
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) differentiation
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) There is no single superior business-level strategy.
Whole Foods focuses on a small market segment, affluent consumers who want to buy high-end, organic groceries. What is the appropriate name for Whole Foods's scope of competition? A) focused B) broad C) specific D) general
A) focused
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) Learning effects occur over time as output accumulates.
Finger Lickin' BBQ is a chain of casual restaurants that promises affordable barbecue using top-quality local ingredients. However, the company has struggled to achieve a competitive advantage because of its high overhead costs. Which of the following scenarios is most likely to result in a competitive advantage? A) lowering the quality of ingredients below what customers expect to control costs B) eliminating brick-and-mortar locations and offering delivery from a central kitchen C) raising prices without improving on the quality of food D) marketing itself as a high-end restaurant and competing with more refined restaurants in the area
B) eliminating brick-and-mortar locations and offering delivery from a central kitchen
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) Cool Apparel offered clothing at a low price but failed to differentiate its product as being exclusive.
While Eye Windows incurs a cost of $12 for a pair of eyeglasses, Dura Frames, its competitor, manufactures a pair of glasses at $10. Both the companies are able to sell their glasses for a maximum of $30 per pair. Which of the following statements is true in this scenario? A) Eye Windows and Dura Frames have achieved differentiation parity. B) Eye Windows is a cost-leader when compared to Dura Frames. C) Eye Windows has created a greater economic value than Dura Frames. D) Dura Frames has a higher opportunity cost than Eye Windows.
A) Eye Windows and Dura Frames have achieved differentiation parity.
________ is best described as the output range needed to bring down the cost per unit as much as possible, allowing a firm to stake out the lowest-cost position that is achievable through economies of scale. A) Minimum efficient scale B) Break-even output C) Maximum output capacity D) Optimum sustainable yield
A) Minimum efficient scale
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) When should we introduce our product/service in the market?
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) business-level strategy
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) buyers will be reluctant to pay for a product unless the quality is acceptable.
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) cost-leadership
Louis's Secondhand Store offers slightly lower quality merchandise than competitors at a much lower price. What strategy is Louis's Secondhand Store using? A) cost-leadership B) differentiation C) niche marketing D) product diversification
A) cost-leadership
A differentiator is least likely to be threatened by increases in input prices due to powerful suppliers when the A) differentiator is able to create a significant difference between perceived value and current market prices. B) differentiator is able to significantly reduce the value gap. C) source of a competitor's differential appeal is tangible rather than intangible. D) new product features added raise costs but not the perceived value in the minds of consumers.
A) differentiator is able to create a significant difference between perceived value and current market prices.
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) focus on adding unique features to her product that customers will value.
The fact that both Whole Foods (a high-end grocery store) and Aldi (an inexpensive grocery store) have a competitive advantage in the grocery store industry is an indication that A) following a different generic business strategy within the same industry can lead to a competitive advantage for more than one organization. B) following thesame generic business strategy can allow for two firms competing in thesame industry to have a competitive advantage at thesame time. C) in order to evaluate whether Whole Foods has a sustained competitive advantage it is useful to compare it to Aldi from a cost perspective. D) in order to evaluate whether Aldi has a sustained competitive advantage, it is useful to compare it to Whole Foods from a differentiation perspective.
A) following a different generic business strategy within the same industry can lead to a competitive advantage for more than one organization.
Trader Joe's successfully used a blue ocean strategy by offering lower-cost food than Whole Foods for the same market of patrons. By doing this, Trader Joe's was able to A) gain a market share and make up the loss in margin through increased sales. B) create higher value creation and thus generate greater profit margins. C) gain a market share and make up the loss in margin through increased pricing. D) create higher value creation and thus generate greater sales.
A) gain a market share and make up the loss in margin through increased sales.
The strategy canvas for movie theaters includes factors such as prices, comfort, customer service, concessions variety, and hours of operation. Which of the following value curves is most likely to represent a theater that successfully positions itself as a differentiator? A) high price, high comfort, high customer service, high concessions variety, low hours of operation B) low price, high comfort, high customer service, high concessions variety, low hours of operation C) high price, low comfort, low customer service, high concessions variety, low hours of operation D) low price, low comfort, low customer service, low concessions variety, low hours of operation
A) high price, high comfort, high customer service, high concessions variety, low hours of operation
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) jumps to a steeper learning curve
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) learning-curve effect
Both Acme Inc. and Farma & Farma Corp. have discovered similar vaccines to prevent cancer. While Farma & Farma Corp.'s vaccine sells at $100 per unit, Acme sells its vaccine at $90 per unit. This price differentiation has mainly been attributed to the companies' capital decisions. While Acme used its retained earnings to develop the vaccine, Farma & Farma Corp. borrowed funds from banks to develop the vaccine. Thus, Farma & Farma Corp. pays a higher interest on its capital, which makes it necessary to price its vaccine higher. Thus, the key driver for Acme's competitive advantage is A) low-cost input factors. B) economies of scale. C) superior customer service. D) availability of complements.
