Strategic Management Chapters 5-8 Exam 2

Which of these strategies represents a company that has selected a differentiation strategy? a. A grocery store chain that is converting their 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. b. 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. 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 farther. d. A restaurant entrepreneur that announces a new fast-food chain where every item on the menu is just $1.

a. A grocery store chain that is converting their 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.

How can companies avoid letting disruptive technology be the reason it fails? a. By investing in emerging technologies that have potential to become disruptive technology. b. By ignoring emerging technologies that have potential to become disruptive technology. c. By re-introducing existing technologies with more complements. d. By using its cash flows to produce as much of its current product as possible.

a. By investing in emerging technologies that have potential to become disruptive technology

What is the importance of complements in a format war? a. Complements stimulate the incentive to buy the original product because customers will then have a large supply of complements to use in conjunction with the main product. b. Complements tend to be of more importance than the product itself. c. Complements are not as important as the original product. d. Complements stimulate the incentive to buy the original product because customers then will have a limited, exclusive supply to use in conjunction with the main product.

a. Complements stimulate the incentive to buy the original product because customers will then have a large supply of complements to use in conjunction with the main product.

An entrepreneur establishes a social justice online retail company. The company purchases authentic artwork, jewelry and crafts at a fair price from artisans in developing countries and then sells them through a website. As a company following a differentiation strategy, which of these functional-level strategies will be important for sustaining the business? a. Developing a robust marketing program to promote the social justice elements of the business and gain insights into consumer purchasing behavior on the website b. Leveraging its purchasing power to pressure artisans into selling their goods at a reduced price c. Adopting a lean manufacturing technique to reduce production costs d. Incentivizing employees with bonuses for cutting costs within the operation

a. Developing a robust marketing program to promote the social justice elements of the business and gain insights into consumer purchasing behavior on the website

A pharmaceutical company was the first company to introduce a revolutionary treatment for rheumatoid arthritis. Sales and demand increase rapidly; however, the company could not meet the demand due to lack of manufacturing power. Based on what you know about the company, which innovation strategy should it have implemented? a. Enter into an alliance with another company b. Market and develop the treatment independently c. License the technologies behind the treatment d. Wait two more years to initiate market and development independently

a. Enter into an alliance with another company

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

a. Focused differentiation strategy

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

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

Often companies employ a blend of the franchising and chaining model, with some locations owned by franchisees and others owned by the corporation. Which of these is a recent example of this blended model and the implications the structure can have on a stakeholder group? a. McDonald's announced plans to increase the minimum wage of its workers at 1,500 corporate-owned stores, but the decision had no impact on the workers at 40,000 independent stores. b. Macy's opens "Macy's Backstage" stores in New York City to sell discount clothing, expanding its brand. c. Abercrombie & Fitch announces plans to close its chain stores and completely close one of its brand name chains, Gilly Hicks. d. Starbucks continues its international expansion with new stores in India.

a. McDonald's announced plans to increase the minimum wage of its workers at 1,500 corporate-owned stores, but the decision had no impact on the workers at 40,000 independent stores.

In creating the Wii, how did Nintendo ensure a supply of complements that would motivate customers to adopt its new video game format? a. Nintendo produced a sufficient supply of games to run on the Wii system. b. Nintendo made only a select number of games to run exclusively on the Wii system. c. Nintendo formatted the Wii to be able to run games from previous formats like PlayStation and Xbox. d. Nintendo gave customers the technologies to create their own Wii formatted games.

a. Nintendo produced a sufficient supply of games to run on the Wii system.

Keesha works as a marketing manager for a running shoe company. She has been tasked with implementing a market development strategy. What first step could she take? a. Research the market segments of individuals who might purchase running shoes and compare it to the demographics of the stores existing customers. Identify any customer segments the company is not currently serving. b. Work with the R&D team to identify several product innovations and enhancements that would make the running shoes more attractive to existing customers. Develop marketing materials promoting these new features and benefits. c. Create a discounting program for repeat customers of the shoes. Market the coupon through emails to the existing customer database and on social media. d. Identify a competitor shoe from a start-up that is reaching an older customer demographic. Work with the R&D team to create a new shoe that will also serve this new market.

a. Research the market segments of individuals who might purchase running shoes and compare it to the demographics of the stores existing customers. Identify any customer segments the company is not currently serving.

