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Chapter 06 Business Strategy: Differentiation, Cost Leadership, and
Blue Oceans Answer Key
Multiple Choice Questions
1.
A _____ primarily details the goal-directed actions managers take in their quest for
competitive advantage when competing in a single product market.
2.
Which of the following is a firm effect that has an impact on the competitive advantage of a
firm?
3.
A firm's business strategy will lead to a competitive advantage if it allows the firm to
4.
When a firm makes choices between a cost or value position to achieve competitive
advantage, it is primarily involved in
5.
Firms pursuing a differentiation strategy primarily seek to
6.
Home Smart Inc. is a chain of supermarkets that sells its products at higher prices than its
competitors. Yet, the supermarket chain has a large customer base due to its wide product
portfolio and superior customer service. Which of the following generic business strategies
has Home Smart adopted in this scenario?
7.
Bargain Styles Inc. is an apparel company that caters to the highly price-conscious customers.
Through its simple apparel designs, acceptable quality levels, and minimal customer service,
the company has been able to sell its merchandise at the lowest prices in the industry. Which
of the following generic business strategies is Bargain Styles applying?
8.
Why are differentiation and cost-leadership strategies referred to as generic business
strategies?
9.
True Empire Autos Inc. is an automobile company known for its luxury cars and follows a
differentiation strategy. In this scenario, True Empire Autos should ideally compare its
strategic position with a(n)
10.
Wear Crush Inc. is an apparel company known for its affordable clothes that follows a cost-
leadership strategy. In this scenario, Wear Crush should ideally compare its strategic position
with
11.
In a focused cost-leadership strategy, a firm
12.
Organic Eats is a restaurant that caters to the needs of a small percentage of highly health-
conscious consumers. It has an all-organic, vegan menu. Since there are very few restaurants
that offer the same unique services, customers are willing to pay a premium price for its
products and services. In this scenario, Organic Eats is following a
13.
A company that uses a differentiation strategy can achieve a competitive advantage as long
as its
14.
Both Viten Electronics Inc. and JL Electronics Inc. incur a cost of $400 to manufacture a LED
television. However, the economic value created by JL Electronics is more than that created
by Viten Electronics. What does this indicate?
15.
A firm pursuing a differentiation strategy as opposed to a low-cost strategy will
16.
When a differentiator charges a similar price as its competitors in the same strategic group
but offers more perceived value, it
17.
Both Blue Horizons Electronics Inc. and CLR Inc. have achieved cost parity in the television
market. To gain and sustain a competitive advantage against CLR, Blue Horizons Electronics
should
18.
Which of the following will hamper a differentiator's ability to achieve a competitive
advantage?
19.
Whole Foods differentiates itself from competitors by offering top-quality foods obtained
through sustainable agriculture. This business strategy implies that Whole Foods focuses on
20.
Which of the following is more of a value driver than a cost driver?
21.
Oviyo Inc. has been successful at differentiating itself from competitors by claiming a
premium price for its digital cameras based on superior image quality and advanced
technology. In this scenario, which of the following is the key value driver?
22.
Lush Roses is a chain of premium hotels around the globe that charges higher prices for its
rooms and suites when compared to the average industry standards. Yet, the hotel enjoys the
largest market share in the industry. This is mainly due its highly responsive staff that has a
strong commitment toward achieving a 100 percent guest satisfaction. In this scenario, which
of the following is the key value driver?
23.
When Internet service providers offer free routers for subscriptions to their wireless Internet
packs, the perceived value of the service offering increases. In this case, the value driver
would be
24.
Body Sync Inc. is a chain of gyms. It offers a fitness package that allows its members to use
the gym facilities for 12 months by paying only for 10 months. Included in the package are two
health checkups and a gym kit. These add-ons by themselves are not very valuable, but as a
package they can enhance the perceived value of the service offerings. In this case, Body
Sync's primary value driver is
25.
Value drivers contribute to a firm's competitive advantage only if
26.
A firm achieves differentiation parity ideally when
27.
While Aros Inc. incurs a cost of $20 for a pair of shoes, Shoes Cult Inc., its competitor,
manufactures a pair of shoes at $22. Both the companies are able to sell their shoes for a
maximum of $30 per pair. Which of the following statements is true in this scenario?
28.
AccuroDisk Inc. manufactures external hard disks for $32 per unit, and the maximum price
customers are willing to pay is $47 per unit. TD Storage Inc. is a competitor of AccuroDisk Inc.
that produces external hard disks for $37 per unit, and customers are willing to pay a
maximum price of $50 per unit. What does this imply?
29.
Evia Cycles Inc. incurs $400 to manufacture a bicycle, and the maximum price customers are
willing to pay is $550 per unit. Archer Cycles Inc., its competitor, incurs $450 to manufacture a
similar bicycle, and customers are willing to pay a maximum price of $620 for it. What does
this indicate?
A.
Both Evia Cycles and Archer Cycles have achieved differentiation parity.
B.
Evia Cycles has a competitive advantage over Archer Cycles.
C.
Archer Cycles has created a greater economic value than Evia Cycles.
D.
Both Evia Cycles and Archer Cycles have achieved cost parity.
Archer Cycles has created a greater economic value than Evia Cycles. A cost-leader can
achieve a competitive advantage as long as its economic value created is greater than that of
its competitors.
30.
Even without differentiation parity, a firm pursuing a cost-leadership strategy can still gain a
competitive advantage as long as its
31.
Which of the following contributed the
most
to JCPenny’s failed blue ocean strategy?
32.
In contrast to a differentiator, a cost-leader will
33.
Juanita Apparels Inc. outsources its production to contract manufacturers located in
underdeveloped nations where unskilled labor is available in plenty for very low wages. This
has helped the apparel brand become a price leader in the industry. Which of the following is
the key driver behind Juanita Apparel's strategic position?
