61. A company using a narrow target market in its business strategy is
a. following a cost leadership business strategy.
b. focusing on a broad array of geographic markets.
c. limiting the group of customer segments served.
d. decreasing the number of activities on its value chain.
62. As the television industry has changed in the last few decades from just three major networks to a multiplicity of
networks, one of the major aspects of business strategy for the newer networks is
networks.
a. broader target market
b. narrower target market
c. increased use of primary activities to capture value
d. increased use of support activities to capture value
than the traditional
63. The effectiveness of any of the generic business-level strategies is contingent upon
a. customer needs and competitors’ strategies.
b. the match between the opportunities and threats in its external market and the strengths of its internal
environment.
c. the trends in the general consumer base and the robustness of the global and industry economy.
d. the firm‘s competitive scope and its competitive advantage.
64. A cost leadership strategy provides goods or services with features that are
a. acceptable.
b. unique.
c. substandard.
d. mediocre.
65. A cost leadership strategy targets the industry’s customers.
a. most typical
b. poorest
c. least educated
d. most frugal
66. Durable Ceramics, Inc., provides inexpensive ceramic tile to builders of institutional buildings such as schools,
prisons, and public administration buildings. It has always competed on a cost leadership basis. Most of its products
are purchased by a few commercial construction firms, so it is fairly dependent on these construction firms for
selling its product. Durable Ceramic’s next most-efficient competitor, Cost-Less Ceramics, Inc., earns average
returns, whereas Durable earns above-average returns. The commercial construction firms are putting pressure on
Durable to reduce its prices. If Durable reduces its prices below those of Cost-Less’s prices, it is likely that
a. both Durable and Cost-Less will devise additional ways to become more efficient in their production
processes.
b. Durable will be unable to absorb the lower cost, and will go out of business.
c. both Cost-Less and Durable will go out of business, leaving the customers with fewer alternative sources of
low–cost tile.
d. Cost-Less will go out of business, and Durable will gain higher power over its customers.
67. Research suggests that having a competitive advantage in
than it does in the differentiation strategy.
a. marketing and sales
b. technology development
c. logistics
d. human resource management
creates more value in the cost leadership strategy
68. A river barge company can offer cheaper, although slower, per pound transportation of products to companies
when compared with transportation by air, truck, or rail. The river barge company should first target customers
whose companies use
a. the integrated cost leadership/differentiation strategy.
b. either of the focus strategies.
c. the cost leadership strategy.
d. any of the strategies except the focused differentiation strategy.
69. Walmart went against business-level strategy and made changes to attract upscale customers. These changes had
which of the following results?
a. It strengthened Walmart’s position against rivals such as Dollar Stores and Amazon.
b. It made Walmart vulnerable to Dollar Store and Amazon.
c. It attracted significant numbers of new customers.
d. Family Dollar, Dollar Tree, and Dollar General all experienced losses in sales as many of their customers
went to Walmart.
70. Walmart’s same store sales have been declining and those of rivals Family Dollar and Amazon have been
increasing. What could explain this recent change?
a. Walmart was too aggressive with its low-cost position and lost customers who wanted more upscale
products.
b. Walmart changed its strategy to focused differentiation.
c. Amazon and Family Dollar changed their strategies to attract more upscale customers.
d. Walmart changed its strategy to attract more upscale customers.
71. A company pursuing the differentiation or focused differentiation strategy would tend to
a. build economies of scale and efficient operations.
b. develop and maintain cost-effective MIS operations.
c. develop flexible systems that allow rapid response to customers’ changing needs.
d. have relationships with suppliers to maintain efficient flow of supplies for operations.
72. When the costs of supplies increase in an industry, the low-cost leader
a. may continue competing with rivals on the basis of product features.
b. will lose customers as a result of price increases.
c. will be unable to absorb higher costs because cost-leaders operate on very narrow profit margins.
d. may be the only firm able to pay the higher prices and continue to earn average or above-average returns.
73. Ever-improving levels of efficiency enhance profit margins for a cost-leader. This effects which of the five forces
of industry structure most directly?
a. potential entrants
b. substitutes
c. buyer power
d. supplier power
74. The typical risks of a cost leadership strategy include
a. the inability to balance high differentiation and low price.
b. production and distribution processes becoming obsolete.
c. excessive differentiation to the point where the customer base is too small.
d. loss of customer loyalty.
75. When a firm is able to produce nonstandardized (that is, distinctive) products for customers who value
differentiated features more than they value low cost, the firm is successfully implementing
a. a differentiation strategy.
b. a cost leadership strategy.
c. an integrated cost leadership/differentiation strategy.
d. a single-product strategy.
76. A firm successfully implementing a differentiation strategy would expect
a. customers to be sensitive to price increases.
b. to charge premium prices.
c. customers to perceive the product as standard.
d. to have high levels of power over suppliers.