How can a high-tech company implementing a low cost structure strategy when faced with high fixed costs and low marginal costs increase profitability? a. Stimulate demand and increase volume b. Drive down demand and focus on the exclusivity of premium buyers c. Stimulate demand and decrease volume d. Drive down demand and decrease volume to avoid fixed costs

a. Stimulate demand and increase volume

Paradigm shifts are more likely to occur in an industry with which of the following conditions? a. Technology in the industry is mature, and a disruptive technology has entered the marketplace. b. Technology in the industry is growing, and a disruptive technology is on the brink of entering the marketplace. c. Technology in the industry is declining, and a disruptive technology has entered the marketplace. d. Technology in the industry is being introduced, and disruptive technology has entered the marketplace.

a. Technology in the industry is mature, and a disruptive technology has entered the marketplace.

The problem of excess capacity in a mature industry is often caused by competitive factors. Which of these represents an effective capacity control strategy? a. The 12 nations of OPEC gather regularly to discuss oil production across the globe. Their decisions and announcements drive crude oil capacity and prices even for non-member countries. b. Homebuilders reacting to increased demand purchased additional inventory of residential development just before the Great Recession, when the housing market was undercut by the sub-prime mortgage crisis. c. The Big Three automakers are reluctant to increase capacity for automobile manufacturing, despite signals of increased demand and a shortage of some models at dealerships. d. QVC and HSN utilize limited quantity sales for short time-frames to spur increased sales by artificially reducing the quantity of product available.

a. The 12 nations of OPEC gather regularly to discuss oil production across the globe. Their decisions and announcements drive crude oil capacity and prices even for non-member countries.

What kind of structure might a company employ to dedicate resources for developing and exploiting new disruptive technologies while maximizing sales from existing technologies? a. The company can establish a separate division dedicated to the new technology with distinct R&D and sales resources. b. The company can operate both the old and new technologies from the same division, sharing resources between them. c. The company can close its current division and open a new division dedicated to developing a new disruptive technology. d. The company can choose not to pursue the disruptive technology because it will result in lower sales for its existing technology.

a. The company can establish a separate division dedicated to the new technology with distinct R&D and sales resources.

Which of these industries have the most factors that indicate it is in a severe decline? a. The wired telecommunications industry has a mature infrastructure and nearly all of the companies operating in the industry offer the same services to the same customers. The industry projects annual growth at -0.5% through 2018. b. The brewing industry in the U.S. used to be dominated by two major players, Anheuser-Busch and MillerCoors, but in recent years the industry has given rise to more than 2,000 craft breweries, aided by technology advancements that make brewing more cost effective and accessible to entrepreneurs. c. The airline industry has cyclical periods of growth and contraction based on the nature of the economy, the price of fuel and concerns about security and travel. Regardless of the phase in the cycle, profit margins for airlines also vacillate d. The healthcare industry is burdened by regulations and controls on reimbursement rates from the government and insurance companies. This creates strain on profitability. At the same time, technological advances require constant investment in new medical devices and equipment.

a. The wired telecommunications industry has a mature infrastructure and nearly all of the companies operating in the industry offer the same services to the same customers. The industry projects annual growth at -0.5% through 2018.

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

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

The business-level strategies that support a differentiation strategy are: a. based around ensuring that customers perceive a product to have greater value targeted to a single customer niche and its unique needs. b. focused on reducing cost throughout the value chain of activities. c. based on creating superior efficiency and superior product reliability. d. focused on decreasing customer churn and utilizing economies of scale.

a. based around ensuring that customers perceive a product to have greater value targeted to a single customer niche and its unique needs.

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

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

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

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

If there is a sudden influx of various technology formats for the same type of product, consumers may delay their purchase as a result of the confusion. Companies try to avoid this occurrence by: a. cooperating with one another. b. retaining an ultra-competitive environment with one another. c. merging as one company and using the best format among them. d. providing a large amount of differentiations between each other's format capabilities.

a. cooperating with one another.

When companies enter an industry during the embryonic stage of that industry and then seek to grow with the industry to serve the mass market, this is known as: a. crossing the competitive chasm. b. growth through acquisition. c. expansion through franchising. d. market penetration.

a. crossing the competitive chasm.

Microsoft and Apple are widely known as technological rivals. When one company comes out with a new laptop, the other is quick to respond with a new product offering using its respective operating system. Both companies seek to control the technical standards in the personal computer market. This competition is referred to as: a. format wars. b. dominant designs. c. standard battles. d. segment zero.

a. format wars.

