Q&A Hero

Q: Recently, the only type of car available for Anthony to rent on a business trip was a compact, fuel-efficient Japanese import. Anthony was surprised at the comfort and performance of the car. He is in the market for a new car and had previously considered only buying another luxury SUV. Now, he is thinking about the significant cost savings he would have if he bought the compact vehicle rather than a new SUV. This is an example of the competitive risk that: a. a competitor's products can convey a product's differentiated features to a customer at a significantly reduced price. b. a product imitation can cause customers to perceive that competitors offer essentially the same goods. c. experience can narrow a customer's perceptions of the value of a product's differentiated features. d. brand loyalty insulates a company from rivalry with competitors.

Q: The focused differentiation strategy differs from the differentiation strategy in that: a. the focused differentiators have a broader competitive scope. b. the value-creating activities of focused differentiators are more constrained. c. focused differentiators target a narrower customer market. d. there are fewer risks with the focused differentiation strategy.

Q: 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?

Q: The ________dimension of relationships with customers is particularly important for social networking sites such as Facebook and Twitter. a. reach b. richness c. affiliation d. social

Q: New Balance Athletic Shoes target Baby Boomers' needs for well-fitting shoes. The company is unique in that it offers a very broad range of shoe widths. A realistic potential risk New Balance runs in this focused differentiation strategy includes the possibility that: a. Baby Boomers may find that they do not need well-fitting shoes, because they will become increasingly sedentary as they age. b. a competitor may be able to better use flexible manufacturing systems to make shoes with an individualized fit. c. athletic shoes may go out of style. d. New Balance shoes may begin to appeal to a wider market, thus losing New Balance's focus advantage.

Q: A cost leadership strategy targets the industry's ____ customers. a. most typical b. poorest c. least educated d. most frugal

Q: Before the firm decides what products to offer and what benefits and features they will have, the firm must decide all the following questions EXCEPT: a. who the firm should serve. b. when the customer's needs should be satisfied. c. what needs the firm should satisfy. d. what core competencies are needed to satisfy customer needs.

Q: Ever-improving levels of efficiency enhance profit margins for a cost-leader. This effects which of the five forces of industry structure most directly? a. Potential entrants b. Substitutes c. Buyer power d. Supplier power

Q: More choices and easily accessible information about the functionality of firms' products are creating increasingly ______ customers. a. sophisticated and knowledgeable b. loyal c. dissatisfied d. content

Q: When the costs of supplies increase in an industry, the low-cost leader: a. may continue competing with rivals on the basis of product features. b. will lose customers as a result of price increases. c. will be unable to absorb higher costs because cost-leaders operate on very narrow profit margins. d. may be the only firm able to pay the higher prices and continue to earn average or above-average returns.

Q: As the television industry has changed in the last few decades from just three major networks to a multiplicity of networks, one of the major aspects of business strategy for the newer networks is ____ than the traditional networks. a. broader target market b. narrower target market c. increased use of primary activities to capture value d. increased use of support activities to capture value

Q: If Southwest Airlines employees lost their high enthusiasm and commitment to the company: a. the airline could continue without problems because its cost leadership strategy is dependent on its efficient internal procedures. b. replacement employees could be hired from rival airlines that are laying off employees and easily be merged into the Southwest culture. c. there would be no impact on Southwest's profitability because Southwest's customers value the low fares rather than being "entertained" by the employees. d. Southwest would have lost one of its competitive advantages, and its performance would be threatened.

Q: Walmart went against business-level strategy and made changes to attract upscale customers. These changes had which of the following results? a. It strengthened Walmart's position against rivals such as Dollar Stores and Amazon. b. It made Walmart vulnerable to Dollar Store and Amazon. c. It attracted significant numbers of new customers. d. Family Dollar, Dollar Tree, and Dollar General all experienced losses in sales as many of their customers went to Walmart.