77. The products or services that are differentiated from others have qualities that are
a. perceived by the customer to add value for which they will pay a premium.
b. valued by the typical industry customer.
c. perceived as standardized by the customer.
d. seen as classic attributes rather than passing fads.
78. Blind taste-tests have shown that the taste of premium-priced vodkas and inexpensive vodkas are indistinguishable
even to regular drinkers of vodka. But the sales of premium vodkas are thriving. This is an example of
a. the perception of perceived prestige and status as a means of differentiating a product.
b. the importance of high-quality raw materials when using the differentiation strategy.
c. the risk of product imitation by competitors.
d. the danger counterfeiting holds for firms pursuing the differentiation strategy.
79. All of the following are examples of differentiated products EXCEPT
a. Mont Blanc pens.
b. Caterpillar‘s heavy–duty earth–moving equipment.
c. Great Value brand at Walmart.
d. Prada fashion.
80. The use of a differentiation strategy would be expected to be LEAST effective in which of the following markets?
a. commodity goods
b. motion pictures
c. popular music
d. writing instruments
81. All of the following are ways that a good or service can be differentiated EXCEPT
a. responsive customer service.
b. perceived prestige and status.
c. economies of scale and efficient operations.
d. engineering design and performance.
82. The differentiation strategy can be effective in controlling the power of rivalry with existing competitors in an
industry because
a. customers will seek out the lowest-cost product.
b. customers of nondifferentiated products are sensitive to price increases.
c. customers are loyal to brands that are differentiated in meaningful ways.
d. the differentiation strategy benefits from rivalry because it forces the firm to innovate.
83. Wholesome Pet Food has successfully specialized for 20 years in high-quality pet food made from all-natural
ingredients and organically raised lamb. This brand has a strong following and is recommended by veterinarians
who practice in affluent neighborhoods. Wholesome’s main supplier of lamb has announced that the price for lamb
will be 15 percent higher next year.
a. Wholesome will probably be able to pass the cost on to its customers because they are less sensitive to price
increases than the average buyer.
b. Companies pursuing Wholesome’s business strategy are especially vulnerable to this risk.
c. If Wholesome raises its pet food prices, customers will turn to less expensive brands such as Purina.
d. Wholesome probably operates on very thin margins, and a cost increase will threaten its ability to earn
average returns.
84. Which of the following is NOT a value-creating activity associated with the differentiation strategy?
a. Developing policies to ensure efficient hiring and retention to keep costs low and implement training to
ensure high employee efficiency.
b. Providing accurate and timely delivery of goods to customers.
c. Ensuring receipt of high quality supplies (raw materials and other goods).
d. Developing flexible systems that allow rapid response to customers’ changing needs.
85. A differentiation strategy can be effective in controlling the power of substitutes in an industry because
a. customers have low switching costs.
b. substitute products are lower quality.
c. a differentiating firm can always lower prices.
d. customers develop brand loyalty.
86. Recently, the only type of car available for Anthony to rent on a business trip was a compact, fuel-efficient
Japanese import. Anthony was surprised at the comfort and performance of the car. He is in the market for a new
car and had previously considered only buying another luxury SUV. Now, he is thinking about the significant cost
savings he would have if he bought the compact vehicle rather than a new SUV. This is an example of the
competitive risk that
a. a competitor’s products can convey a product’s differentiated features to a customer at a significantly
reduced price.
b. a product imitation can cause customers to perceive that competitors offer essentially the same good.
c. experience can narrow a customer’s perceptions of the value of a product’s differentiated features.
d. brand loyalty insulates a company from rivalry with competitors.
87. A manufacturer of jewelry imitates the style of a popular and expensive brand using manufactured stones rather
than real gemstones and lesser grade metals rather than silver and gold. The manufacturer packages the jewelry in
boxes of the same color imprinted with an almost identical logo. About 85 percent of the company’s sales are
through Internet sales. This example illustrates the competitive risk of
differentiation strategy.
a. customer sensitive to price differentials
b. threat by the cost leader
c. customer experience
d. counterfeiting
that threatens companies that use the
88. The typical risks of a differentiation strategy do NOT include which of the following?
a. Customers may find the price differential between the low-cost product and the differentiated product too
large.
b. Customers’ experience with other products may narrow customers’ perception of the value of a product’s
differentiated features.
c. Counterfeit goods are widely available and acceptable to customers.
d. Suppliers of raw materials erode the firm‘s profit margin with price increases.
89. When implementing a focus strategy, the firm seeks to
a. offer products that are both differentiated and low cost.
b. move into the global market.
c. target the typical customer in an industry.
d. serve the specialized needs of a market segment.