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

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

A group of strategies designed to moderate the intensity of competition within a mature industry among existing companies within that industry is known as: a. managing rivalry. b. deterring entry. c. price competition. d. strategic commitments.

a. managing rivalry.

For companies to successfully implement a divestment strategy they must: a. recognize the signs of an industry's decline earlier than their competitors to divest while the company still has something to offer. b. have a dominant position in terms of economies of scale, offering the best production processes and lowest cost structure to prospective buyers. c. identify the portion of the industry that is not in decline and configure its business to serve those customers. d. create a value innovation to consolidate the industry as it breaks apart.

a. recognize the signs of an industry's decline earlier than their competitors to divest while the company still has something to offer.

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

a. the importance of controlling cost to maintain profitability.

A jeans company is pursuing a low cost strategy and has achieved a position in which it is the lowest cost manufacturer of denim products. One of the ways the company can achieve a competitive advantage against its rivals is to: a. undercut them in a price war to increase volumes and drive weaker low cost rivals out of business. b. add features and cost to the jeans to compete with higher priced differentiated brands. c. build brand loyalty through an intense marketing and media blitz. d. focus on selling a wide variety of jean styles and colors to appeal to different market segments.

a. undercut them in a price war to increase volumes and drive weaker low cost rivals out of business.

Which of these functional-level strategies is designed to improve quality as reliability for a company pursuing a low cost strategy? a. A hotel chain builds a 100-seat call center to manage customer service and after-sales technical support. b. A manufacturer implements a Six Sigma training program with a goal to double the number of Six Sigma black belts within 5 years. c. An IT company enhances its research & development team through a major recruiting effort from engineering colleges. d. An electronic component supplier develops an information technology system to track inventory as it is being used by its customers to forecast and fulfill future orders.

b. A manufacturer implements a Six Sigma training program with a goal to double the number of Six Sigma black belts within 5 years.

Companies can also consolidate a fragmented industry through horizontal acquisition. What is horizontal acquisition? a. Diversifying a business by expanding into other industries by purchasing companies already operating in that business. b. Acquiring competitors in an industry to combine into a single, larger enterprise to build a more compelling national brand. c. Seeking new investors among private equity firms and angel investors to infuse capital in a company and scale up. d. Working with franchisees to open locations across the country quickly.

b. Acquiring competitors in an industry to combine into a single, larger enterprise to build a more compelling national brand.

Three companies, Fast Forward, Ultra Entertainment, and LBS are investing in developing Blu-ray players for premium enhanced media experience for customers. The three companies decided to work together in order to avoid introducing competing and incompatible technology. They combined their technologies and are projected to come out with their Blu-ray formatted product next year. What strategy did the companies use to establish its technology as a standard? a. License the format b. Cooperate with competitors c. Razor and blade strategy d. Killer application

b. Cooperate with competitors

Social media has become an excellent tool for organizations to spread the word about their products and causes. Which of these demonstrates the viral model of infection at work on a social media platform? a. A blackout in the stadium during the Super Bowl in 2013 led Oreo to author a tweet that was shared more than 20,000 times on social media. b. During a video campaign on social media that included numerous celebrities and thousands of submitted videos of people dumping buckets of water over their head, the ALS Association raised more than $220 million. c. The Got Milk? Campaign launched in the 1990s featured celebrities with milk mustaches, achieving near 90% awareness of the campaign. d. Best Buy develops "Connected Home" sections in 400 of its stores, allowing customers to experience the ways they can automate their homes.

b. During a video campaign on social media that included numerous celebrities and thousands of submitted videos of people dumping buckets of water over their head, the ALS Association raised more than $220 million.

Which of these designations indicates a type of technology industry in which the underlying scientific knowledge that companies use is rapidly advancing, as well as the attributes of the products and services that result from its application? a. Low-tech b. High-tech c. Bio-tech d. Blu-ray tech

b. High-tech

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

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

Instead of improving upon its technology faster than consumers keep up, a company can instead serve "segment zero." What is the strategic benefit of this move? a. It enables companies to save money on the fixed costs of technology development. b. It reaches consumers who prefer low-end technologies that fit their needs. c. Companies can continue to advance their products and sell at a premium price. d. It reaches consumers who prefer high-end technologies that provide more than their needs.

b. It reaches consumers who prefer low-end technologies that fit their needs.

