Question 1

A low-cost position in the industry is not a valuable defense against rivals when competing on the basis of price.

Accepted Answer

A low-cost position in the industry can be a valuable defense against rivals when competing on the basis of price. By having lower costs, a company can offer lower prices and still maintain profitability. This can attract price-sensitive customers and make it difficult for competitors to match prices without sacrificing profitability. However, achieving a low-cost position is not enough on its own and other factors such as quality, customer service, and branding also need to be considered when competing on the basis of price.

Question 2

Low-cost leaders usually concentrate on the value chain activities of inbound logistics and outbound logistics as a means to reduce costs.

Accepted Answer

Low-cost leaders typically focus on minimizing costs in all value chain activities, but they often prioritize inbound logistics (e.g. sourcing materials efficiently) and outbound logistics (e.g. delivering products to customers at a low cost) since these areas can have a significant impact on overall costs.

Question 3

A new generation of lunch trucks in cities such as New York, San francisco, and Los Angeles serving high-end fare such as hamburgers made from grass-fed cattle, escargot and crème brulee illustrate the focus cost leadership strategy.

Accepted Answer

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Question 4

Counterfeit products are a serious problem for firms following the differentiation strategy.

Accepted Answer

Counterfeit products can easily mimic the unique features and qualities of a differentiated product. This makes it difficult for consumers to distinguish between the original and the fake products, which can ultimately undermine the value proposition of the original product and hurt the competitive advantage of the firm that follows a differentiation strategy.

Question 5

Kazoo Toys has successfully implemented an integrated cost leadership /differentiation strategy by creating value for parents and children interested in purchasing unique toys while simultaneously having access to unique services.

Accepted Answer

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Question 6

A risk of the differentiation strategy is that the firm's means of differentiation may eventually not provide value for which customers are willing to pay.

Accepted Answer

This is a common risk of the differentiation strategy as customer preferences and expectations may change over time, causing the firm's means of differentiation to become less valuable or unique.

Question 7

The differentiation strategy is effective for products that are expensive, luxury consumer goods. It is not effective for common, inexpensive products such as doughnuts.

Accepted Answer

The differentiation strategy can be effective for common, inexpensive products such as doughnuts if a company is able to differentiate their doughnuts from competitors through unique flavors, ingredients, or packaging. However, it may not be as effective as it would be for expensive, luxury consumer goods.

Question 8

According to the Chapter 4 Strategic Focus, Walmart's change in strategy to attract more upscale customers was particularly successful especially against Family Dollar and Amazon.

Accepted Answer

The statement is incorrect. Walmart's change in strategy to attract more upscale customers was not particularly successful against Family Dollar or Amazon. Walmart's primary competition in this market segment is Target.

Question 9

The activities in the value chains of companies using focus strategies are quite different than the activities in the value chains of companies using industry-wide business strategies.

Accepted Answer

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Question 10

Firms implementing cost leadership strategies often sell no-frills standardized goods or services (but with competitive levels of differentation) to the industry's most typical customers.

Accepted Answer

This is true. Firms implementing cost leadership strategies typically focus on producing standardized products or services with minimal frills, but they still differentiate themselves from their competition through competitive pricing and efficient operations. They often target the industry's most typical or price-sensitive customers.

Question 11

In general, firms can be most effective if they develop business-level strategies that will serve the needs of the "typical customer" in the industry.

Accepted Answer

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Question 12

The best of the generic business strategies is the integrated cost leadership/differentiation strategy.

Accepted Answer

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Question 13

The integrated cost leadership/differentiation strategy is superior to the other business-level strategies.

Accepted Answer

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Question 14

The value-creating activities associated with the cost leadership strategy and differentation strategy are the same.

Accepted Answer

The activities associated with cost leadership strategy and differentiation strategy are different. Cost leadership strategy focuses on reducing costs at every level of the value chain, whereas differentiation strategy focuses on developing unique and desirable products or services that customers are willing to pay a premium for. This requires different activities such as research and development, marketing, and product design.

Question 15

Unlike a cost leadership and a differentiation strategy, both focus strategies are less dependent on the completion of various value chain and support activities in order to compete in a superior manner.

Accepted Answer

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Question 16

Human resources and other support functions are not value-creating activities in the value chain; only the value chain activities create value.

Accepted Answer

Human resources and other support functions can contribute to the efficiency and effectiveness of the value chain activities, thus indirectly adding value to the final product or service. However, they are not directly involved in the creation of the product or service, which means they are not value-creating activities in the value chain.

Question 17

Walmart's actions (Chapter 4 Strategic Focus) of becoming more upscale with the intent of taking sales away from Target provided an opening for competitors such as Amazon and Family Dollar to better compete on the basis of price and attract several of Walmart's customer.

Accepted Answer

Walmart's shift towards a more upscale strategy allowed Amazon and Family Dollar to compete with Walmart on the basis of price and potentially attract some of Walmart's customers.

Question 18

A low-cost leader may create entry barriers to potential entrants by continually improving its levels of efficiency.

Accepted Answer

By continually improving efficiency and reducing costs, a low-cost leader can maintain its low prices and make it difficult for potential entrants to compete on cost. This can create a barrier to entry for these competitors.

Question 19

Virtually anything can be a basis for a firm to create a differentiated product or service.

Accepted Answer

This is true. A firm can differentiate its product or service based on features, quality, price, design, packaging, branding, marketing, customer service, or any other aspect that sets it apart from its competitors.

Question 20

Essentially, there are only two basic competitive advantages: lower cost than rivals and the ability to differentiate.

Accepted Answer

The statement is true, as per Porter's Generic Strategies theory, a company can achieve competitive advantage either by offering lower cost products or by differentiating their products from their competitors.

Quiz 4: Business Level Strategy