Bài tập Chương 4 Business level strategy and competitive advantage insights môn Business Strategy and Policy | Đại học kinh tế Quốc dân

lOMoAR cPSD| 58511332
Chap 4: Business - Level Strategy
A business model is developed first. Then the firm takes steps to understand customers in terms of who, what, and F
how in order to develop a business-level strategy
A business model should be selected with great care because it cannot be changed, or even adjusted, once a firm F
begins to use the model to implement its business-level strategy
A business-level strategy describes what a firm does to create, deliver, and capture value for its stakeholders. F
A business-level strategy is a framework for how the firm will create value, while a business model creates the F
path a firm intends to follow to gain competitive advantage
A business-level strategy is an integrated and coordinated set of commitments and actions the firm uses to gain a T
competitive advantage by exploiting core competencies in specific product markets.
A flexible manufacturing system is a computer-controlled process used to produce a variety of products in T
moderate, flexible quantities with a minimum of manual intervention.
A low-cost position in the industry is not a valuable defense against rivals when competing on the basis of price. F
A new generation of lunch trucks in cities such as New York, San Francisco, and Los Angeles is serving high-end T
fare such as hamburgers made from grass-fed cattle, escargot, and crème brulee, at less expensive prices than sit-
down restaurants. This illustrates a focused differentiation strategy
A risk of a focus strategy is that the needs of customers within a narrow competitive segment may become more T
similar to those of industry-wide customers as a whole over time
A risk of the differentiation strategy is that a firm's means of differentiation may cease to provide value for which T customers are willing to pay
Almost any identifiable human or organizational characteristic can be used to subdivide a market into segments T
that differ from one another on a given characteristic
Although it is a cost leader, IKEA also offers some differentiated features that appeal to its target customers, T
including its unique furniture designs, in-store playrooms for children, wheelchairs for customer use, and extended hours
Because of its focus on innovation and quality manufacturing, total quality management is not useful for firms F
that follow a cost leadership strategy.
Changing consumer needs are illustrated by Starbucks' enabling consumers to have an experience and design their T
own drinks rather than just a cup of coffee. lOMoAR cPSD| 58511332
Companies without core competencies in their value-chain activities and support functions are still able to F
successfully implement either a cost leadership or a differentiation strategy, although they cannot implement an
integrated cost leadership/differentiation strategy
Cost leaders usually concentrate on the value-chain activities of inbound logistics and outbound logistics as a T means to reduce costs
Delgado is a U.S.-based firm that serves an international market. It determines product offerings and price points F
based on the country in which the product will be sold. Delgado is using consumption patterns as the basis for segmenting its customers
Effective use of generic business strategies allows a firm to favorably position itself relative to the five T
competitive forces in the industry
Every firm uses all levels of strategy: corporate-level, merger and acquisition, international, and cooperative. F
Firms implementing cost leadership strategies often sell no-frills standardized goods or services (but with T
competitive levels of differentiation) to the industry's most typical customers
Flexible manufacturing systems, information networks, and total quality management are three techniques that F
make it possible for firms to implement the focused differentiation strategy
Global competition has increased the options for consumers and has made it more imperative for firms to identify T
the needs of customers to earn above-average returns
Human resources and other support functions are not value-creating activities in the value chain; only value-chain F activities create value
In general, firms can be MOST effective if they develop business-level strategies that will serve the needs of the F
"typical customer" in the industry
One of the benefits of the integrated cost leadership/differentiation strategy is that it is less risky than either the F
cost leadership or differentiation strategies.
Southwest Airlines' tightly integrated activities make its cost leadership strategy more vulnerable to imitation than F
if its activities were loosely integrated.
Steak and Shake just announced that it is selling some of its stores to individuals who will then pay a fee and T
royalties back to the company in exchange for use of the company name and products. Steak and Shake is
transitioning into a franchise business model lOMoAR cPSD| 58511332
Strategic fit among the many activities in the value chain is critical for competitive advantage because it is more T
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
The activities in the value chains of companies using focus strategies are quite different than the activities in the F
value chains of companies using industry-wide business strategies
The difference between the cost leadership and differentiation business-level strategies on the one hand, and the F
focused cost leadership and focused differentiation strategies on the other, are their basis for customer value
The differentiation strategy is ineffective for products that are expensive, luxury consumer goods. It is best used F
for common, inexpensive products such as donuts
The generalized forms of value that goods and services provide are either low-cost with acceptable features or T
highly differentiated features with acceptable cost.