Craig is a product development manager for a home appliance company. Recently, a start-up has begun developing appliances with built-in technology features, such as WiFi connections to smartphone apps that track your refrigerator stock in staple items. Which of these strategies can Craig implement in his functional role to deter this rival before they gain traction in the industry? a. Focus only on the core product line and develop ways to reduce production cost, which will improve profitability and equip us for a future price war. b. Move up the launch date for a new line of tech-connected appliances his team has been working on in recent months. c. Start selling parts of the business off to competitors, offering your production equipment and processes to rivals. d. Announce that you are consolidating your operations into fewer plants and reducing your overall production of appliances in the hopes that other appliance companies follow suit to create a scarcity and increase long-term demand.

b. Move up the launch date for a new line of tech-connected appliances his team has been working on in recent months.

Several strategies for mature industries have the potential to result in anti-trust violations that could result court action if not implemented correctly. Each of these strategies must be undertaken ethically and legally to avoid these kinds of repercussions. Which describes a potentially illegal implementation? a. Price Signaling: Outokumpu, a stainless steel mill company, announces its prices on stainless steel each month on its website and through press releases. b. Price Leadership: Apple collaborates with ebook publishers to raise prices on millions of titles offered through the iBooks store. c. Coordination Capacity Control: The association for manufacturers of air conditioning and heating units publishes total sales for the industry on a regular basis. d. Limit Price: The airline industry determines its pricing through similar methodologies - fuel consumption, plane size, route demand, flight capacity. This results in similar prices for plane tickets among the major airlines.

b. Price Leadership: Apple collaborates with ebook publishers to raise prices on millions of titles offered through the iBooks store.

Which of these companies is pursuing a differentiation strategy to gain a competitive advantage? a. Big Lots! advertises its low prices and revolving offering of products to appeal to value shoppers. b. Starbucks utilizes an upscale customer experience, high-quality coffee drinks and brand building to charge a premium price for its products. c. Vonage, a supplier of cloud-based communication, offers customers a voice over IP alternative to traditional home phone service. d. Kroger grocery store Big K brand soda offers the same flavor options as Coca-Cola and Pepsi brands.

b. Starbucks utilizes an upscale customer experience, high-quality coffee drinks and brand building to charge a premium price for its products.

The way a phone's keyboard is numbered and alphabetized is a commonly recognized and used format across nearly every differentiated device. This format has set a: a. Dominant standard b. Technical standard c. Technical design d. Standard dimension

b. Technical standard

An industry moves from the embryonic stage to the growth stage when a mass market starts to develop for its product. What three things spur a mass market to emerge? a. An influential lead adopter endorses the product, a leader from a different industry enters the market and the industry consolidates through chaining. b. Technology advances to make the product easier to use, complementary products are developed and the industry finds ways to reduce the cost of the product and lower prices. c. A pioneering company gets a large influx of capital, inflation falls to lower the cost of the product and the industry starts to grow through franchising. d. The government provides incentives for people to buy the product, advertising makes more people aware of the product, and distribution is highly specialized with products available in only select markets.

b. Technology advances to make the product easier to use, complementary products are developed and the industry finds ways to reduce the cost of the product and lower prices.

A non-profit 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 that makes it possible to deliver greater value to the communities it serves? a. The relief group could employ a marketing campaign to increase disaster preparedness and awareness. b. 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. c. The relief group could utilize its donated relief supplies to provide support for only the homeless in its communities. d. The relief group could specialize in delivering relief supplies only for storm victims, those affected by floods, tornados and hurricanes.

b. 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.

Which of these companies developed a business concept that included value innovation allowing it to compete in a blue ocean: a. Target evolves into the Expect More. Pay Less. brand promise in 1994 with the goal of making designer goods more affordable. b. Uber, founded in 2009, introduced peer-to-peer ride sharing for the first time, redefining the taxi and limousine service industry. c. Shell announces plans to expand its capabilities in natural gas drilling by unlocking shale gas in Pennsylvania in 2014. d. In 2010, Reebok introduces Zig footwear technology, an innovation to the soles of athletic shoes to make them more flexible and lightweight.

b. Uber, founded in 2009, introduced peer-to-peer ride sharing for the first time, redefining the taxi and limousine service industry.