Q: Wholesome Pet Food has successfully specialized for 20 years in high-quality pet food made from all-natural ingredients and organically raised lamb. This brand has a strong following and is recommended by veterinarians who practice in affluent neighborhoods. Wholesome's main supplier of lamb has announced that the price for lamb will be 15 percent higher next year. Which one of the following is true? a. Wholesome will probably be able to pass the cost on to its customers because they are less sensitive to price increases than the average buyer. b. Companies pursuing Wholesome's business strategy are especially vulnerable to this risk. c. If Wholesome raises its pet food prices, customers will turn to less expensive brands such as Purina. d. Wholesome probably operates on very thin margins, and a cost increase will threaten its ability to earn average returns.

Q: When a firm is able to produce nonstandardized (that is, distinctive) products for customers who value differentiated features more than they value low cost, the firm is successfully implementing: a. a differentiation strategy. b. a cost leadership strategy. c. an integrated cost leadership/differentiation strategy. d. a single-product strategy.

Q: Historically, women have paid more for dry cleaning than men. Signature Cleaners advertises "equal price" for all customers. Signature Cleaners appeals to women, which is market segmentation by ______ factors. a. demographic b. socioeconomic c. geographic d. consumption pattern

Q: Focus strategies are: a. sheltered from the risks associated with industry-wide strategies because of their niche focus. b. able to avoid global risk by focusing on niches in national or regional markets. c. faced with additional types of risks than are industry-wide strategies. d. more subject to failure than industry-wide strategies.

Q: J.C. Penney attempted the strategy ______ . But it couldn't out ______ Walmart, nor could it ______ Macy's and Target. a. of integrated cost leadership; price; compete with b. of focused differentiation; cost; differentiate between c. of cost leadership; cost; differentiate between d. of focused cost leadership; price; differentiate between

Q: Customer ratings of products they bought online is an example of: a. loyalty. b. reach. c. richness. d. affiliation.

Q: The risks of a focus strategy include: a. a competitor's ability to use its core competencies to outfocus the focuser by serving an even more narrowly defined segment. b. a competitor's ability to use its core competencies to outfocus the focuser by serving an even more broadly defined segment. c. decisions by industry-wide competitors to use their resources to serve a wider range of customers' needs than the focuser has been serving. d. decisions by focused competitors to use their resources to serve a wider range of customers' needs.

Q: By examining the ____ of Southwest Airlines, one can identify the strategic themes around which it has developed its business strategy. These themes include limited passenger service, high aircraft utilization, and highly productive ground and gate crews. a. activity map b. profit sharing c. value diagram d. five forces model

Q: An entrepreneur is investigating starting a company that provides tax advice to small companies. In order to position his company differently from the existing competitors, the entrepreneur must: a. analyze the reach, richness, and affiliation the company must have with its customers. b. provide tax advice either in a different manner or provide a different kind of tax service than competitors. c. offer tax advice at a price lower than the cheapest competitor. d. offer tax advice at a higher quality than the best competitor.

Q: Walmart's same store sales have been declining and those of rivals Family Dollar and Amazon have been increasing. What could explain this recent change? a. Walmart was too aggressive with its low-cost position and lost customers who wanted more upscale products. b. Walmart changed its strategy to focused differentiation. c. Amazon and Family Dollar changed their strategies to attract more upscale customers. d. Walmart changed its strategy to attract more upscale customers.

Q: Suppose another firm found a way to offer IKEA's customers (young buyers interested in stylish furniture at low cost) additional sources of differentiation while charging the same price or to provide the same service with the same sources of differentiation at a lower price. What category of competitive risk to a focus strategy would this be? a. An industry-wide competitor decides that the market segment served by IKEA is worth entering. b. Focusing on a more narrowly defined segment and "outfocusing" the focuser. c. The needs of the customers in this narrow segment have become more similar to those of industry-wide competitors. d. Experience can narrow customer's perceptions of value of the firm's differentiated features.

