Question 1

Differentiation is a viable strategy for earning above-average returns in a specific business because the resulting increased value to the customer
A) lowers costs.
B) lowers price sensitivity.
C) lowers customer loyalty.
D) lowers market share.
E) lowers entry barriers.

Accepted Answer

Differentiation creates a unique product or service that offers additional benefits, which can lower price sensitivity among customers. This can lead to a higher willingness to pay and, therefore, improved profitability for the firm.

Question 2

Which of the following is not one of the risks of a cost leadership strategy?
A) The technology that the organization has been using changes.
B) Pricing for higher quality that is too far above the price of the competition.
C) Competitors can achieve viable imitations.
D) Other bases for cost leadership erode.
E) Proximity in differentiation is lost.

Accepted Answer

Pricing for higher quality that is too far above the price of the competition is not a risk of a cost leadership strategy, as it goes against the main goal of cost leadership, which is to offer products or services at a lower cost than the competition. The other options listed are all potential risks of pursuing a cost leadership strategy.

Question 3

Walt Disney Company competes successfully in the entertainment industry using which of Porter's competitive strategies?
A) differentiation focus
B) stuck in the middle
C) cost leadership
D) differentiation
E) cost focus

Accepted Answer

Walt Disney Company competes using a differentiation strategy by offering unique and high-quality experiences that are not easily reproduced by competitors. Examples of this include their iconic brand, theme parks, and successful movie franchises.

Question 4

Research suggests that a differentiation strategy is more likely to generate higher profits than a lower cost strategy because differentiation creates
A) a better entry barrier.
B) a better exit barrier.
C) a better niche market.
D) a more sustainable competitive advantage.
E) no clear long-term strategy.

Accepted Answer

The answer of Research suggests that a differentiation strategy is...

Question 5

The last stage of a hypercompetitive industry is reached when the remaining large global competitors
A) raise entry barriers.
B) move into untapped markets.
C) attack the strongholds of other firms.
D) compete on cost and quality.
E) work their way to a situation of perfect competition in which no one has any advantage and profits are minimal.

Accepted Answer

The last stage of a hypercompetitive industry is characterized by intense competition and pressure on profit margins. At this stage, the remaining large global competitors have likely exhausted all possible strategies for gaining a competitive advantage and are now competing on cost and quality. Eventually, they will have worked their way towards a situation of perfect competition where no one has any advantage and profits are minimal. This is the ultimate stage of a hypercompetitive industry where firms may either merge or exit the market altogether.

Question 6

Which of Porter's competitive strategies is likely to predominate in a fragmented industry?
A) cost leadership
B) differentiation
C) cost focus
D) stuck in the middle
E) cooperative

Accepted Answer

Cost focus is the best choice in a fragmented industry because the market is characterized by many small players, making it difficult to achieve a large market share through cost leadership or differentiation. A cost focus strategy targets a niche within the industry where a company can achieve lower costs and compete on price.

Question 7

As an industry matures while overcoming fragmentation and becomes dominated by a small number of large companies,it tends to become a(n)
A) united industry.
B) fragmented industry.
C) consolidated industry.
D) isolated industry.
E) integrated industry.

Accepted Answer

When an industry becomes dominated by a small number of large companies, it tends to consolidate or become a consolidated industry. This is because the larger companies are able to acquire smaller competitors or merge with them, leading to fewer players in the market. This consolidation often results in increased efficiency and higher barriers to entry for new competitors, making it harder for new companies to enter the market.

Question 8

Morgan Motor Car Company manufactures classic British sports cars.Which of Porter's strategies is this company following?
A) differentiation focus
B) cost leadership
C) stuck in the middle
D) differentiation
E) cost focus

Accepted Answer

Morgan Motor Car Company targets a specific market segment (enthusiasts of classic British sports cars) with a unique product offering, which aligns with the differentiation focus strategy. This strategy involves offering a product or service that is perceived as unique or high-quality within a specific market segment.

Question 9

The focus strategies will likely predominate when many small- and medium-sized local companies compete for relatively small shares of the total market in a(n)
A) united industry.
B) fragmented industry.
C) consolidated industry.
D) isolated industry.
E) integrated industry.

Accepted Answer

Fragmented industries are characterized by a large number of small- and medium-sized companies competing for relatively small shares of the total market. In such an industry, focus strategies can be effective in targeting specific customer segments or niche markets. In contrast, united or consolidated industries are dominated by a few large companies, making it difficult for smaller players to compete using focused strategies. Isolated and integrated industries are not well-defined industry types.

Question 10

According to D'Aveni's book,Hypercompetition,which of the following statements is true?
A) Except for a few stable industries, strategy initiatives do not provide sustainable competitive advantage.
B) Hypercompetition is rare.
C) It is enough to gain competitive advantage by being the lowest cost competitor.
D) The theory of hypercompetition is not supported by any research.
E) The American home appliance industry was immune to hypercompetition.

Accepted Answer

D'Aveni argues that in hypercompetitive industries, sustained competitive advantage is rare and short-lived. Companies must constantly adapt and innovate to stay ahead, and strategy initiatives alone are not enough to guarantee success.

Question 11

Strict targets to improve efficiency are likely to be found in organizations following which of Porter's generic competitive strategies?
A) cost leadership
B) differentiation
C) stuck in the middle
D) differentiation focus
E) cooperative

Accepted Answer

Strict targets to improve efficiency are more likely to be found in organizations following Porter's cost leadership strategy, as this strategy focuses on achieving cost efficiencies and reducing costs to maintain competitive prices while still making a profit. Therefore, organizations following this strategy may implement strict targets to improve their operational efficiency and cost-effectiveness.