Organizations can experience a high return on investment if they are able to consolidate a fragmented industry. This is known as: a. Leadership strategy b. Value innovation c. Market penetration d. Product proliferation

b. Value innovation

A company can lower costs through functional-level strategy and organization by: a. customizing the product offering to market to different market segments. b. achieving economies of scale, using information systems to automate business processes and adopting lean production technologies. c. concentrating on designing products that have more functions and features and higher performance. d. maintaining existing processes and structures.

b. achieving economies of scale, using information systems to automate business processes and adopting lean production technologies.

Non-price competition is a group of market strategies that companies utilize to manage rivalry without price cutting and price wars. To employ one of these strategies, a company must: a. be focused on signaling to competitors where they plan to set prices so that others can follow suit. b. define its differentiation through products or market segments. c. monitor the market and preempt its competitors when ramping up production to gain first-mover advantage. d. secure alliances with a distributor network and a supplier base that offer exclusivity, leaving competitors without access to the preferred stakeholders in these categories.

b. define its differentiation through products or market segments.

Joaquin is part of the team developing strategies for new wearable technology that integrates smartphone and fitness tracker tools. To accelerate customer demand he is seeking to demonstrate the product's relative advantage. He should: a. offer customers a 30-day, no obligation demo period for the product so they can try it out. b. educate customers about the ways in which the new device replaces several products in among their personal gadgets and show how the consolidated product saves them money and helps them achieve their fitness goals. c. create a series of online videos showing customers the steps for configuring the device, making the technology more accessible. d. Work out merchandising agreements to have the products appear in the technology sections of all of the major retail outlets.

b. educate customers about the ways in which the new device replaces several products in among their personal gadgets and show how the consolidated product saves them money and helps them achieve their fitness goals.

In most high-tech industries, the fixed costs of developing the product are very _____, and the costs of producing one extra unit of the product are very ______. a. low; high b. high; low c. high; high d. low; low

b. high; low

Applications or uses of a new technology or product that are so compelling that they persuade customers to adopt the new format or technology in droves, thereby eliminating demand for competing formats, is known as: a. technological paradigm shift. b. killer applications. c. razor and blade strategy. d. first-mover.

b. killer applications

Companies utilize strategies that deter entry into their mature industries because: a. new entrants in an industry do not have anything useful to offer to customers. b. new entrants in an industry can generate additional competitive forces that may cause a company to lose customers, lose profitability and reduce the return on investment. c. new entrants always offer lower priced goods and undercut industry profitability. d. new entrants exist because they use technology better and pioneer innovations that disrupt the industry.

b. new entrants in an industry can generate additional competitive forces that may cause a company to lose customers, lose profitability and reduce the return on investment.

Nokia was one of the front-runners of the mobile phone industry. However, when smart phone technology was introduced, Nokia quickly become a forgotten name. Basic phones have become largely obsolete and the selection has decreased exponentially since the demand for smartphones has heavily increased. Apple, Android, and Samsung now currently hold the largest market share for the smartphone industry. With this information, we can conclude that Nokia has been affected by a(n): a. industry paradigm shift. b. technological paradigm shift. c. computer paradigm shift. d. disruptive technology.

b. technological paradigm shift.

The arrival of personal computer technology gave rise to client server networks that replaced traditional mainframe and minicomputers for many business uses. Companies such as Wang, Control Data, and DEC did not survive this revolutionized computer industry. What happened in this instance is a prime example of a(n): a. industry paradigm shift. b. technological paradigm shift. c. computer paradigm shift. d. disruptive technology.

b. technological paradigm shift.

Companies competing with a blue ocean strategy can create an advantage because: a. they have created a lower price structure for a product or service that still satisfies the same needs as other companies in their industry. b. they are able to define and set the rules for the new industry segment where they are operating. c. they are achieving low cost by operating across geographic markets using the flow of skills between different company subsidiaries. d. they are acquiring companies in their supply chain to deliver greater efficiencies and lower their costs.

b. they are able to define and set the rules for the new industry segment where they are operating.

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

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

Increased competition among high-technology markets tends to lead to faster improvement of technology than consumers can fully utilize. Why? a. A company that outputs lower technology can demand higher premium price points to attempt to set the standard of the market. b. A company that outputs higher technology can develop a lower price point to entice customers with a high technical standard and low cost structure. c. A company that outputs higher technology can demand higher premium price points to attempt to set the standard of the market. d. A company that outputs lower technology can develop a lower price point which enables segment zero to buy technologies, which leads to higher profit margins for the company.

c. A company that outputs higher technology can demand higher premium price points to attempt to set the standard of the market.

