104. Three sources of flexibility in completing primary and support activities are particularly useful for firms using the
integrated strategy. These are
a. Flexible Manufacturing Systems, Reengineering, and Total Quality Management.
b. Outsourcing, Reengineering, and Flexible Manufacturing Systems.
c. Outsourcing, Total Quality Management, and Information Networks.
d. Flexible Manufacturing Systems, Total Quality Management, and Information Networks.
105. The benefit of a flexible manufacturing system is that
a. the lot size needed to manufacture a firm’s product efficiently is reduced.
b. the necessary skill levels of workers are reduced, allowing the firm to reduce costs.
c. it lends itself to empowerment of employees.
d. it captures the cost savings of economies of scale.
106. A flexible manufacturing system is
a. based on the use of temporary and part-time employees as well as outsourcing.
b. a computer-controlled process that is used to produce a variety of products in moderate, flexible quantities
with minimal human intervention.
c. based on a 360–degree view of the company’s relationships with customers.
d. a system that identifies “the one best way” to produce each product in the company‘s line.
107. A nationwide chain of pet stores wishes to identify the tradeoffs that its customers are willing to make between
low-cost products such as generic pet foods and differentiated features such as pick-up and delivery of pets for
grooming. The best technique for this firm to learn this information would be to use
a. information networks.
b. a flexible manufacturing system.
c. differentiation development planning.
d. Enterprise Resource Planning.
108. By linking companies with their suppliers, distributors, and customers, provide a company with flexibility.
a. flexible manufacturing systems
b. information networks
c. total quality management systems
d. capabilities
109. TQM is most helpful to firms following the business strategy.
a. cost leadership
b. integrated cost leadership/differentiation
c. focused cost leadership
d. focused differentiation
110. The term “stuck in the middle”
a. means adhering to a middle of the road strategy in the face of negative outcomes.
b. indicates that the customers of the firm are willing to pay only a mid-range price for the product.
c. reflects the fact that the customers of the firm have only moderate expectations regarding product quality.
d. means that the firm’s cost structure is not low enough to allow it to attractively price its products and that its
products are not sufficiently differentiated to create value for its target customer.
111. All of the following describe strategies EXCEPT
a. they are purposeful.
b. they cannibalize the old strategy.
c. they precede the taking of actions to which they apply.
d. they demonstrate a shared understanding of the firm’s vision and mission.
112. More choices and easily accessible information about the functionality of firms‘ products are creating increasingly
______ customers.
a. sophisticated and knowledgeable
b. loyal
c. dissatisfied
d. content
113. The
customers.
a. loyalty
b. reach
c. richness
d. affiliation
dimension of relationships with customers is concerned with the firm’s access and connection to
114. Reach is an especially critical dimension for which firm?
a. Google
b. J.C. Penney
c. Blockbuster
d. Colgate-Palmolive
115. Customer ratings of products they bought online is an example of
a. loyalty.
b. reach.
c. richness.
d. affiliation.
116. A company selling diapers knows the market is for people with young children. However, within that segment they
can further divide the market by a demographic factor like
a. culture.
b. lifestyle.
c. consumption pattern.
d. income.
117. Consumers in the United States are known for their
a. low income.
b. impatience.
c. loyalty.
d. group think.
118. When firms use core competencies to implement value-creating strategies they are answering the ” ”
question.
a. who
b. what
c. why
d. how
119. Stage in the family life cycle is a factor.
a. demographic
b. socioeconomic
c. psychological
d. perceptual
120. The book The Dyslexic Advantage appeals to a market of educators, people with dyslexia, their friends, family,
and coworkers. This is customer segmentation by factors.
a. demographic
b. socioeconomic
c. psychological
d. consumption
121. Religious beliefs are an example of customer segmentation by factors.
a. demographic
b. socioeconomic
c. geographic
d. psychological
122. Historically, women have paid more for dry cleaning than men. Signature Cleaners advertises “equal price” for all
customers. Signature Cleaners appeals to women, which is market segmentation by factors.
a. demographic
b. socioeconomic
c. geographic
d. consumption pattern
123. Chelsea Milling Company makes Jiffy packaged baking mixes. It was established in 1930. It has never spent one
cent on advertising, which is one reason it is able to pursue a(n) strategy.
a. differentiation
b. focused differentiation
c. integrated cost leadership/differentiation
d. cost leadership
124. Mercedes mass produces luxury vehicles at a premium price. It uses a(n) strategy.
a. differentiation
b. focused differentiation
c. integrated cost leadership/differentiation
d. focused cost leadership
125. A firm using a(n) strategy generally needs to operate “below the radar” of larger and more resource rich
firms that serve the broader market.
a. cost leadership
b. differentiation
c. focused
d. integrated cost leadership/differentiation
Subjective Short Answer
Case Scenario 1: International Cow Packers.
International Cow Packers (ICP) is a $12 billion meat processor (slaughter, processing, and packing). Founded in
1943, ICP has grown to become the largest beef and pork processor in the United States (revenues come 90
percent from beef and 10 percent from pork) and also has a growing export market to Japan. The company follows
a focused cost leadership strategy, delivering USDA-graded meats primarily to the institutional (schools, prisons,
hospitals) and supermarket channels. ICP‘s entire value chain is organized to deliver volume product at the
industry’s lowest per-unit cost. Its supplier industries, primarily cattle and swine feedlots, have relatively little power
since prices for these raw materials are determined in the commodity markets. While entry barriers to the industry
are high due to high minimum start-up costs, industry rivalry is extremely intense—primarily due to the fact that
three large companies (including ICP) control 80 percent of the market for processed meats. The threat of
substitutes is high with an increasing trend for consumers to favor poultry and other non-beef proteins. Buyers are
also powerful since supermarkets are relatively concentrated at a regional level and end consumers have ample
choices.