A) low-cost input factors.
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) product features
Bigger & Better Inc. is a big box retailer who is in direct competition with Walmart and Target. Bigger & Better Inc. initially tried to respond to Walmart by cutting its prices and reducing costs. Walmart has greater buying power and a more efficient supply chain, therefore, Bigger & Better Inc. was not able to compete on costs. the company then tried to differentiate itself by signing a celebrity to create an in-house line of clothing. However, Target has a celebrity clothing line that has a more differentiated appeal. the economic value created by Bigger & Better Inc. is currently less than Target and Walmart. It can be said that A) Bigger & Better Inc. is successful in creating an integration strategy positioned between Walmart and Target. B) Bigger & Better Inc. is "stuck in the middle" and has a competitive disadvantage. C) Bigger & Better Inc. is still creating an integration strategy positioned between Walmart and Target and is on the right track. It should continue this business strategy. D) Bigger & Better Inc. is "stuck in the middle" and has a competitive advantage.
B) Bigger & Better Inc. is "stuck in the middle" and has a competitive disadvantage.
Although JetBlue used a blue ocean strategy to achieve an initial competitive advantage, it failed to maintain this advantage. Which of the following provides the best reason for this development? A) It failed to drive up the perceived customer value. B) It failed to refine its strategic position over time. C) It failed to move into a contested market space. D) It failed to offer enough strategic trade-offs.
B) It failed to refine its strategic position over time.
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) It must reduce the firm's cost below that of its competitors while offering adequate value.
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) It requires the reconciliation of fundamentally different strategic positions—differentiation and low cost.
When Total Semiconductors was operating at the minimum efficient scale of 10,000-12,000 units per month, the firm's cost per unit was $45. However, when the output level was increased beyond 12,000 units, the cost per unit increased to $47. This increase was attributed to the wear-and-tear of the machinery, and complexities of managing and coordinating. What is this phenomenon known as? A) minimum efficient scale B) diseconomies of scale C) experience-curve effect D) learning-curve effect
B) diseconomies of scale
ComfySeat Furniture is a brand reputed for its wide variants of sofas that introduced a new range of mattresses and bed frames a few years ago. Since most of its products could be produced using the same resources and technology, the company's cost structure lowered, while its product portfolio widened. In this scenario, which of the following value and cost drivers is ComfySeat applying? A) mass customization B) economies of scope C) learning-curve effect D) network effect
B) economies of scope
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) economies of scope
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) innovation that allows competitors to emerge with more economical replacements
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) Eastern Airlines offers high-quality beverages and meals, plush airport lounges, only a few connections via hubs domestically, poor customer service, and low prices.
Mohawk is a leader in sustainable and innovative carpeting and floorings, as evidenced by its signature product, the world's first organic cotton carpet. Its product is unique and has appealing customer attributes. If Mohawk's raw material costs increased by 12 percent this year, what would be the likely outcome? A) Mohawk would lower profit margins to absorb this cost increase. B) the company would launch an all-out effort to reduce other costs by 12 percent. C) Mohawk would pass a major portion of this increase along as a price increase to its customers. D) Mohawk would seek to find other materials with lower costs, even if it meant losing the carbon-neutral label on the product.
C) Mohawk would pass a major portion of this increase along as a price increase to its customers.
Jonathan is the owner of a landscaping company that caters to a very wealthy clientele. His company has struggled to differentiate itself from the other high-end landscapers in the area, but because he has hired several expensive but highly qualified team members, Jonathan is unable to shift to a cost-leadership strategy. Which strategy is most likely to achieve a competitive advantage? A) Offer similar services as competitors but raise prices to increase profits. B) Lower prices but continue employing high-paid expert gardeners. C) Narrow the scope of competition and focus on unique features such as the use of organic materials. D) Maintain prices but replace all the expert employees with less-skilled workers to control costs.
C) Narrow the scope of competition and focus on unique features such as the use of organic materials.
Tablette Corp. is a consumer electronics company known for its affordable mobile devices that follows a cost-leadership strategy. In this scenario, Tablette Corp. should ideally compare its strategic position with A) a company that sells small kitchen appliances at affordable prices. B) a consumer electronics company that sells high-end devices. C) a consumer electronics company popular among price-conscious customers. D) an online company that sells customized electronics accessories.
C) a consumer electronics company popular among price-conscious customers.
