True / False
1. A business-level strategy is an integrated and coordinated set of commitments and actions designed to exploit core
competencies and gain a competitive advantage in specific product markets.
a. True
b. False
2. Every firm uses all levels of strategy: corporate, acquisition and restructuring, international and cooperative.
a. True
b. False
3. When selecting a business level strategy, the firm determines who will be served, what customer needs will be
satisfied, and how those needs will be satisfied.
a. True
b. False
4. Global competition has increased the options for consumers and has made it more imperative for firms to identify
the needs of customers in order to earn above-average returns.
a. True
b. False
5. Effective use of the generic business strategies allows the firm to favorably position itself relative to the five forces.
a. True
b. False
6. Almost any identifiable human or organizational characteristic can be used to subdivide a market into segments that
differ from one another on a given characteristic.
a. True
b. False
7. The generalized forms of value that goods and services provide are either low cost with acceptable features or
highly differentiated features with acceptable cost.
a. True
b. False
8. An English professor spends her summers writing low-brow romance novels that sell directly to paperback. She
writes under a fictional name because she is embarrassed to admit to her colleagues and students how she earns
the extra money for foreign vacations. The professor is correct in her concern that she is serving customer needs
that are objectively inferior and bad.
a. True
b. False
9. Changing consumer needs is illustrated by Starbucks’ allowing consumers to have an experience rather than just a
cup of coffee and to design their own drinks.
a. True
b. False
10. Companies without the core competencies in their value chain activities and support functions are still able to
implement successfully a either a cost leadership or a differentiation strategy, although they cannot implement an
integrated cost leadership/differentiation strategy.
a. True
b. False
11. To position itself differently from competitors, a firm must decide to either perform activities differently or to
perform different activities.
a. True
b. False
12. Southwest Airlines’ tightly integrated activities make its cost leadership strategy more vulnerable to imitation than if
its activities were loosely integrated.
a. True
b. False
13. The key to Southwest Airlines‘ success has been its ability to continuously reduce costs while providing customers
with superior levels of differentiation such as an engaging culture.
a. True
b. False
14. Strategic fit among the many activities in the value chain is critical for competitive advantage because it is more
difficult for a competitor to match a configuration of integrated activities than to imitate a particular activity such as
sales promotion or a process technology.
a. True
b. False
15. The difference between the cost leadership and differentiation business-level strategies, and the focused cost
leadership and focused differentiation strategies, is their basis for customer value.
a. True
b. False
16. The integrated cost leadership/differentiation strategy is superior to the other business-level strategies.
a. True
b. False
17. The best of the generic business strategies is the integrated cost leadership/differentiation strategy.
a. True
b. False
18. Low-cost leaders usually concentrate on the value chain activities of inbound logistics and outbound logistics as a
means to reduce costs.
a. True
b. False
19. Firms implementing cost leadership strategies often sell no–frills standardized goods or services (but with
competitive levels of differentiation) to the industry’s most typical customers.
a. True
b. False
20. A low–cost position in the industry is not a valuable defense against rivals when competing on the basis of price.
a. True
b. False
21. Walmart’s change in strategy to attract more upscale customers will likely succeed because cost leaders are good
at differentiating.
a. True
b. False
22. Walmart’s actions of becoming more upscale with the intent of taking sales away from Target provided an opening
for competitors such as Amazon and Family Dollar to better compete on the basis of price and attract some of
Walmart’s customer.
a. True
b. False
23. The value-creating activities associated with the cost leadership strategy and differentiation strategy are the same.
a. True
b. False
24. Human resources and other support functions are not value-creating activities in the value chain; only the value
chain activities create value.
a. True
b. False
25. In general, firms can be most effective if they develop business-level strategies that will serve the needs of the
“typical customer” in the industry.
a. True
b. False
26. The differentiation strategy is effective for products that are expensive, luxury consumer goods. It is not effective
for common, inexpensive products such as doughnuts.
a. True
b. False
27. A risk of the differentiation strategy is that the firm’s means of differentiation may eventually not provide value for
which customers are willing to pay.
a. True
b. False
28. Unlike a cost leadership and a differentiation strategy, both focus strategies are less dependent on the completion of
various value chain and support activities in order to compete in a superior manner.
a. True
b. False
29. The activities in the value chains of companies using focus strategies are quite different than the activities in the
value chains of companies using industry-wide business strategies.
a. True
b. False
30. A new generation of lunch trucks in cities such as New York, San Francisco, and Los Angeles serving high-end
fare such as hamburgers made from grass-fed cattle, escargot, and crème brulee illustrate the focus cost leadership
strategy.
a. True
b. False
31. A risk of a focus strategy is that the needs of the customer within a narrow competitive segment may become
more similar to those needs of customers in the whole market.
a. True
b. False
32. Although it is a cost leader, IKEA also offers differentiated features that appeal to its target customers, including its
unique furniture designs, in-store playrooms for children, wheelchairs for customer use, and extended hours.
a. True
b. False
33. Flexible manufacturing systems, information networks, and total quality management are three techniques that
make it possible for firms to implement the focused differentiation strategy.
a. True
b. False
34. A flexible manufacturing system is a computer-controlled process used to produce a variety of products in
moderate, flexible quantities with minimal manual intervention.
a. True
b. False
35. Because of its focus on innovation and quality manufacturing, Total Quality Management is not useful for firms that
follow a cost leadership strategy.
a. True
b. False
36. One of the benefits of the integrated cost leadership/differentiation strategy is that it is less risky than either the cost
leadership or differentiation strategies.
a. True
b. False
37. The hazard of getting “stuck in the middle” applies to firms using any business strategy.
a. True
b. False
38. Research shows that firms using a hybrid strategy (i.e., integrated cost leadership/differentiation) often outperform
firms using pure strategies ( i.e., cost leadership or differentiation).
a. True
b. False
Multiple Choice
39. Business-level strategies detail commitments and actions taken to provide value to customers and gain competitive
advantage by exploiting core competencies in
a. the selection of industries in which the firm will compete.
b. specific product markets.
c. primary value chain activities.
d. particular geographic locations.
40. A firm’s core strategy is its strategy.
a. corporate
b. business
c. pricing
d. international
41. When selecting a business level strategy, the firm must determine all of the following EXCEPT
a. how will the customer’s needs be satisfied?
b. who is the customer?
c. what are the customers’ needs?
d. why should these customers’ needs be satisfied?
42. The three dimensions of a firm’s relationships with customers include all the following EXCEPT
a. exclusiveness.
b. affiliation.
c. richness.
d. reach.
43. Which of the following is TRUE?
a. As customer loyalty increases, customers are more sensitive to price increases.
b. Customer loyalty has a positive relationship with firm profitability.
c. Customer loyalty is fragile and cannot reliably be considered a factor in firm success.
d. Customer loyalty is of importance only to firms using the differentiation strategy.
44. The dimension of relationships with customers is particularly important for social networking sites such
as Facebook and MySpace.
a. reach
b. richness
c. affiliation
d. social
45. Amazon has built capabilities around Internet technology and e-commerce to facilitate information exchanges with
its customers in a cost effective manner. This represents which of the three service dimension?
a. reach
b. richness
c. affiliation
d. None of the these options are correct.
46. Viewing the world through the customer’s eyes and constantly seeking ways to create more value for the company
enhances
a. the reach of the company toward the customer.
b. the ability to identify the customer.
c. the richness of the relationship with the customer.
d. affiliation with the customer.
47. Before the firm decides what products to offer and what benefits and features they will have, the firm must decide
all the following questions EXCEPT
a. who the firm should serve.
b. when the customer’s needs should be satisfied.
c. what needs the firm should satisfy.
d. what core competencies are needed to satisfy customer needs.