The hazard of getting "stuck in the middle" applies to firms using any business strategy. F
The key to Southwest Airlines' success has been its ability to continuously reduce costs while providing customers F
with superior levels of differentiation, such as an engaging culture
The value-creating activities associated with the cost leadership strategy and differentiation strategy are the same. F
To position itself differently from competitors, a firm must decide whether it intends to perform activities T
differently or to perform different activities.
When selecting a business-level strategy, the firm determines who will be served, what needs those target T
customers have that it will satisfy, and how those needs will be satisfied.
38. A business-level strategy is an integrated and coordinated set of commitments and actions the
firm uses to gain a 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.
39. A firm's core strategy is its __________ strategy. a. corporate-level b. business-level c. pricing d. international
40. When selecting a business-level strategy, the firm must determine all of the following EXCEPT: lOMoAR cPSD| 58511332
a. how the customers’ needs will be satisfied. b. who the customer is.
c. what the customers' needs are.
d. why these customers' needs should be satisfied.
41. The three dimensions of a firm's relationships with customers include all the following EXCEPT:
a. exclusiveness. (tính độc quyền) b. affiliation.
c. richness. (tính phong phú) d. reach.
42. Which of the following statements is true?
a. As customer loyalty increases, customers are more sensitive to price increases.
b. Customer satisfaction has a positive relationship with firm profitability.
c. Customer loyalty is fragile (dễ vỡ) and cannot reliably be considered a factor in firm success.
d. Customer loyalty is of importance only to firms using the differentiation strategy.
43. The __________ dimension of relationships with customers is particularly important for social
networking sites such as Facebook and Instagram. a. reach b. richness
c. affiliation (tính liên kết) d. social
44. 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
following service dimensions? a. Reach b. Richness c. Affiliation
d. None of these is correct.
45. Viewing the world through the customer's eyes and constantly seeking ways to create more
value for the company enhances:
a. the reach of the company toward the customer.
b. the ability to identify the customer.
c. the richness of the relationship with the customer.
d. affiliation with the customer.
46. Before a firm decides what products to offer and what benefits and features they will have, it
must determine all of the following EXCEPT: a. who the firm should serve.
b. when the customers' needs should be satisfied.
c. what needs the firm should satisfy
d. how to use core competencies to satisfy customer needs. lOMoAR cPSD| 58511332
47. In the animal food products business, the food-product needs of owners of companion animal
pets (e.g., dogs and cats) differ from the needs for food and health-related products of those
owning production animals (e.g., livestock - gia súc). To which of the following aspects of
managing customer relationships does this choice refer? a. Who: Determining the Customers to Serve
b. What: Determining Which Customer Needs to Satisfy
c. How: Determining Core Competencies Necessary to Satisfy Customer Needs
d. When: Determining When to Satisfy Customer Needs
48. Starbucks determined that all of the following customer needs were important EXCEPT: a. low price.
b. the experience associated with drinking coffee, not just the coffee.
c. the actual product of service (e.g., a cup of coffee), not the experience.
d. allowing customers to design their own drinks.
49. Hyundai allows customers to return their cars if they lose their job within 12 months of
purchase. Hyundai is engaged in which of the following aspects of managing customer relationships?
a. Who: Determining the Customers to Serve
b. What: Determining Which Customer Needs to Satisfy
c. How: Determining Core Competencies Necessary to Satisfy Customer Needs
d. When: Determining When to Satisfy Customer Needs
51. In order to meet and exceed customers' expectations over time, 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.
52. Business-level strategies are concerned specifically with:
a. creating differences between the firm's position and its competitors.
b. selecting the industries in which the firm will compete.
c. how functional areas will be organized within the firm.
d. how a business with multiple physical locations will operate one of those locations.
53. 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. lOMoAR cPSD| 58511332
54. 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 these is correct.
56. By examining the activity map of Southwest Airlines, one can identify the areas of __________
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. strategic intent b. core competency c. differentiation d. data analytics
57. 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.
58. Strategic fit among many activities (often illustrated in an activity map) is fundamental to:
a. the development of core competencies for a firm.
b. the breadth of competitive scope for a firm.
c. sustainability of a firm's competitive advantage.
d. the integrity of the firm's value chain.