Which of these companies is achieving a competitive advantage through a low cost strategy? a. A car company with the largest volume sales in North America but a profit margin below the industry average. b. An electronics company with the highest consumer rated features and most advanced technology. c. A high volume quick-serve restaurant chain that is controlling costs through centralized food production and a streamlined supply chain. d. A retail store offering high commissions to its sales teams to ensure they provide superior customer service while driving sales on high-profit items.

c. A high volume quick-serve restaurant chain that is controlling costs through centralized food production and a streamlined supply chain.

Adaya works for a start-up software company with an innovative product in an embryonic industry. She has been asked to suggest a strategy for developing a mass market for the company. Which of these strategies should she recommend? a. A strategy for developing a new product to increase the company's product portfolio to two service lines. b. A strategy to signal the pricing of the new product to competitors and put up barriers to entry for new companies. c. A strategy to increase the efficiency of the product, lowering its cost and price to consumers. d. A strategy to acquire other software companies with similar products to consolidate the industry.

c. A strategy to increase the efficiency of the product, lowering its cost and price to consumers.

After a company has developed a value innovation in a fragmented industry, it often needs to scale up quickly. Which of these is a strategy for growing a business with multiple corporate-owned locations? a. Franchising b. Licensing c. Chaining d. Rapid deployment

c. Chaining

What is the main difference between industry standards set by consumers versus industry standards set collectively by companies? a. Customers set the standard by lobbying the government to mandate it; companies set the standards by cooperating with one another to implement it. b. Customers set the standard as a result of their buying patterns; companies set the standards after the government implements the standards into the public domain. c. Customers set the standard as a result of their buying patterns; companies set the standards by lobbying the government to mandate it. d. Customers set the standard as a result of their buying patterns; companies set the standards by working together to implement it.

c. Customers set the standard as a result of their buying patterns; companies set the standards by lobbying the government to mandate it.

To develop a blue ocean strategy a company should consider four actions - eliminate, reduce, raise and create. A start-up video game company is considering how it can operate in a blue ocean. What action might it take? a. Collaborate with game makers to ensure the most popular games are compatible with your platform. b. Reduce the cost of games for your platform by reverting to retro graphics. c. Develop a video game platform that seriously reduces the manufacturing cost, and therefore the price, of the console without limiting technology. d. Add motion-detection capabilities to the game platform, similar to those used by the Wii.

c. Develop a video game platform that seriously reduces the manufacturing cost, and therefore the price, of the console without limiting technology.

What is the biggest benefit to a company that is acting as a first-mover? a. Avoiding pioneering costs of the technology b. Lifelong competitive advantage c. Enduring competitive advantage d. Lifelong monopoly position

c. Enduring competitive advantage

Which of these is not true of a fragmented industry: a. It is composed of a large number of small and medium-sized companies. b. It often is a group of locally focused companies with brand loyalty. c. It features companies that enjoy the benefits of economies of scale as they grow. d. It often has low barriers to entry and a steady stream of new entrants.

c. It features companies that enjoy the benefits of economies of scale as they grow.

The passenger railroad industry in the United States has been in decline for the last several decades. For example, Amtrak is sustained for most of its operations by taxpayer subsidies. There is one exception - the Northeast corridor, which serves Boston, Philadelphia, New York City and Washington, D.C. Identify the strategy passenger rail companies are using here and what other parts of the country might also utilize this same strategy. a. Harvest strategy; Large parts of the plain states could serve a demand for rail customers because there is considerable distance between the cities there and a lot of commercial enterprises across those cities. b. Divestment strategy; The south could benefit from this strategy, collecting revenues from the last remaining rail passengers traveling among cities in Georgia, Alabama and Mississippi. c. Niche strategy; Southern California could also have rail passenger lines connecting densely populated cities with strong commercial ties in a region of the country with heavy car traffic. d. Divestment strategy; The Northwest states could collaborate to build a rail system connecting them to Alaska to serve customers traveling from the "lower 48" north through Canada.

c. Niche strategy; Southern California could also have rail passenger lines connecting densely populated cities with strong commercial ties in a region of the country with heavy car traffic.

