Question 1

"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 products or services that consumers are unable to evaluate confidently before they have bought and used them. This means that the quality or value of the good or service can only be determined after purchase or through a trial period. Consumers may rely on personal recommendations, reviews, or their own previous experiences with similar products to make a decision to purchase.

Question 2

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 are product categories that offer a lot of potential for differentiation. Brands can differentiate themselves through design, quality, materials, style, and price in the case of clothes, and through cuisine, atmosphere, and service in the case of restaurants. These are categories with a lot of room for creativity and innovation, which can help brands stand out from their competitors. In contrast, the other categories listed (cement, wheat, jet fuel, sulfur, and ethylene) are more commoditized and offer less potential for differentiation.

Question 3

In strategic management,the expression "blue oceans" refers to:
A)Radical innovation
B)The potential offered by uncontested market space
C)The campaign to reduce pollution in the world's oceans
D)Cost reduction through offshoring production

Accepted Answer

"Blue oceans" in strategic management refers to the potential of uncontested market space, where companies can create new demand and generate profitable growth. This is in contrast to "red oceans," which represent crowded and highly competitive markets. Therefore, option B is the correct choice as it aligns with the concept of exploring new and untapped market opportunities. Options A, C, and D are not relevant to the concept of "blue oceans" in strategic management.

Question 4

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 outlined by Porter in his book "Competitive Strategy". Cost leadership focuses on offering products or services at a lower cost than competitors, while differentiation focuses on offering unique and superior products or services that are valued by customers. These strategies cannot be pursued simultaneously without creating conflicts and confusion in the market, which can lead to the firm being stuck in the middle.

Question 5

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 offer greater potential for differentiation as there are numerous features and aspects that can be customized or varied to make one product stand out from another. From the design and performance of the product to the level of customer service and amenities offered, there are several areas where companies can differentiate themselves and create a unique value proposition for customers.

Question 6

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 have a significant advantage over smaller competitors due to their ability to negotiate better terms with suppliers as a result of their size and purchasing power. This allows them to secure lower prices for the products they sell, which in turn allows them to offer lower prices to consumers while still making a profit. Scale economies in operating large individual retail units and higher capacity utilization do play a role in reducing costs but are secondary to the bargaining power advantage. Lower wage rates are not a primary factor in the cost advantages of these retailers.

Question 7

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

Exploiting pricing anomalies is not an isolating mechanism because it relies on temporary market inefficiencies rather than sustainable competitive advantages that are difficult to replicate or transfer.

Question 8

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 9

Most of the innovative business models deployed by e-commerce firms:
A)Could not have been conceived of prior to the advent of digital technology
B)Have their roots in in business models developed by firms in the pre-digital era
C)Exploit network externalities
D)Are dependent uponthe ability to generate revenues from advertising

Accepted Answer

Many innovative business models in e-commerce have their roots in traditional business models but have been adapted and enhanced by digital technology.

Question 10

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

Isolating mechanisms are barriers that protect a firm's competitive advantage and prevent other firms from eroding its profit differentials.

Question 11

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 is focused on how a company chooses to compete in the market, typically through product or service differentiation. Segmentation, on the other hand, refers to the process of dividing the market into unique groups of consumers with similar needs or characteristics. Segmentation helps companies determine where they should compete in the market, while differentiation helps them determine how to compete within that selected market segment.

Question 12

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 involve taking actions that prevent competitors from entering or expanding in a market, thus reducing their opportunities to invade the firm's strategic space.

Question 13

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 14

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, such as trust and stability, which are intangible and difficult to communicate to customers. Therefore, they need to signal their wealth and stability through impressive and lavish head office buildings. This helps to establish their reputation and differentiate them from their competitors.

Question 15

Conceiving of innovative business models typically involves:
A)Using analogies to transfer and adapt business models from other business sectors
B)Using brain storming to generate creative ideas
C)Deploying articficial intelligence
D)Exploring the interface between custimewr need and the firm's resources and capabilities

Accepted Answer

The answer of Conceiving of innovative business models typically involves:
A)Using...

Question 16

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 implemented a cost-leadership strategy while also incorporating distinctive product differentiation. Ikea offers affordable furniture with modern designs and easy-to-assemble packages, while Southwest Airlines operates on a low-cost model while providing efficient and friendly service. This combination of cost leadership and differentiation has been a key factor in their success. The power of their brand can be seen as a result of this strategy, but it is not the only factor contributing to their success. Top management and advertising may also play a role, but they are not the primary factors demonstrated by these examples.

Question 17

The usefulness of the strategy canvas in developing blue ocean strategies rests on its ability to:
A)Suggest possible applications of frontier technologies
B)Identify opportunities for recombining existing product attributes in novel ways
C)Identify unfulfilled customwer needs
D)Reconfigure a firm's value chain

Accepted Answer

The strategy canvas is a tool used to compare a company's current strategy with that of its competitors. The canvas allows for the identification of opportunities for recombining existing product attributes in novel ways, which is a key aspect of developing a blue ocean strategy. While identifying unfulfilled customer needs is important for blue ocean strategy, it is not the specific function of the strategy canvas. Similarly, the strategy canvas is not used to suggest possible applications of frontier technologies or to reconfigure a firm's value chain.

Question 18

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

Product integrity ensures that the lifestyle products align with the brand's values and meet the social and psychological needs of consumers, creating a differentiation advantage.

Quiz 7: A : The Sources and Dimensions of Competitive Advantage

"Experience goods" are those which:

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

In strategic management,the expression "blue oceans" refers to:

According to Porter,cost leadership and differentiation are:

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

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:

Which of the following is not an isolating mechanism?

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

Most of the innovative business models deployed by e-commerce firms:

Isolating mechanisms are:

What is the difference between differentiation and segmentation?

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

Complementarity between a firm's management practices means that:

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

Conceiving of innovative business models typically involves:

The examples of Ikea and Southwest Airlines demonstrate:

The usefulness of the strategy canvas in developing blue ocean strategies rests on its ability to:

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