Question 1

What is the difference between differentiation and segmentation?
A)There is no difference between the two
B)Differentiation deals with the "how" a firm chooses to compete, while segmentation describes "where" in the entire market a firm chooses to compete
C)Differentiation is a firm's strategic choice, whereas segmentation is given by its environment
D)Segmentation is the head of the marketing department's responsibility, whereas the CEO is in charge of differentiation

Accepted Answer

Differentiation and segmentation are two distinct concepts in marketing. Differentiation refers to how a firm chooses to make its products or services unique and stand out from competitors, while segmentation refers to the process of dividing a larger market into smaller groups of consumers with similar needs or characteristics. Therefore, choice B is the correct answer as it highlights the difference between the two concepts.

Question 2

Firms pursuing differentiation advantages will implement their strategies differently from those pursuing cost advantage.The implementation of differentiation strategy is likely to feature:
A)Employee remuneration based upon individual productivity
B)Frequent performance reporting
C)High levels of outsourcing
D)Low levels of job specialization.

Accepted Answer

Differentiation strategies focus on creating unique products or services, which often require a broader range of skills and creativity from employees, leading to lower levels of job specialization. This approach contrasts with cost leadership strategies, where high job specialization can drive efficiency and lower costs.

Question 3

In supplying "lifestyle" products which are designed to meet consumers' social and psychological needs, the key to differentiation advantage is:
A)A relentless pursuit of quality
B)Thorough market research
C)Product integrity
D)Market segmentation.

Accepted Answer

The answer of In supplying "lifestyle" products which are designed...

Question 4

In retailing, the cost advantages of large retail chains (such as Wal-Mart in the US, Tesco in Britain, Metro in Germany, and Carrefour in France) is primarily the result of:
A)Scale economies in operating large individual retail units
B)Lower costs of bought-in products as a result of superior bargaining power○
C)Higher capacity utilization in retailing and distribution
D)Using superior bargaining power to pay lower wage rates.

Accepted Answer

Large retail chains like Wal-Mart, Tesco, Metro, and Carrefour are able to negotiate better deals with suppliers due to their massive purchasing power, which enables them to obtain better prices for the goods they sell. They are then able to offer these products to their customers at lower prices while making a profit due to the high volume of sales they generate. This gives them a cost advantage over smaller retailers who cannot negotiate as effectively with suppliers.

Question 5

Pre-emption strategies can help sustain a firm's competitive advantage through:
A)Reducing the opportunities available to competiors to invade the firm's strategic space
B)Threatening compeitors with retaliation
C)Engaging in limit pricing that makes entry unprofitable for would-be rivals
D)Reinforcing barriers of mobility

Accepted Answer

Pre-emption strategies aim to reduce the opportunities available to competitors to invade a firm's strategic space. By preempting the market, a firm can establish a first-mover advantage, which will make it difficult for competitors to gain a foothold in the market. This can help sustain the firm's competitive advantage, as it will be hard for competitors to catch up or replicate the firm's advantages. Therefore, choice A is the best answer. While options B, C, and D can also be preemption strategies, they are not a comprehensive representation of all possible preemption strategies, and they do not directly address the maintenance of a firm's competitive advantage.

Question 6

The examples of Ikea and Southwest Airlines demonstrate:
A)The power of brand as a factor of success
B)The quality of the top management of these firms
C)The power of advertising
D)How a cost-leadership strategy can be combined with distinctive product differentiation

Accepted Answer

Both Ikea and Southwest Airlines have successfully implemented a cost-leadership strategy while also providing distinctive product differentiation. Ikea offers affordable furniture with a unique Scandinavian design, while Southwest Airlines offers low-cost flights with a fun and friendly customer service. This combination of cost leadership and differentiation has allowed them to stand out in their industries and achieve success. The power of their brands is also a factor, but it is a result of their effective business strategies rather than the sole factor of their success. Top management and advertising may also play a role, but they are not as significant as the chosen business strategy.

Question 7

"Experience goods" are those which:
A)Have performance attributes that are difficult to ascertain at the moment of purchase
B)Only customers with previous experience of using these goods would rationally consider purchasing
C)Only firms with wide experience in an industry would rationally consider making
D)Have been produced by the firm furthest down the learning curve

Accepted Answer

Experience goods are goods where the performance attributes are difficult to assess before purchase. This means that the consumer can only judge the quality of the product after purchase, based on their experience using it. Examples of experience goods may include restaurants, hotels, and movies.

Question 8

Which of the following product categories offers the greatest potential for differentiation?
A)Clothes and restaurants
B)Cement and wheat
C)Jet fuel for airline jets
D)Sulfur and ethylene

Accepted Answer

Clothes and restaurants offer the greatest potential for differentiation because they are closely tied to fashion, style, taste, and customer experience, which can vary greatly from brand to brand. Cement, wheat, jet fuel for airline jets, sulfur, and ethylene are all commodities that are generally indistinguishable from one producer to another.