Q: Durable Ceramics, Inc., provides inexpensive ceramic tile to builders of institutional buildings such as schools, prisons, and public administration buildings. It has always competed on a cost leadership basis. Most of its products are purchased by a few commercial construction firms, so it is fairly dependent on these construction firms for selling its product. Durable Ceramic's next most-efficient competitor, Cost-Less Ceramics, Inc., earns average returns, whereas Durable earns above-average returns. The commercial construction firms are putting pressure on Durable to reduce its prices. If Durable reduces its prices below those of Cost-Less's prices, it is likely that: a. both Durable and Cost-Less will devise additional ways to become more efficient in their production processes. b. Durable will be unable to absorb the lower cost, and will go out of business. c. both Cost-Less and Durable will go out of business, leaving the customers with fewer alternative sources of low-cost tile. d. Cost-Less will go out of business, and Durable will gain higher power over its customers.

Q: Religious beliefs are an example of customer segmentation by ______ factors. a. demographic b. socioeconomic c. geographic d. psychological

Q: A manufacturer of jewelry imitates the style of a popular and expensive brand using manufactured stones rather than real gemstones and lesser grade metals rather than silver and gold. The manufacturer packages the jewelry in boxes of the same color imprinted with an almost identical logo. About 85 percent of the company's sales are through Internet sales. This example illustrates the competitive risk of ____ that threatens companies that use the differentiation strategy. a. customer sensitive to price differentials b. threat by the cost leader c. customer experience d. counterfeiting

Q: In order to meet and exceed customer's expectations, firms must: a. constantly manipulate customers' perceptions of their needs. b. answer the questions: who, what, when, where, how, and why as they apply to customers. c. continuously improve, innovate, and upgrade their core competencies. d. successfully defend their established core competencies from imitation by competitors.

Q: All of the following are examples of differentiated products EXCEPT: a. Mont Blanc pens. b. Caterpillar's heavy-duty earth-moving equipment. c. Great Value brand at Walmart. d. Prada fashion.

Q: The three dimensions of a firm's relationships with customers include all the following EXCEPT: a. exclusiveness. b. affiliation. c. richness. d. reach.

Q: The book The Dyslexic Advantage appeals to a market of educators, people with dyslexia, their friends, family, and coworkers. This is customer segmentation by ______ factors. a. demographic b. socioeconomic c. psychological d. consumption

Q: The analysis of the activity map of a successful company such as Southwest Airlines emphasizes how: a. the organizational culture of Southwest Airlines is the key to the success of the organization. b. understanding the profit ability in an industry indicates to companies where above-average returns can be earned. c. it is hard for rivals to match a configuration of integrated activities than to imitate a single activity. d. the primary and support activities of a successful company capture value all along the value chain.

Q: Firms use the integrated cost leadership/differentiation strategy because: a. other firms have established unassailable market dominance with the other four strategies. b. global markets allow for much broader competitive scope. c. most consumers want to pay a low price for products with somewhat highly differentiated features. d. one strategy is not enough for most large firms.

Q: A firm using a(n) ______ strategy generally needs to operate "below the radar" of larger and more resource rich firms that serve the broader market. a. cost leadership b. differentiation c. focused d. integrated cost leadership/differentiation

Q: Which of the following are central to implementing value-creating strategies and thereby satisfying customers' needs? a. Firm resources b. Capabilities c. Core competencies d. None of the the above

Q: All of the following describe strategies EXCEPT: a. they are purposeful. b. they cannibalize the old strategy. c. they precede the taking of actions to which they apply. d. they demonstrate a shared understanding of the firm's vision and mission.

Q: A differentiation strategy can be effective in controlling the power of substitutes in an industry because: a. customers have low switching costs. b. substitute products are lower quality. c. a differentiating firm can always lower prices. d. customers develop brand loyalty.

Q: The use of a differentiation strategy would be expected to be LEAST effective in which of the following markets? a. Commodity goods b. Mmotion pictures c. Popular music d. Writing instruments

Q: A business-level strategy is an integrated and coordinated set of commitments and actions designed to exploit core competencies and gain a competitive advantage in specific product markets. a. True b. False Indicate the answer choice that best completes the statement or answers the question.