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) availability of complements.
The primary goal of a firm pursuing a blue ocean strategy should be to A) create thehighest perceived value in its respective industry. B) build a reputation of being thelowest-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) offer a differentiated product or service at a low cost.
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) the tension between value creation and the pressure to keep costs in check
How does availability of complements act as a value driver? A) Complements add value to a product by offering an inferior substitute to it. B) Complements add value to a product by competing with it. C) Complements add value to a product when they imitate it. D) Complements add value to a product when they are consumed in tandem with it.
D) Complements add value to a product when they are consumed in tandem with it.
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) Every time the cumulative output is doubled, the cost per unit will decline by 20 percent.
Evaluate the following statement: Strategic leaders should always try to pursue a blue ocean strategy because it is the most complex, coveted, and most desirable strategy that exists. A) I agree; firms should always pursue a blue ocean strategy because the benefits outweigh the cost. B) I agree; firms should pursue a blue ocean strategy because it's harder for competitors to replicate. C) I disagree; firms should never pursue a blue ocean strategy because it's much too complex. D) I disagree; firms should only pursue this strategy if they are able to reconcile the trade off's of each generic strategy.
D) I disagree; firms should only pursue this strategy if they are able to reconcile the trade off's of each generic strategy.
How did Marriott use economies of scope to achieve greater economic value than its competitors? A) Marriott sees increases in cost per hotel unit as number of customers increases. B) Marriott sees decreases in cost per hotel unit as number of customers increases. C) Marriott lowered its cost structure by focusing its production assets on one type of hotel, which increased the diversity of its hotel line and thus its differentiated appeal. D) Marriott lowered its cost structure by sharing its production assets over several types of hotels, which increased the diversity of its hotel line and thus its differentiated appeal.
D) Marriott lowered its cost structure by sharing its production assets over several types of hotels, which increased the diversity of its hotel line and thus its differentiated appeal.
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) a cosmetics brand that offers superior skin lotion for sensitive skin priced at 100 dollars per bottle
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) availability of complements.
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) beating rivals on product attributes while offering a better price.
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) focused differentiation strategy.
Spotless Inc. outsources its production to contract manufacturers located in underdeveloped nations where unskilled labor is at very low wages is plentiful. This has helped the company become a price leader in the chemicals industry. Which of the following is the key driver behind Spotless Inc.'s strategic position? A) network effects B) superior customer service C) availability of complements D) low-cost input factors
D) low-cost input factors
Which of the following sources of differential appeal is least effective in helping a firm sustain its advantage? A) reputation for innovation B) reputation for quality C) superior customer experience D) observable product features
D) observable product features
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) the value and the cost position of the firm relative to its competitors
The pursuit of both differentiation and low cost at the same time in a way that creates a leap in value for both the firm and consumers is called A) cost driving. B) cost innovation. C) value driving. D) value innovation.
D) value innovation.
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) move down a given learning curve.
In a successful ________ strategy, the trade-offs between differentiation and low cost are reconciled. A) blue ocean B) focused differentiation C) liquidation D) divestment
A) blue ocean
The question that business-level strategy answers is ________ the firm will compete. A) when B) where C) who D) how
D) how
________ 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) Economies of scale
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) value; cost
One of the reasons that big box retailers like Home Depot are able to achieve economies of scale is that A) they have both broad and narrow economies of scope. B) they are able to take advantage of physical properties and maximize their scale efficiencies by stocking more merchandise and handling inventory more efficiently. C) they are able to take advantage of market size and spread investment losses over many locations. D) they have been able to protect themselves from thethreat of buyer power by increasing input prices.
B) they are able to take advantage of physical properties and maximize their scale efficiencies by stocking more merchandise and handling inventory more efficiently.
Ticker Inc. is a wristwatch company known for its luxury watches, and it follows a differentiation strategy. In this scenario, Ticker Inc. should ideally compare its strategic position with a A) watch retailer that sells pre-owned watches. B) watch maker that sells high-end, premium watches. C) watch maker that manufactures low-priced watches. D) watch maker that follows a differentiation strategy.
B) watch maker that sells high-end, premium watches.
A value curve indicates a lack of effectiveness in a firm's strategic profile when it A) stays level. B) zig-zags. C) trends downward. D) trends upward.
B) zig-zags.
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) "stuck in the middle."