126. (Refer to Case Scenario 1). Is ICP’s focused low-cost strategy appropriate for its industry? Why?
127. (Refer to Case Scenario 1). What risks is ICP accepting by adopting its focused low-cost strategy?
128. (Refer to Case Scenario 1). What can ICP do to decouple itself from the ups and downs of the pure commodity
markets? What specific actions might ICP undertake?
Case Scenario 2: Walt Disney Company.
Walt Disney Company is famed for its creativity, strong global brand, and uncanny ability to take service and
experience businesses to higher levels. In the early 1990s, then-CEO Michael Eisner looked to the fast-food
industry as a way to draw additional attention to the Disney presence outside of its theme parks—its retail chain
was highly successful and growing rapidly. A fast-food restaurant made sense from Eisner’s perspective since
Disney’s theme parks had already mastered rapid, high-volume food preparation, and, despite somewhat
undistinguished food and high prices (or perhaps because of), all its in-park restaurants were extremely profitable.
From this inspiration, Mickey’s Kitchen was launched. The first two locations were opened in California and in a
suburb of Chicago, adjacent to existing Disney stores. Menu items included healthy, child-oriented fare like Jumbo
Dumbo burgers and even a meatless Mickey Burger. Eisner thought that locating each restaurant next to existing
Disney stores was sure to increase foot traffic through both venues. Less than 2 years later Disney closed down
the California and Chicago stores and shuttered further expansion plans. Eisner cited overwhelming competition
from McDonalds and general oversaturation in the fast-food industry as the primary reasons for closing down the
failing Mickey‘s Kitchen.
129. (Refer to Case Scenario 2). Based on your own knowledge of Disney and the information provided in the scenario,
does Disney appear to create value in its businesses primarily through a cost leadership or through a differentiation
strategy?
130. (Refer to Case Scenario 2). What resources and value-chain activities did Disney try to leverage through the
opening of Mickey’s Kitchen?
131. (Refer to Case Scenario 2). Why do you think that Mickey’s Kitchen failed?
132. (Refer to Case Scenario 2). Mickey’s Kitchens was successful primarily because it was able to create a
differentiated Disney experience that drew customers away from other fast-food restaurants such as McDonald’s.
Case Scenario 3: Abrahamson’s Jewelers.
Through its sole location in an affluent suburb of San Francisco, Abrahamson’s Jewelers has established a strong
niche market in the upscale jewelry store segment. Abrahamson’s was founded in 1871 and is currently owned and
operated by John Wickersham, who bought the firm from its namesake founders in 1985. Wickersham joined the
firm as a trainee out of high school, completed his gemology training, and several years later took ownership with
the financial help of his parents. That debt has long been paid off and business has thrived. When he first acquired
the business, Abrahamson‘s offered a full range of jewelry and gift items from watches to wedding sets to
silverware to clocks. This broad range of products was mirrored by a broad price range-$10,000 Rolex watches
were sold next to $50 Seiko watches. While some jewelry was custom designed and manufactured, most of the
products were “case ready,” meaning they were sourced from large jewelry and silver manufacturers from around
the world. Over the last 15 years, Wickersham has narrowed the company’s product offering considerably to focus
only on high-end watches like Rolex and Piaget, custom jewelry, and estate jewelry. Wickersham stresses that this
is an appropriate focus for his business since each of the products lends itself to relationship selling, and price rarely
comes into the discussion. Despite the narrower offering moreover, Abrahamson‘s floor space has doubled, and
clients are intensely loyal to the good taste, design skills, and personal service level provided by Mr. Wickersham.
133. (Refer to Case Scenario 3). What generic business strategy best describes Abrahamson’s? Why?
134. (Refer to Case Scenario 3). While Abrahamson’s is doing well, Mr. Wickersham would like to grow his business
beyond the present location. He believes that growth may bring greater profitability, as well as employment avenues
for his only child, who will soon be finishing high school. What recommendations do you have for Mr. Wickersham
regarding his growth choices?
135. (Refer to Case Scenario 3). Would you recommend that Mr. Wickersham embark on an Internet sales strategy for
his company?
Essay
136. Define strategy and business-level strategy. What is the difference between these two concepts?
137. When a firm chooses a business-level strategy, it must answer the questions “Who? What? and How?” What are
these questions and why are they important?
138. Discuss how a cost leadership strategy can allow a firm to earn above-average returns in spite of strong
competitive forces. Address each of the five competitive forces.
139. Describe the risks of a differentiation strategy.
140. How do focused differentiation and focused cost leadership strategies differ from their non-focused counterparts?
141. Describe the additional risks undertaken by firms pursuing a focus strategy.
142. Describe the advantages of integrating cost leadership and differentiation strategies.
143. What are the risks of an integrated cost leadership/differentiation strategy?
144. Describe how a differentiation strategy can help a firm earn above-average returns.
145. Describe a firm with which you are familiar. Which business-level strategy does it use and what are the risk to that
particular firm?