Q: Global competition has increased the options for consumers and has made it more imperative for firms to identify the needs of customers to earn above-average returns. a. True b. False

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

Q: Strategic fit among the many activities in the value chain is critical for competitive advantage because it is more difficult for a competitor to match a configuration of integrated activities than to imitate a particular activity, such as sales promotion or a process technology. a. True b. False

Q: To position itself differently from competitors, a firm must decide to either perform activities differently or to perform different activities. a. True b. False

Q: The key to Southwest Airlines' success has been its ability to continuously reduce costs while providing customers with superior levels of differentiation, such as an engaging culture. a. True b. False

Q: Because of its focus on innovation and quality manufacturing, Total Quality Management is not useful for firms that follow a cost leadership strategy. a. True b. False

Q: Effective use of the generic business strategies allows a firm to favorably position itself relative to the five forces. a. True b. False

Q: The differentiation strategy is effective for products that are expensive, luxury consumer goods. It is not effective for common, inexpensive products such as donuts. a. True b. False

Q: 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. a. True b. False

Q: 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. a. True b. False

Q: Firms implementing cost leadership strategies often sell no-frills standardized goods or services (but with competitive levels of differentiation) to the industry's most typical customers. a. True b. False

Q: Walmart's change in strategy to attract more upscale customers will likely succeed because cost leaders are good at differentiating. a. True b. False

Q: 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. a. True b. False

Q: 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. a. True b. False

Q: 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 crme brulee, at less expensive prices than sit-down restaurants. This illustrates a focus cost leadership strategy. a. True b. False

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

Q: Every firm uses all levels of strategy: corporate, acquisition and restructuring, international and cooperative. a. True b. False

Q: 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, and extended hours. a. True b. False

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

Q: The value-creating activities associated with the cost leadership strategy and differentiation strategy are the same. a. True b. False

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

Q: The hazard of getting "stuck in the middle" applies to firms using any business strategy. a. True b. False

Q: 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. a. True b. False

Q: Southwest Airlines' tightly integrated activities make its cost leadership strategy more vulnerable to imitation than if its activities were loosely integrated. a. True b. False

Q: Almost any identifiable human or organizational characteristic can be used to subdivide a market into segments that differ from one another on a given characteristic. a. True b. False

Q: Research shows that firms using a hybrid strategy (i.e., integrated cost leadership/differentiation) often outperform firms using pure strategies ( i.e., cost leadership or differentiation). a. True b. False

Q: When selecting a business-level strategy, the firm determines who will be served, what customer needs will be satisfied, and how those needs will be satisfied. a. True b. False

Q: The difference between the cost leadership and differentiation business-level strategies, and the focused cost leadership and focused differentiation strategies, are their basis for customer value. a. True b. False

Q: The best of the generic business strategies is the integrated cost leadership/differentiation strategy. a. True b. False

Q: Changing consumer needs are illustrated by Starbucks' enabling consumers to have an experience and design their own drinks rather than just a cup of coffee. a. True b. False

Q: Companies without core competencies in their value chain activities and support functions are still able to successfully implement either a cost leadership or a differentiation strategy, although they cannot implement an integrated cost leadership/differentiation strategy. a. True b. False

Q: The integrated cost leadership/differentiation strategy is superior to the other business-level strategies. a. True b. False

Q: The generalized forms of value that goods and services provide are either low cost with acceptable features or highly differentiated features with acceptable cost. a. True b. False

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

Q: Walmart's actions to become more upscale with the aim 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 some of Walmart's customers. a. True b. False

Q: Human resources and other support functions are not value-creating activities in the value chain; only value chain activities create value. a. True b. False

Q: Capabilities are usually developed separately from specific functional areas such as manufacturing, R&D, and marketing. a. True b. False

Q: The value of tangible assets, such as the firm's borrowing capacity and its physical plant, is high because these assets can be easily leveraged to derive additional value. a. True b. False

Q: Costly-to-imitate capabilities are those which other firms cannot easily develop as they have no strategic equivalent. a. True b. False

Q: Understanding how to leverage the firm's unique bundle of resources and capabilities is a key outcome decision makers seek when analyzing the internal organization. a. True b. False

Q: Firms achieve strategic competitiveness and earn above-average returns by acquiring, bundling, and leveraging their resources for the purpose of taking advantage of opportunities in the external environment in ways that create value for customers. a. True b. False