Tindel Inc. competes on cost with Nirvana Sites in the web design industry. Both firms operate on a 90 percent learning curve, and neither firm is capable of increasing its cumulative output any further. How might Tindel Inc. achieve a cost-leadership position while maintaining customer satisfaction? A) by increasing the amount of time the company spends on each website by 25 percent without raising prices B) by eliminating costly service features like 24/7 customer support C) by reducing its client base and lowering output D) by incorporating new programming techniques to take advantage of experience curve effects
D) by incorporating new programming techniques to take advantage of experience curve effects
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) complements
Which of the following drivers simultaneously increases value while lowering cost? A) economies of scale B) superior customer service C) availability of complements D) innovation
D) innovation
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) stuck in the middle.
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) the characteristics of both the industry and the firm.
Value drivers contribute to a firm's competitive advantage only if A) the increase in value creation exceeds the increase in costs. B) they can shrink the firm's value gap. C) they can restrict the firm from claiming a premium price for its products. D) the decrease in perceived value leads to an increase in costs.
A) the increase in value creation exceeds the increase in costs.
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) 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.
When a firm operates at an output level of 9,000 units, the per-unit cost is $5. When the production is between 10,000-12,000 units, the per-unit cost is $4. At a production level of 13,000 units, the production cost is again $5 per unit. At 14,000 units and above, the production cost increases further. At what output level does the firm experience economies of scale? A) 9,000 units B) 11,000 units C) 13,000 units D) 15,000 units
B) 11,000 units
When a firm manufactures 2,000-3,000 units of a product, it incurs an average cost of $10 per unit. When it manufactures 3,000-4,000 units of the same product, the average cost per unit reduces to $7. However, manufacturing beyond 4,000 units will raise the average cost per unit to $9. Which of the following is the firm's minimum efficient scale? A) 2,000-3,000 units B) 3,000-4,000 units C) below 2,000 units D) above 4,000 units
B) 3,000-4,000 units
Pete's Bikes enjoys a competitive advantage as a cost-leader because high demand for its products has allowed it to operate at the minimum efficient scale. Which of the following scenarios would be most concerning to the managers of Pete's Bikes? A) Pete's leading competitor develops a new low-sodium product. B) Pete's most reliable production worker takes a job in another industry. C) A major winter storm shuts down Pete's production for several days. D) A wheat shortage raises input costs across the industry.
C) A major winter storm shuts down Pete's production for several days.
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) delivers low-cost products and services to a specific, narrow part of the market.
Food Tiger Inc. is a large chain of hypermarkets. It has cost benefits due to its extensive operation. the company's marketing and sales, logistics, administrative, and other such related costs get divided between a large number of product units stocked in its stores. This makes it difficult for smaller retail stores and supermarkets to compete against Food Tiger's low prices. Thus, Food Tiger has a competitive advantage due to its A) superior customer service. B) time compression economies. C) economies of scale. D) learning-curve effects.
C) economies of scale.
The concept of a(n) ________ attempts to capture both learning effects and process improvements at firms. A) managerial grid B) growth matrix C) experience curve D) diminishing utility curve
C) experience curve
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) focused marketing strategy.
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) increasing the perceived value created for customers, which allows it to charge a premium price.
To initiate a strategic move that allows a firm to open up new and uncontested market space through value innovation, managers must address four key questions when formulating a blue ocean business strategy. These questions focus on A) increasing cost and maintaining perceived customer benefits. B) lowering cost and maintaining perceived customer benefits. C) lowering cost and increasing perceived customer benefits. D) increasing cost and increasing perceived customer benefits.
C) lowering cost and increasing perceived customer benefits.
Due to its large sales volume and low-cost structure, Bunny's Lo-Cost enjoys a cost leadership position. Which of the following scenarios might threaten Bunny's competitive advantage? A) Existing competitors in the same industry lower their prices to match those of Bunny's. B) Industry suppliers raise their prices. C) Competitors engage in an all-out price war. D) A new competitor is perceived to provide similar value, but in addition offers innovative self-checkout that Bunny's doesn't offer.
D) A new competitor is perceived to provide similar value, but in addition offers innovative self-checkout that Bunny's doesn't offer.
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) Differentiation parity deals with value not cost.
In the multiplex industry, Home Again Movies Inc. is an upscale multiplex that focuses on superior customer experience. the firm charges premium prices for its movie tickets and services. Movies-for-less Inc., in contrast, charges the lowest price in the industry with its no-frills approach. In between these two segments is Just Right Films Inc., which offers a customer experience comparable to that of Home Again Movies at a price almost as low as that of Movies-for-less. What strategy is Just Right Films pursuing in this scenario? A) liquidation strategy B) product diversification strategy C) market penetration strategy D) blue ocean strategy
D) blue ocean strategy
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) firm has intangible resources, is able to pass on increases in supplier cost to the customer, and its differentiation appeal creates customer loyalty.
Product features, customer service, and complements are all examples of important A) cost curves. B) cost drivers. C) value curves. D) value drivers.
D) value drivers.