Question 12

Most entrepreneurial ventures follow
A) differentiation strategies.
B) focus strategies.
C) no strategies.
D) cost leadership strategies.
E) stuck in the middle strategies.

Accepted Answer

Most entrepreneurial ventures follow focus strategies, in which they specialize in a specific product, market, or customer segment to differentiate themselves from their competitors and create unique value for their customers.

Question 13

Which strategy is a firm following if it provides a unique and superior value in a narrow market?
A) differentiation focus
B) cost leadership
C) differentiation
D) cost focus
E) stuck in the middle

Accepted Answer

This firm is following the differentiation focus strategy, which involves providing unique and superior value in a narrow market segment.

Question 14

Competitive scope is
A) the breadth of the company's target market.
B) a business strategy.
C) the common thread found in the firm's mission statement.
D) the foundation of the choice between cost leadership and differentiation strategies.
E) an element of the marketing mix.

Accepted Answer

Competitive scope refers to the breadth of the company's target market, determining whether the company targets a broad market or a narrow market segment.

Question 15

According to Porter,a business unit in a competitive marketplace with no generic competitive strategy is
A) achieving synergy.
B) practicing innovative leadership.
C) stuck in the middle.
D) not goal directed.
E) last in line.

Accepted Answer

According to Porter, a business unit that has no clear, well-defined competitive strategy is "stuck in the middle." This is because they're not truly differentiating themselves from their competitors in any meaningful way, and thus are unlikely to be able to maintain a sustainable competitive advantage over the long term. Thus, the best answer choice is C.

Question 16

When a company is concerned that the higher price it charges for its higher quality is too far above the price of the competition,the company is likely addressing a risk of following which competitive strategy?
A) cost leadership
B) focus
C) stuck-in-the-middle
D) differentiation
E) competitive scope

Accepted Answer

Differentiation strategy involves offering unique products or services that justify a higher price. When a company worries its prices are too high compared to competitors, it's concerned about the sustainability of its differentiation strategy, fearing that customers may not perceive enough value in the higher quality to warrant the higher price.

Question 17

A method developed in the mid-1990s as an efficient means to quickly consolidate a fragmented industry can be referred to as a
A) merger.
B) strategic rollup.
C) cost strategy.
D) differentiation strategy.
E) focus strategy.

Accepted Answer

The method developed in the mid-1990s as an efficient means to quickly consolidate a fragmented industry is referred to as a strategic rollup. This involves a company acquiring multiple smaller companies within the same industry to increase market share, reduce competition, and achieve economies of scale.

Question 18

Which of Porter's broad mass market competitive strategies requires tight cost control,frequent detailed control reports,and cost minimization in areas like R&D,service and advertising?
A) focus
B) differentiation
C) cost leadership
D) focus differentiation
E) concentration

Accepted Answer

The broad mass market competitive strategy that requires tight cost control, frequent detailed control reports, and cost minimization in areas like R&D, service, and advertising is known as cost leadership. This strategy focuses on producing and delivering products or services at the lowest cost possible while maintaining an acceptable level of quality. It requires a relentless focus on cost reduction and efficiency, which requires tight cost control, frequent detailed control reports, and cost minimization in all areas of the business. Therefore, option C is the correct choice.

Question 19

As an industry becomes hypercompetitive,firms initially respond by
A) raising entry barriers.
B) moving into untapped markets.
C) attacking the strongholds of other firms.
D) competing on cost and quality.
E) working their way to a situation of perfect competition.

Accepted Answer

When an industry becomes hypercompetitive, firms often compete on cost and quality in order to differentiate themselves from their rivals. This is because it becomes increasingly difficult to maintain market share based solely on other factors like location or product features. By offering better value for money, firms can attract customers and gain an edge over their competitors.

Question 20

The book Hypercompetition was written by
A) Porter.
B) D'Aveni.
C) Mintzberg.
D) Maslow.
E) Drucker.

Accepted Answer

The book Hypercompetition was written by Richard D'Aveni, a professor of strategic management at the Tuck School of Business at Dartmouth College.

Quiz 6: Strategy Formulation: Business Strategy

Differentiation is a viable strategy for earning above-average returns in a specific business because the resulting increased value to the customer

Which of the following is not one of the risks of a cost leadership strategy?

Walt Disney Company competes successfully in the entertainment industry using which of Porter's competitive strategies?

Research suggests that a differentiation strategy is more likely to generate higher profits than a lower cost strategy because differentiation creates

The last stage of a hypercompetitive industry is reached when the remaining large global competitors

Which of Porter's competitive strategies is likely to predominate in a fragmented industry?

As an industry matures while overcoming fragmentation and becomes dominated by a small number of large companies,it tends to become a(n)

Morgan Motor Car Company manufactures classic British sports cars.Which of Porter's strategies is this company following?

The focus strategies will likely predominate when many small- and medium-sized local companies compete for relatively small shares of the total market in a(n)

According to D'Aveni's book,Hypercompetition,which of the following statements is true?

Strict targets to improve efficiency are likely to be found in organizations following which of Porter's generic competitive strategies?

Most entrepreneurial ventures follow

Which strategy is a firm following if it provides a unique and superior value in a narrow market?

Competitive scope is

According to Porter,a business unit in a competitive marketplace with no generic competitive strategy is

When a company is concerned that the higher price it charges for its higher quality is too far above the price of the competition,the company is likely addressing a risk of following which competitive strategy?

A method developed in the mid-1990s as an efficient means to quickly consolidate a fragmented industry can be referred to as a

Which of Porter's broad mass market competitive strategies requires tight cost control,frequent detailed control reports,and cost minimization in areas like R&D,service and advertising?

As an industry becomes hypercompetitive,firms initially respond by

The book Hypercompetition was written by