A mobile device company launches with a new strategy - just $50 for the device and an extensive library of software and applications at a price of $25-$75 per application. The applications, which are created by the company and not third-party developers, only work with the specific device. What strategy is the company using? a. Killer application b. First-mover c. Razor and blade strategy d. Licensing its format

c. Razor and blade strategy

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

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

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 them negatively in its advertising and promotions.

c. delivering superior functions and features.

A pet products company is developing a dog feeding system that senses when a dog is hungry and dispenses their food into their bowls. This product is marketed toward owners with long, unpredictable workdays who want their pet to remain a on a regular eating schedule. The company has the complementary assets necessary to fully develop the product. There are also very limited number of competitors and high barriers to imitating the innovation. Based on this information, the company should: a. develop and market the product with a partnering company. b. license the innovation's technology. c. develop and market the product alone. d. develop and market the product with several other companies.

c. develop and market the product alone.

In a mature industry, a company can employ several potential strategies to compete with existing companies in the industry. Which of these is a strategy that it seeks to manage rivalry? a. utilize a strategy of growing its market presence through multiple corporate-owned locations. b. develop a strategy to serve a part of the market that is declining slower than other segments. c. employ a strategy to identify a new market for the company's existing products. d. implement a strategy to create a price structure that is not attractive to potential entrants.

c. employ a strategy to identify a new market for the company's existing products.

A company that wishes to exit a declining industry and makes decisions to optimize cash flow in the short term is using a: a. niche strategy. b. divestment strategy. c. harvest strategy. d. leadership strategy

c. harvest strategy.

A mature industry is one that: a. contains several pioneering companies in the process of transitioning to the mass market. b. includes a single, dominant company operating as a near-monopoly. c. is dominated by a small number of large companies but may also have specialized medium-sized and small companies. d. has not had a new entrant within the last decade.

c. is dominated by a small number of large companies but may also have specialized medium-sized and small companies.

A company in a declining industry employs several tactics as part of its current strategy, including slashing prices, ramping up marketing and acquiring smaller businesses. This company is executing a: a. divestment strategy. b. market penetration strategy. c. leadership strategy. d. price limit strategy

c. leadership strategy.

The smartphone industry has been revolutionized in the past five years. The emergence of industry operating system front-runners Apple and Android has led to complete and total dominance of the market. While each company would be included on releases of newer, better, and technologically improved smartphones each year, the difference in technology from each newer version is getting less and less distinguishable. One could argue that the smartphone industry is reaching its: a. decline. b. disruptive technology. c. natural limit. d. technological paradigm shift.

c. natural limit.

Technological paradigm shifts do not occur when: a. new technologies revolutionize the structure of the industry. b. new technologies dramatically alter the nature of competition. c. old technologies revolutionize the structure of the industry. d. new technologies require companies to adopt new strategies in order to survive.

c. old technologies revolutionize the structure of the industry.

Pricing the product low in order to stimulate demand and increase the installed base, and then trying to make high profits on the sale of complements that are relatively high in price is known as the: a. killer application strategy. b. first-mover strategy. c. razor and blade strategy. d. high and low strategy.

c. razor and blade strategy.

A blue ocean strategy is when a company: a. pursues a globalization strategy by opening new facilities and sales offices abroad. b. outperforms rivals through higher sales volume, either through a low cost or a differentiation strategy. c. redefines the product offering through value innovation to create a new market space. d. chooses both a differentiation and a low-cost strategy for its business-level strategy.

c. redefines the product offering through value innovation to create a new market space.

As a customer group, innovators are: a. risk averse and afraid to try new things. b. interested in weighing the benefits of new technology against the costs. c. skilled in technology and able to experiment with systems that have glitches and failures. d. conservative and interested in maintaining the status quo.

c. skilled in technology and able to experiment with systems that have glitches and failures.

A set of technical specifications that producers adhere to when making the product, or a component of it, is known as: a. product standards. b. format standards. c. technical standards. d. strategy standards.

c. technical standards.

The president of a software firm has chosen to implement a differentiation strategy, offering his product in a Software as a Service (SaaS) platform with a monthly subscription in the cloud. Most of his competitors are selling their products as a one-time purchase on a disc in a retail store. Which of these functional-level strategies will be critical to his plan? a. Discounting the product to gain large volumes quickly to achieve economies of scale. b. Implement supply chain coordination for IT infrastructure components for the company's data warehouse. c. Collaborate with a distribution network of retail stores to ensure just-in-time inventory management of the product. d. A 24/7 technical support hotline with a team that is knowledgeable about the product and business goals of the company's customers.

d. A 24/7 technical support hotline with a team that is knowledgeable about the product and business goals of the company's customers.

