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Indicate whether the statement is true or false.
1. Human resources and other support functions are not value-creating activities in the value chain; only value chain
activities create value.
a.
True
b.
False
2. Walmart’s actions to become more upscale with the aim 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
customers.
a.
True
b.
False
3. 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
4. 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
5. The integrated cost leadership/differentiation strategy is superior to the other business-level strategies.
a.
True
b.
False
6. Companies without core competencies in their value chain activities and support functions are still able to successfully
implement either a cost leadership or a differentiation strategy, although they cannot implement an integrated cost
leadership/differentiation strategy.
a.
True
b.
False
7. Changing consumer needs are illustrated by Starbucks’ enabling consumers to have an experience and design their own
drinks rather than just a cup of coffee.
a.
True
b.
False
8. The best of the generic business strategies is the integrated cost leadership/differentiation strategy.
a.
True
b.
False
9. The difference between the cost leadership and differentiation business-level strategies, and the focused cost leadership
and focused differentiation strategies, are their basis for customer value.
a.
True
b.
False
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10. 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
11. 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
12. 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
13. 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
14. 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
15. The hazard of getting “stuck in the middle” applies to firms using any business strategy.
a.
True
b.
False
16. Unlike a cost leadership and a differentiation strategy, both focus strategies are less dependent on the completion of
various value chain and support activities to compete in a superior manner.
a.
True
b.
False
17. The value-creating activities associated with the cost leadership strategy and differentiation strategy are the same.
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. 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, and extended hours.
a.
True
b.
False
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20. Every firm uses all levels of strategy: corporate, acquisition and restructuring, international and cooperative.
a.
True
b.
False
21. 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
22. 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, at less expensive prices than sit-down
restaurants. This illustrates a focus cost leadership strategy.
a.
True
b.
False
23. 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
24. 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
25. Walmart’s change in strategy to attract more upscale customers will likely succeed because cost leaders are good at
differentiating.
a.
True
b.
False
26. 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
27. 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
28. 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
29. The differentiation strategy is effective for products that are expensive, luxury consumer goods. It is not effective for
common, inexpensive products such as donuts.
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a.
True
b.
False
30. Effective use of the generic business strategies allows a firm to favorably position itself relative to the five forces.
a.
True
b.
False
31. 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
32. 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
33. To position itself differently from competitors, a firm must decide to either perform activities differently or to perform
different activities.
a.
True
b.
False
34. 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
35. 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
36. Global competition has increased the options for consumers and has made it more imperative for firms to identify the
needs of customers to earn above-average returns.
a.
True
b.
False
37. 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
Indicate the answer choice that best completes the statement or answers the question.
38. The use of a differentiation strategy would be expected to be LEAST effective in which of the following markets?
a.
Commodity goods
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b.
Mmotion pictures
c.
Popular music
d.
Writing instruments
39. 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.
40. 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.
41. 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 the above
42. 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
43. 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.
44. 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 the profit ability 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.
45. 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
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b.
socioeconomic
c.
psychological
d.
consumption
46. The three dimensions of a firm’s relationships with customers include all the following EXCEPT:
a.
exclusiveness.
b.
affiliation.
c.
richness.
d.
reach.
47. 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.
48. 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.
49. 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 ____ that threatens companies that use the differentiation strategy.
a.
customer sensitive to price differentials
b.
threat by the cost leader
c.
customer experience
d.
counterfeiting
50. Religious beliefs are an example of customer segmentation by ______ factors.
a.
demographic
b.
socioeconomic
c.
geographic
d.
psychological
51. 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.
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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.
52. 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.
53. 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.
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. 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, and highly productive ground
and gate crews.
a.
activity map
b.
profit sharing
c.
value diagram
d.
five forces model
56. 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.
57. Customer ratings of products they bought online is an example of:
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a.
loyalty.
b.
reach.
c.
richness.
d.
affiliation.
58. J.C. Penney attempted the strategy ______ . But it couldn’t out ______ Walmart, nor could it ______ Macy’s and
Target.
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
59. 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.
60. 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
61. 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.
62. 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. Which one of the following is true?
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.
63. Walmart went against business-level strategy and made changes to attract upscale customers. These changes had
which of the following results?
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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.
64. 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 and easily be 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.
65. 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 ____ than the traditional 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
66. 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.
67. 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
68. 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
69. 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.
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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.
70. A cost leadership strategy targets the industry’s ____ customers.
a.
most typical
b.
poorest
c.
least educated
d.
most frugal
71. 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, because 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.
72. The ________dimension of relationships with customers is particularly important for social networking sites such as
Facebook and Twitter.
a.
reach
b.
richness
c.
affiliation
d.
social
73. 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?
74. 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.
75. 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.
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b.
a product imitation can cause customers to perceive that competitors offer essentially the same goods.
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.
76. 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.
77. 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.
78. 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.
79. 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.
80. 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.
81. 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.
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82. 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
83. 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.
84. The ______ dimension of relationships with customers is concerned with the firm’s access and connection to
customers.
a.
loyalty
b.
reach
c.
richness
d.
affiliation
85. 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.
86. 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
87. 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
88. 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.
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b.
a flexible manufacturing system.
c.
differentiation development planning.
d.
Enterprise Resource Planning.
89. 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.
90. 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.
91. 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.
92. 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.
93. 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
94. 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.
95. A flexible manufacturing system is:
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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.
96. 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
97. Stage in the family life cycle is a ______ factor.
a.
demographic
b.
socioeconomic
c.
psychological
d.
perceptual
98. 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
99. When firms use core competencies to implement value-creating strategies they are answering the “______” question.
a.
who
b.
what
c.
why
d.
how
100. 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.
101. 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.
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102. 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.
103. 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.
104. 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
105. A cost leadership strategy provides goods or services with features that are:
a.
acceptable.
b.
unique.
c.
substandard.
d.
mediocre.
106. 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.
107. 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
108. 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.
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d.
any of the strategies except the focused differentiation strategy.
109. Reach is an especially critical dimension for which firm?
a.
Google
b.
J.C. Penney
c.
Blockbuster
d.
Colgate-Palmolive
110. 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.
111. 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.
112. 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.
113. 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
114. 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
115. The products or services that are differentiated from others, have qualities that are:
a.
perceived by the customer to add value that they will pay a premium to purchase.
b.
valued by the typical industry customer.
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c.
perceived as standardized by the customer.
d.
seen as classic attributes rather than passing fads.
116. 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.
117. 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.
118. A firm’s core strategy is its ____ strategy.
a.
corporate
b.
business
c.
pricing
d.
international
119. 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.
120. 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.
121. 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.
122. Research suggests that having a competitive advantage in ____ creates more value in the cost leadership strategy
than it does in the differentiation strategy.
a.
marketing and sales
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b.
technology development
c.
logistics
d.
human resource management
123. Describe the risks of a differentiation strategy.
124. 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.
125. How do focused differentiation and focused cost leadership strategies differ from their non-focused counterparts?
126. Describe the advantages of integrating cost leadership and differentiation strategies.
127. Describe a firm with which you are familiar. Which business-level strategy does it use and what are the risk to that
particular firm?
128. Describe the additional risks undertaken by firms pursuing a focus strategy.
129. 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?
130. What are the risks of an integrated cost leadership/differentiation strategy?
131. Describe how a differentiation strategy can help a firm earn above-average returns.
132. Define strategy and business-level strategy. What is the difference between these two concepts?
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