Question 1

Value-chain support activities that involve excellent applications engineering support (technology development)and facilities that promote a positive firm image (firm infrastructure)characterize which generic strategy?
A) overall cost leadership
B) differentiation focus
C) differentiation
D) stuck-in-the middle

Accepted Answer

Examples of value-chain activities for differentiation include value chain support activities like excellent applications engineering support (technology development) and facilities that promote a positive firm image (firm infrastructure).

Question 2

Zulily protects itself from buyer power and intense rivalry from competitors by
A) increasing the bargaining power of its customers.
B) paying close attention to costs.
C) increasing costs.
D) increasing the buyer power.

Accepted Answer

Zulily pays close attention to costs that help to protect the company from buyer power and intense rivalry from competitors. Thus, Zulily is able to drive down costs and reduce the bargaining power of its customers.

Question 3

Marlin Steel Wire Products is a manufacturer of commodity wire products out of Baltimore,MD.Marlin has many rivals based in China and other emerging markets.The company cannot compete on labor costs so it used a ________ strategy to automate its production and now specializes in high-end products.
A) differentiation
B) overall cost leadership
C) focus strategy
D) low cost leadership

Accepted Answer

Marlin Steel Wire Products, a Baltimore-based manufacturing company, has also seen great benefit from developing a niche-differentiator strategy. Marlin, a manufacturer of commodity wire products, faced stiff and ever-increasing competition from rivals based in China and other emerging markets. These rivals had labor-based cost advantages that Marlin found hard to counter. Marlin responded by changing the game it played. The company president decided to go upmarket, automating his production and specializing in high-end products.

Question 4

A firm can achieve differentiation through all the following means except
A) improving brand image.
B) offering lower prices to frequent customers.
C) better customer service.
D) adding additional product features.

Accepted Answer

A differentiation strategy consists of creating differences in the product or service offering of the firm by creating something that is perceived industrywide as unique and valued by customers. Differentiation can take many forms, including prestige or brand image, quality, technology, innovation, features, customer service, or a dealer network.

Question 5

At one CVS drugstore,a four-pack of Energizer AA batteries was on sale at 2.99 USD compared with a Duracell four-pack at 4.59 USD.The Duracell market share dropped 2 percent in a recent two-year period,and its profits declined over 30 percent.Why did this happen?
A) The price differential was too high.
B) The market for batteries is saturated.
C) The customer perceived the products to be different.
D) There are valid alternatives for batteries.

Accepted Answer

Customers may desire the product, but they are repelled by the price premium. For example, Duracell recently charged too much for batteries. The firm tried to sell consumers on its superior-quality products, but the mass market was not convinced. Why? The price differential was simply too high. Clearly, the price-performance proposition Duracell offered customers was not accepted.

Question 6

Which of the following is not a potential pitfall of an integrated overall low cost and differentiation strategy?
A) Firms that target too large a market that causes unit costs to increase.
B) Firms that underestimate the expenses associated with coordinating value-creating activities in the extended value chain.
C) Firms that fail to attain both strategies may end up with neither and become stuck-in-the-middle.
D) Firms that miscalculate sources of revenue and profit pools in the company industry.

Accepted Answer

The pitfalls of integrated overall cost leadership and differentiation include:firms that fail to attain both strategies may end up with neither and become stuck-in-the-middle; underestimating the challenges and expenses associated with coordinating value-creating activities in the extended value chain; and miscalculating sources of revenue and profit pools in the company industry.

Question 7

Which of the following is false regarding how a differentiation strategy can help a firm to improve its competitive position relative to the Porter five-forces model?
A) Firms will enjoy high customer loyalty.
B) By increasing firm margins, it avoids the need for a low-cost position.
C) It reduces buyer power because buyers lack comparable alternatives.
D) Supplier power is increased, because suppliers will be able to charge higher prices for their inputs.

Accepted Answer

Supplier power is also decreased, because there is a certain amount of prestige associated with being the supplier to a producer of highly differentiated products and services.

Question 8

Early pioneer in online education,University of Phoenix,has faced increasing challenges from traditional university online programs who are able to offer their programs at the same cost.This is an example of which generic strategy gone wrong:
A) Differentiation.
B) Overall cost leadership.
C) Focus strategy.
D) Low cost leadership.