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

d. Differentiation strategy

Marguerite has developed a restaurant concept featuring her grandmother's recipe for fried ice cream and opens a walk-up window mini-store specializing in the dessert. The concept is profitable and gains a lot of media attention. She wants to open up additional locations, but doesn't have a lot of start-up capital. Which of these consolidation strategies for fragmented industries could she utilize? a. Hub-and-spoke distribution b. Chaining c. Self-service d. Franchising

d. Franchising

Social media has become an excellent strategy for start-up companies with little access to capital to spread the word about their innovative products. Using video and customer testimonials and encouraging others to share their experiences with the product, companies can generate third-party endorsement of their products and services. This is an example of what strategy? a. Relative advantage b. Complexity c. Trialability d. Observability

d. Observability

A strategy that involves developing new products to serve every niche and segment of the marketplace to prevent start-up companies from entering an industry is known as: a. Limit price strategy b. Technology upgrading strategy c. Strategic commitment strategy d. Product proliferation strategy

d. Product proliferation strategy

A Blue Ocean strategy encourages strategic leaders to consider four questions, including "what factors can we create that rivals do not offer, thereby increasing value?" Which of these might be an answer to this question for a company operating in the legal services industry? a. We can do all of our legal work by attorneys, without assistance from paralegals. b. We can flatten our hierarchy and get rid of the associate-to-partner promotion path to pay our attorneys less. c. We can raise our hourly fee to the same level as our nearest competitor. d. We can offer our customers project pricing instead of hourly pricing so that they have predictability for their legal expenses.

d. We can offer our customers project pricing instead of hourly pricing so that they have predictability for their legal expenses.

A fitness electronics company is a first-mover in wearable fitness trackers. Its innovative everyday activity and exercise bracelet has created a monopoly for its product. Executives are apprehensive about its ability to maintain its competitive advantage because they know that its rival company has competent research and development skills and access to complementary assets. These rivals are considered: a. complementary assets. b. barriers to imitation. c. first-movers. d. capable competitors.

d. capable competitors

Often, only one standard dominates the market. This makes it important for a company to have ownership of the technical standards to maintain and increase: a. product differentiation. b. competitive share. c. market domination. d. competitive advantage.

d. competitive advantage.

An industry shows signs of decline when: a. the number of companies competing in the industry grows rapidly. b. just a few companies are able to achieve the economies of scale necessary for companies to be profitable in the industry. c. only innovators and early adopters are purchasing the company's products. d. demand for its products falls because a technology makes the industry's product obsolete.

d. demand for its products falls because a technology makes the industry's product obsolete.

Superior quality is an important functional-level strategy for both low cost and differentiation strategies. Strategic managers for a company pursuing a low cost strategy should focus on: a. increasing quality as excellence to add perceived value by the customer. b. research and development to launch innovative products and open new markets. c. enhancing its global presence by opening manufacturing plants in regions with the largest numbers of customers. d. improving the ability to manufacture products by reducing production inputs to lower cost.

d. improving the ability to manufacture products by reducing production inputs to lower cost.

A situation in which marginal costs rise as a company tries to expand output is called: a. law of expanding returns. b. strategic significance. c. strategic insignificance. d. law of diminishing returns.

d. law of diminishing returns.

The incentive structure and organization of a company can be an important part of a business-level strategy. Flat organizations can be a structure used by companies pursuing a: a. differentiation strategy. b. blue ocean strategy. c. integration strategy. d. low cost strategy

d. low cost strategy

JVC and Matsushita implemented a licensing strategy where any consumer electronics company could manufacture VHS-format players. In doing this, the demand for VHS-tapes of films increased, causing movie studios to issue more films for rental in VHS format. This process is referred to as: a. establishment of standards. b. public domain. c. network strategy. d. network effects.

d. network effects.

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

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

In the market demand S-shaped growth curve, the early majority is: a. the least important customer segment for a growing company and industry. b. the group of customers that drive replacement demand for a product. c. the group of customers most likely to try new technology before it has been proven useful or stable. d. the group of customers who begin purchasing a product at the beginning of an industry's transition from embryonic to growing.

d. the group of customers who begin purchasing a product at the beginning of an industry's transition from embryonic to growing.