Question 9

According to Porter, cost leadership and differentiation are:
A)What leads a firm to "be stuck in the middle"
B)Two names for the same fundamental strategy
C)Distinct generic strategies
D)Strategies that can be pursued simultaneously

Accepted Answer

Cost leadership and differentiation are two distinct generic strategies identified by Porter. Cost leadership involves producing and selling products or services at a lower cost than competitors, while differentiation involves offering unique and desirable features or attributes that distinguish a company's products or services from those of competitors. Pursuing both strategies simultaneously can be difficult, as it requires finding ways to differentiate while also maintaining low costs. If a company fails to effectively differentiate or keep costs low, it runs the risk of "being stuck in the middle," which is an unenviable position because it does not offer any clear competitive advantage.

Question 10

Which of the following is not an isolating mechanism?
A)Private ownership of a company which means that it is not obliged to publish its financial statements
B)Competitive advantage which is based upon the interaction of a number of different resources and capabilities
C)Competitive advantage based upon exploiting pricing anomalies
D)Competitive advantage based upon resources that are difficult to transfer and slow to replicate.

Accepted Answer

The answer of Which of the following is not an...

Question 11

Complementarity between a firm's management practices means that:
A)None: the concepts are identical in practice
B)The performance impact of a generic practice is independent of the firm's other practices; the impact of a contextual practice depends upon the firm's other practices
C)Generic practices relate to basic functions; contextual practices tend to be more idiosyncratic
D)A generic practices offers incremental performance improvement; a contextual practices leads to a new fitness peak.

Accepted Answer

Complementarity between a firm's management practices means that the impact of a contextual practice is dependent on the firm's other practices. However, the impact of a generic practice is independent of the firm's other practices. Therefore, option B correctly explains the complementarity between the firm's management practices. Option A is incorrect because the concepts may not be identical in practice. Option C is incorrect because both generic and contextual practices can relate to basic functions or be idiosyncratic. Option D is incorrect because a contextual practice can lead to incremental performance improvement, and a generic practice can lead to a new fitness peak in some cases.

Question 12

Banks spend more money on their head office buildings than most other large corporations because:
A)They tend to be located in financial centers where property prices are high
B)They offer "experience goods", hence they need to signal wealth and stability
C)Their CEOs are more committed to the display of wealth than other CEOs
D)Because their products are essentially commodities, they need to find alternative ways of differentiating.

Accepted Answer

Banks offer "experience goods", meaning their products are based on intangible factors such as trust and confidence. Therefore, they need to signal their stability and wealth through their head office buildings in order to establish this trust and confidence with their customers.

Question 13

Isolating mechanisms are:
A)Barriers to the erosion of interfirm profit differentials
B)Mechanisms that impede the equilibration of rents between industries
C)The same as "barriers to mobility"
D)Sources of disequilibrium that cause the profitability of different firms in an industry to diverge over time

Accepted Answer

The answer of Isolating mechanisms are:
A)Barriers to the erosion of...

Question 14

Compared with simple products like flour or toilet paper, complex products such as cars or hotels:
A)Fewer opportunities for differentiation
B)Greater potential for differentiation○
C)Offer similar opportunities for differentiation--it all depends upon the creativity of product designers and marketers
D)Fewer incentives for differentiation because of their high costs

Accepted Answer

Complex products like cars or hotels have many different features and components that can be customized and tailored to the specific needs and preferences of different customers, leading to greater potential for differentiation. For example, luxury hotels can differentiate themselves based on the quality and range of amenities they offer, while car manufacturers can differentiate themselves based on the performance, style, and features of their vehicles.

Quiz 7: The Sources and Dimensions of Competitive Advantage

What is the difference between differentiation and segmentation?

Firms pursuing differentiation advantages will implement their strategies differently from those pursuing cost advantage.The implementation of differentiation strategy is likely to feature:

In supplying "lifestyle" products which are designed to meet consumers' social and psychological needs, the key to differentiation advantage is:

In retailing, the cost advantages of large retail chains (such as Wal-Mart in the US, Tesco in Britain, Metro in Germany, and Carrefour in France) is primarily the result of:

Pre-emption strategies can help sustain a firm's competitive advantage through:

The examples of Ikea and Southwest Airlines demonstrate:

"Experience goods" are those which:

Which of the following product categories offers the greatest potential for differentiation?

According to Porter, cost leadership and differentiation are:

Which of the following is not an isolating mechanism?

Complementarity between a firm's management practices means that:

Banks spend more money on their head office buildings than most other large corporations because:

Isolating mechanisms are:

Compared with simple products like flour or toilet paper, complex products such as cars or hotels: