Question 1

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.

Accepted Answer

Numerous studies have shown a positive relationship between customer loyalty and firm profitability. As customers become more loyal, they are more likely to repeat business, spread positive word-of-mouth, and be less sensitive to price changes. This leads to increased profits for the firm. Option A is incorrect as customer loyalty reduces price sensitivity. Option C is incorrect as customer loyalty is a key factor in firm success. Option D is incorrect as customer loyalty is important for all firms, regardless of their strategy.

Question 2

The three dimensions of a firm's relationships with customers include all the following EXCEPT
A) exclusiveness.
B) affiliation.
C) richness.
D) reach.

Accepted Answer

The three dimensions of a firm's relationships with customers are affiliation, richness, and reach. Exclusiveness is not one of the dimensions.

Question 3

A firm's core strategy is its ____ strategy.
A) corporate
B) business
C) pricing
D) international

Accepted Answer

A firm's core strategy refers to the direction and scope of its business activities and this is captured by its business strategy. Corporate strategy refers to the overall direction of the entire organization, including its various businesses and product lines. Pricing strategy and international strategy are components of the business strategy. Therefore, the best choice is B - business strategy.

Question 4

The hazard of getting "stuck in the middle" applies to firms using any business strategy.

Accepted Answer

The hazard of getting "stuck in the middle" refers to a situation where a firm fails to achieve either a low-cost advantage or a differentiation advantage, and as a result, becomes stuck with a mediocre product and no clear market position. This hazard can apply to any business strategy, whether it is focused on cost leadership or differentiation.

Question 5

Zara offers current and desirable fashion goods at relatively low prices. To implement this strategy, Zara has sophisticated designers and effective means of managing costs. Zara is an example of the integrated cost leadership/differentiation strategy.

Accepted Answer

Zara's strategy combines a low-cost approach with a focus on product differentiation through fast, responsive design and production processes. This is an example of an integrated cost leadership/differentiation strategy.

Question 6

The Li Ning Company's move from a cost leadership strategy to an integrated cost leadership/differentation strategy in the sportswear industry was so successful in China that both Nike and Adidas exited the Chinese market (Chapter 4 Strategic Focus).

Accepted Answer

There is no evidence to suggest that Nike and Adidas exited the Chinese market due to Li Ning's successful shift in strategy. Both Nike and Adidas continue to have a strong presence in the Chinese sportswear market.

Question 7

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.

Accepted Answer

Business-level strategies focus on specific product markets and how a company can gain a competitive advantage within those markets by leveraging its core competencies. Choices A, C, and D are all aspects of a company's overall strategy, but they do not specifically pertain to business-level strategies.

Question 8

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

Accepted Answer

Richness refers to the amount of information that can be exchanged between the service provider and the customer. In this case, Amazon has built capabilities around Internet technology and e-commerce to facilitate detailed information exchanges with its customers in a cost-effective manner. Therefore, Amazon's capabilities represent richness as a service dimension.

Question 9

A flexible manufacturing system is a computer-controlled process used to produce a variety of products in moderate, flexible quantities with minimal manual intervention.

Accepted Answer

A flexible manufacturing system is indeed a computer-controlled process that can produce a variety of products in flexible quantities with minimal manual intervention.

Question 10

Starbuck's (Chapter 4 Opening Case) was able to revolutionize the coffee drining experience throug its business level strategy of
A) focused cost.
B) cost leadership.
C) differentiation.
D) stuck-in-the-middle.

Accepted Answer

Starbucks was able to differentiate itself from other coffee shops by providing a unique experience, such as cozy atmosphere, providing free Wi-Fi, and offering a wide array of food and drink options. This helped Starbucks create a loyal customer base who were willing to pay premium prices for their products.

Question 11

Flexible manufacturing systems, information networks, and total quality management are three techniques that make it possible for firms to implement the focused differentiation strategy.

Accepted Answer

The answer of Flexible manufacturing systems, information networks, and total...

Question 12

A risk of The Li Ning Company's integrated cost leadership/differentation strategy is that it may end up "stuck-n-the-middle," i.e., not having either a low cost or a uniqueness advantage (Chapter 4 Strategic Focus).

Accepted Answer

The answer of A risk of The Li Ning Company's...

Question 13

The ________dimension of relationships with customers is particularly important for social networking sites such as Facebook and MySpace.
A) reach
B) richness
C) affiliation
D) social

Accepted Answer

The answer of The ________dimension of relationships with customers is...

Question 14

Research shows that firms using a hybrid strategy (i.e., integrated cost leadership/differentation) often outperform firms using pure strategies ( i.e., cost leadership or differentation).

Accepted Answer

The answer of Research shows that firms using a hybrid...

Question 15

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.

Accepted Answer

The answer of One of the benefits of the integrated...

Question 16

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.

Accepted Answer

This statement is true. As competition increases within a narrow segment, companies may start to offer similar products or services, making it difficult for a focused company to maintain their unique selling proposition. Additionally, changes in consumer preferences or market trends may also make it challenging to continue catering to a small group of customers.

Question 17

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, wheelchairs for customer use, and extended hours.

Accepted Answer

The statement accurately describes differentiated features offered by IKEA in addition to its cost leadership strategy.

Question 18

According to the Chapter 4 Opening Case, part of Starbuck's success in 2011 was the decision to
A) cease introducing new products.
B) emphasize innovation by introducing new products.
C) cut back on the number of stores it operates.
D) discontinue unternational expansion.

Accepted Answer

The opening case states that part of Starbuck's success in 2011 was the decision to emphasize innovation by introducing new products.

Question 19

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?

Accepted Answer

The firm must determine how to satisfy the customer's needs, who the customer is, and what the customers' needs are in order to select an appropriate business level strategy. The only option that is not necessary to consider is why these customers' needs should be satisfied.

Question 20

Because of its focus on innovation and quality manufacturing, Total Quality Management is not useful for firms which follow a cost leadership strategy.

Accepted Answer

While Total Quality Management may place an emphasis on innovation and quality manufacturing, it can still be useful for firms pursuing a cost leadership strategy. TQM can help these firms improve efficiency, reduce waste, and enhance customer satisfaction, all of which can contribute to a lower cost structure and a competitive advantage in the marketplace.

Quiz 4: Business-Level Strategy

Which of the following is TRUE?

The three dimensions of a firm's relationships with customers include all the following EXCEPT

A firm's core strategy is its ____ strategy.

The hazard of getting "stuck in the middle" applies to firms using any business strategy.

Zara offers current and desirable fashion goods at relatively low prices. To implement this strategy, Zara has sophisticated designers and effective means of managing costs. Zara is an example of the integrated cost leadership/differentiation strategy.

The Li Ning Company's move from a cost leadership strategy to an integrated cost leadership/differentation strategy in the sportswear industry was so successful in China that both Nike and Adidas exited the Chinese market (Chapter 4 Strategic Focus).

Business-level strategies detail commitments and actions taken to provide value to customers and gain competitive advantage by exploiting core competencies in

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 flexible manufacturing system is a computer-controlled process used to produce a variety of products in moderate, flexible quantities with minimal manual intervention.

Starbuck's (Chapter 4 Opening Case) was able to revolutionize the coffee drining experience throug its business level strategy of