Accepted Answer

The advantages of a cost focus strategy may be fleeting if the cost advantages are eroded over time. For example, early pioneers in online education, such as the University of Phoenix, have faced increasing challenges as traditional universities have entered with their own online programs that allow them to match the cost benefits associated with online delivery systems. This is a pitfall of a focus strategy.

Question 9

Which of the following is a risk (or potential pitfall)of cost leadership?
A) Cost cutting in one area of the value chain might increase costs in another.
B) Attempts to stay ahead of the competition may lead to gold plating.
C) Cost differences increase as the market matures.
D) Producers are more able to withstand increases in supplier costs.

Accepted Answer

Potential pitfalls of overall cost leadership strategy include too much focus on one or a few value-chain activities; increase in the cost of the inputs on which the advantage is based; the strategy is imitated too easily; a lack of parity on differentiation; reduced flexibility; and obsolescence of the basis of cost advantage

Question 10

Porsche has enhanced power over buyers because its strong reputation makes buyers more willing to pay a premium price.This ________ rivalry,since buyers become ________ price-sensitive.
A) increases; more
B) lessens; more
C) lessens; less
D) increases; less

Accepted Answer

Porsche has enjoyed enhanced power over buyers because its strong reputation makes buyers more willing to pay a premium price. This lessens rivalry, since buyers become less price-sensitive. The prestige associated with its brand name also lowers supplier power since margins are high. Suppliers would probably desire to be associated with prestige brands, thus lessening their incentives to drive up prices.

Question 11

Which of the following is not a potential pitfall of a focus strategy?
A) Erosion of cost advantages can arise within the narrow segment.
B) Product/service offerings that are highly focused are subject to competition from new entrants.
C) Focusers can become too focused to satisfy buyer needs.
D) All rivals share a common input or raw material.

Accepted Answer

Potential pitfalls of focus strategies include:erosion of cost advantages within the narrow segment; the idea that even product and service offerings that are highly focused are subject to competition from new entrants; and focusers that become too focused to satisfy buyer needs.

Question 12

Which statement regarding competitive advantages is true?
A) With an overall cost leadership strategy, firms need not be concerned with parity on differentiation.
B) In the long run, a business with one or more competitive advantages is probably destined to earn normal profits.
C) If several competitors pursue similar differentiation tactics, they may all be perceived as equals in the mind of the consumer.
D) Attaining multiple types of competitive advantage is a recipe for failure.

Accepted Answer

Potential pitfalls of a differentiation strategy include the idea that perceptions of differentiation may vary between buyers and sellers. The issue here is that beauty is in the eye of the beholder. Companies must realize that although they may perceive their products and services as differentiated, their customers may view them as commodities.

Question 13

High product differentiation is generally accompanied by
A) higher market share.
B) higher profit margins and lower costs.
C) significant economies of scale.
D) decreased emphasis on competition based on price.

Accepted Answer

Differentiation provides protection against rivalry because brand loyalty lowers customer sensitivity to price and raises customer switching costs. By increasing company margins, differentiation also avoids the need for a low-cost position.

Question 14

The text discusses three approaches to combining overall cost leadership and differentiation competitive advantages.Which of the following is not one of these three approaches?
A) automated and flexible manufacturing systems
B) deriving benefits from highly-focused and high-technology markets
C) exploiting the profit pool concept for competitive advantage
D) coordinating the extended value chain by way of information technology

Accepted Answer

Three approaches to combining overall low cost and differentiation include:automated and flexible manufacturing systems, using data analytics, exploiting the profit pool concept for competitive advantage, and coordinating the extended value chain by way of information technology.

Question 15

The factors that lead to a low-cost position also provide a substantial ________ barriers position with respect to ________ products introduced by new and existing competitors.
A) entry; substitute
B) exit; primary
C) product; substitute
D) entry; primary

Accepted Answer

The factors that lead to a low-cost position also provide a substantial entry barriers position with respect to substitute products introduced by new and existing competitors.

Question 16

A ________ can be defined as the total profits in an industry at all points along the industry value chain.
A) profit maximizer
B) revenue enhancer
C) profit pool
D) profit outsourcing

Accepted Answer

A profit pool is defined as the total profits in an industry at all points along the industry value chain.

Question 17

Which of the following is not a potential pitfall of a differentiation strategy?
A) Uniqueness that is not valuable.
B) The price premium is too high.
C) All rivals share a common input or raw material.
D) Perceptions of differentiation may vary between buyers and sellers.

Accepted Answer

Potential pitfalls of a differentiation strategy include uniqueness that is not valuable; too much differentiation; too high a price premium; differentiation that is easily imitated; dilution of brand identification through product-line extensions; or perceptions of differentiation may vary between buyers and sellers.

Question 18

Hardware chains such as Ace and True Value are losing market share to rivals such as Lowe's and Home Depot in spite of them using a focus strategy.Why?
A) Achieving parity on costs for specialty retailers is difficult.
B) They have too broad a product line.
C) They have equivalent purchasing power as the national chains.
D) Their costs are the same as those of the national chains.

Accepted Answer

Some firms attempting to attain advantages through a focus strategy may have too narrow a product or service. Consider many retail firms. Hardware chains such as Ace and True Value are losing market share to rivals such as Lowe's and Home Depot that offer a full line of home and garden equipment and accessories. And given the enormous purchasing power of the national chains, it would be difficult for such specialty retailers to attain parity on costs.

Question 19

A differentiation strategy enables a business to address the five competitive forces by
A) having brand-loyal customers become more sensitive to prices.
B) increasing economies of scale.
C) providing protection against rivalry.
D) serving a broader market segment.

Accepted Answer

Differentiation provides protection against rivalry since brand loyalty lowers customer sensitivity to price and raises customer switching costs.

Question 20

A firm following a focus strategy must focus on
A) governmental regulations.
B) a market segment or group of segments.
C) rising cost of inputs.
D) avoiding entering international markets.

Accepted Answer

A focus strategy is based on the choice of a narrow competitive scope within an industry. A firm following this strategy selects a segment or a group of segments and tailors its strategy to serve them. The essence of focus is the exploitation of a particular market niche.

Quiz 5: Business-level Strategy: Creating and Sustaining Competitive Advantages

Value-chain support activities that involve excellent applications engineering support (technology development) and facilities that promote a positive firm image (firm infrastructure) characterize which generic strategy?

Zulily protects itself from buyer power and intense rivalry from competitors by

Marlin Steel Wire Products is a manufacturer of commodity wire products out of Baltimore,MD.Marlin has many rivals based in China and other emerging markets.The company cannot compete on labor costs so it used a ________ strategy to automate its production and now specializes in high-end products.

A firm can achieve differentiation through all the following means except

At one CVS drugstore,a four-pack of Energizer AA batteries was on sale at 2.99 USD compared with a Duracell four-pack at 4.59 USD.The Duracell market share dropped 2 percent in a recent two-year period,and its profits declined over 30 percent.Why did this happen?

Which of the following is not a potential pitfall of an integrated overall low cost and differentiation strategy?

Which of the following is false regarding how a differentiation strategy can help a firm to improve its competitive position relative to the Porter five-forces model?

Early pioneer in online education,University of Phoenix,has faced increasing challenges from traditional university online programs who are able to offer their programs at the same cost.This is an example of which generic strategy gone wrong:

Which of the following is a risk (or potential pitfall) of cost leadership?

Porsche has enhanced power over buyers because its strong reputation makes buyers more willing to pay a premium price.This rivalry,since buyers become price-sensitive.

Which of the following is not a potential pitfall of a focus strategy?

Which statement regarding competitive advantages is true?

High product differentiation is generally accompanied by

The text discusses three approaches to combining overall cost leadership and differentiation competitive advantages.Which of the following is not one of these three approaches?

The factors that lead to a low-cost position also provide a substantial barriers position with respect to products introduced by new and existing competitors.

A ________ can be defined as the total profits in an industry at all points along the industry value chain.

Which of the following is not a potential pitfall of a differentiation strategy?

Hardware chains such as Ace and True Value are losing market share to rivals such as Lowe's and Home Depot in spite of them using a focus strategy.Why?

A differentiation strategy enables a business to address the five competitive forces by

A firm following a focus strategy must focus on