48. In the animal food products business, food-product needs of owners of companion animals pets (e.g., dogs and
cats) differ from the needs for food and health-related products of those owning production animals (e.g.,
livestock). Which of the following aspects of managing customer relationships does this choice refer to?
a. Who: Determining the Customers to Serve
b. What: Determining Which Customer Needs to Satisfy
c. How: Determining Core Competencies Necessary to satisfy Customer Needs
d. When: Determining When to Satisfy Customer Needs
49. Starbuck‘s determined that all of the following customer needs were important EXCEPT
a. low price.
b. the experience associated with drinking coffee, not just the coffee.
c. the actual product of service (e.g., a cup of coffee), not the experience.
d. allowing customer to design their own drinks.
50. Hyundai allows customers to return their cars if they lose their job within 12 months of purchase. Which of the
following aspects of managing customer relationships is Hyundai engaged in?
a. Who: Determining the Customers to Serve
b. What: Determining Which Customer Needs to Satisfy
c. How: Determining Core Competencies Necessary to satisfy Customer Needs
d. When: Determining When to Satisfy Customer Needs
51. An interior decorator has moved his business from Los Angeles to St. Paul, Minnesota, because his spouse’s
company transferred her to St. Paul. The decorator is distressed because the customers in his target market have,
in his words, “banal and bourgeois taste.” What is the decorator‘s problem?
a. The decorator does not understand that customer needs are neither right nor wrong, good nor bad.
b. The decorator has no core competencies that will transfer to his new geographic market.
c. The decorator should choose a strategy of cost leadership in this environment.
d. The decorator is highly affiliated with the new target market and understands how he can create value for it.
52. In order to meet and exceed customer’s expectations, firms must
a. constantly manipulate customers’ perceptions of their needs.
b. answer the questions: who, what, when, where, how, and why as they apply to customers.
c. continuously improve, innovate, and upgrade their core competencies.
d. successfully defend their established core competencies from imitation by competitors.
53. Business-level strategies are concerned specifically with
a. creating differences between the firm‘s position and its competitors.
b. selecting the industries in which the firm will compete.
c. how functional areas will be organized within the firm.
d. how a business with multiple physical locations will operate one of those locations.
54. An entrepreneur is investigating starting a company that provides tax advice to small companies. In order to position
his company differently from the existing competitors, the entrepreneur must
a. analyze the reach, richness, and affiliation the company must have with its customers.
b. provide tax advice either in a different manner or provide a different kind of tax service than competitors.
c. offer tax advice at a price lower than the cheapest competitor.
d. offer tax advice at a higher quality than the best competitor.
55. Which of the following are central to implementing value-creating strategies and thereby satisfying customers‘
needs?
a. firm resources
b. capabilities
c. core competencies
d. None of the these options are correct.
56. The analysis of the activity map of a successful company such as Southwest Airlines emphasizes how
a. the organizational culture of Southwest Airlines is the key to the success of the organization.
b. understanding of the profit pool in an industry indicates to companies where above-average returns can be
earned.
c. it is hard for rivals to match a configuration of integrated activities than to imitate a single activity.
d. the primary and support activities of a successful company capture value all along the value chain.
57. By examining the of Southwest Airlines, one can identify the strategic themes around which it has developed
its business strategy. These themes include limited passenger service, high aircraft utilization, highly productive
ground and gate crews, and so forth.
a. activity map
b. profit pool
c. value diagram
d. five forces model
58. If Southwest Airlines employees lost their high enthusiasm and commitment to the company,
a. the airline could continue without problems because its cost leadership strategy is dependent on its efficient
internal procedures.
b. replacement employees could be hired from rival airlines that are laying off employees easily merged into the
Southwest culture.
c. there would be no impact on Southwest‘s profitability because Southwest‘s customers value the low fares
rather than being “entertained” by the employees.
d. Southwest would have lost one of its competitive advantages and its performance would be threatened.
59. Strategic fit among many activities (in an activity map) is fundamental to
a. the development of core competencies for a firm.
b. the breadth of competitive scope for a firm.
c. sustainability of a firm‘s competitive advantage.
d. the integrity of the firm’s value chain.
60. All of the following are considered generic business-level strategies EXCEPT
a. product diversification.
b. cost leadership.
c. focused differentiation.
d. integrated cost leadership/differentiation.