90. Ikea offers young customers a selection of home furnishings featuring good design, function, and acceptable quality
at low prices. Ikea is using which business-level strategy?
a. cost leadership
b. focused cost leadership
c. differentiation
d. focused differentiation
91. The focused differentiation strategy differs from the differentiation strategy in that
a. the focused differentiators have a broader competitive scope.
b. the value-creating activities of focused differentiators are more constrained.
c. focused differentiators target a narrower customer market.
d. there are fewer risks with the focused differentiation strategy.
92. Chico‘s is a clothing retailer that targets middle-aged women who want stylish and appealing clothes that are
suitable for the mature figure. Chico’s has an extensive customer list, a frequent-buyer discount card, and frequent
sales promotions to Chico’s customers based on their spending levels. Chico’s uses a strategy.
a. focused differentiation based on a buyer group
b. focused differentiation based on a product line segment
c. generic differentiation
d. integrated cost leadership/differentiation
93. The new generation of lunch trucks serving high–end fare in cities such as New York, San Francisco, and Los
Angeles share which of the following a business strategies?
a. cost leadership
b. focused differentiation
c. integrated cost leadership/differentiation
d. differentiation
94. The Monteleone Company pays large fees to a highly recognizable, prestigious individual to be the spokesperson for
the company’s products, luxury private jets. Monteleone is probably following the
a. focused cost leadership strategy.
b. focused differentiation strategy.
c. integrated cost leadership/differentiation strategy.
d. total quality strategy.
95. The risks of a focus strategy include
a. a competitor’s ability to use its core competencies to outfocus the focuser by serving an even more narrowly
defined segment.
b. a competitor‘s ability to use its core competencies to outfocus the focuser by serving an even more broadly
defined segment.
c. decisions by industry-wide competitors to use their resources to serve a wider range of customers’ needs
than the focuser has been serving.
d. decisions by focused competitors to use their resources to serve a wider range of customers’ needs.
96. Focus strategies are
a. sheltered from the risks associated with industry-wide strategies because of their niche focus.
b. able to avoid global risk by focusing on niches in national or regional markets.
c. faced with additional types of risks than are industry-wide strategies.
d. more subject to failure than industry-wide strategies.
97. New Balance Athletic Shoes target Baby Boomers’ needs for well-fitting shoes. The company is unique in that it
offers a very broad range of shoe widths. A realistic potential risk New Balance runs in this focused differentiation
strategy includes the possibility that:
a. Baby Boomers may find that they do not need well-fitting shoes, since they will become increasingly
sedentary as they age.
b. a competitor may be able to better use flexible manufacturing systems to make shoes with an individualized
fit.
c. athletic shoes may go out of style.
d. New Balance shoes may begin to appeal to a wider market, thus losing New Balance’s focus advantage.
98. Suppose another firm found a way to offer IKEA’s customers (young buyers interested in stylish furniture at low
cost) additional sources of differentiation while charging the same price or to provide the same service with the
same sources of differentiation at a lower price. What category of competitive risk to a focus strategy would this
be?
a. An industry-wide competitor decides that the market segment served by IKEA is worth entering.
b. Focusing on a more narrowly defined segment and “outfocusing” the focuser.
c. The needs of the customers in this narrow segment have become more similar to those of industry-wide
competitors.
d. Experience can narrow customer’s perceptions of value of the firm’s differentiated features.
99. Zara has pioneered “cheap chic” in clothing apparel. Zara offers current and desirable fashion goods at relatively
low prices. To implement the strategy, Zara uses sophisticated designers and effective means of managing costs.
These are all characteristics of which business level strategy?
a. cost leadership
b. differentiation
c. integrated cost leadership/differentiation
d. stuck in the middle
100. Firms use the integrated cost leadership/differentiation strategy because
a. other firms have established unassailable market dominance with the other four strategies.
b. global markets allow for much broader competitive scope.
c. most consumers want to pay a low price for products with somewhat highly differentiated features.
d. one strategy is not enough for most large firms.
101. The integration of a cost leadership and a differentiation strategy
a. is challenging because it increases the number of value-chain activities and support functions in which the
firm must become competent.
b. forces a firm to adapt more slowly to changes in its environment.
c. allows the firm to avoid being “stuck in the middle.”
d. requires such a large customer base that it is most practical for firms in the global marketplace.
102. Target’s brand promise “Expect More. Pay Less” and appeal to higher-income, fashion-conscious discount shoppers
illustrates the strategy.
a. cost leadership
b. differentiation
c. focused differentiation
d. integrated cost leadership/differentiation
103. J.C. Penney attempted the strategy
Target.
. But it couldn’t out Walmart, nor could it Macy’s and
a. of integrated cost leadership; price; compete with
b. of focused differentiation; cost; differentiate between
c. of cost leadership; cost; differentiate between
d. of focused cost leadership; price; differentiate between