59. All of the following are considered generic business-level strategies EXCEPT:
a. product diversification. b. cost leadership.
c. focused differentiation.
d. integrated cost leadership/differentiation.
60. A company using a narrow target market in its business strategy is:
a. following a cost leadership business strategy.
b. focusing on a broad array of geographic markets.
c. limiting the group of customer segments served.
d. decreasing the number of activities on its value chain.
61. 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 a(n) __________ than the traditional networks. a. broader target market
b. narrower target market lOMoAR cPSD| 58511332
c. increased use of primary activities to capture value
d. increased use of support activities to capture value
62. The effectiveness of any of the generic business-level strategies is contingent on both:
a. customer needs and competitors' strategies.
b. the opportunities and threats in a firm’s external environment and the strengths and
weaknesses derived from the firm’s resource portfolio.
c. the trends in the general consumer base and the robustness of the global and industry economy.
d. the firm's competitive scope and its competitive advantage.
63. How does a firm capture value when using a franchise business model?
a. By receiving fees and royalty payments
b. By selling a premium version of its product or service
c. By giving advertisers access to target customers
d. By matching those who want a service with those who are providing it
64. A cost leadership strategy targets the industry's __________ customers. a. most typical b. poorest c. least educated d. most frugal
65. 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 Ceramics' 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 their 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.
66. Research suggests that having a competitive advantage in __________ creates more value with
a cost leadership strategy than with a differentiation strategy. a. marketing and sales b. technology development c. logistics d. human resource management lOMoAR cPSD| 58511332
67. A river barge company can offer cheaper, although slower, per-pound transportation of
products to companies when compared with transportation by air, truck, or rail. The river barge
company should first target customers whose companies use: a. the integrated cost
leadership/differentiation strategy.
b. either of the focus strategies.
c. the cost leadership strategy.
d. any of the strategies except the focused differentiation strategy.
68. Netflix offers products to customers on demand. What type of business model does Netflix use? a. Freemium b. Subscription c. Franchise d. Advertising
69. Airbnb matches people wanting to rent out their properties with individuals seeking properties
to rent. What type of business model does Airbnb use? a. Franchise b. Subscription c. Advertising d. Peer-to-peer
70. A company pursuing the differentiation or focused differentiation strategy would tend to:
a. build economies of scale and efficient operations.
b. develop and maintain cost-effective MIS operations.
c. develop flexible systems that allow rapid response to customers' changing needs.
d. have relationships with suppliers to maintain efficient flow of supplies for operations.
71. When the costs of supplies increase in an industry, the 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.
72. Ever-improving levels of efficiency enhance profit margins for a cost leader. This affects which
of the following forces of industry structure most directly? a. Potential entrants b. Substitutes c. Buyer power d. Supplier power
73. The typical risks of a cost leadership strategy include:
a. the inability to balance high differentiation and low price.
b. production and distribution processes becoming obsolete.
c. excessive differentiation to the point where the customer base is too small. lOMoAR cPSD| 58511332 d. loss of customer loyalty.
74. When a firm is able to produce nonstandardized (i.e., distinctive) products for customers who
value differentiated features more than they value low cost, the firm is successfully implementing a(n):
a. differentiation strategy.
b. cost leadership strategy.
c. integrated cost leadership/differentiation strategy.
d. single-product strategy.
75. A firm successfully implementing a differentiation strategy would expect:
a. customers to be sensitive to price increases.
b. to charge premium prices.
c. customers to perceive the product as standard.
d. to have high levels of power over suppliers.
76. The products or services that are differentiated from others have qualities that are:
a. perceived by the customer to add value that they will pay a premium to purchase.
b. valued by the typical industry customer.
c. perceived as standardized by the customer.
d. seen as classic attributes rather than passing fads
77. Blind taste-tests have shown that the taste of premium-priced vodkas and inexpensive vodkas
are indistinguishable even to regular drinkers of vodka. But the sales of premium vodkas are
thriving. This is an example of the:
a. perception of perceived prestige and status as a means of differentiating a product.
b. importance of high-quality raw materials when using the differentiation strategy.
c. risk of product imitation by competitors.
d. danger counterfeiting holds for firms pursuing the differentiation strategy.
78. Duolingo is a free app that includes in-app advertising. There is also an upgraded version that
consumers can purchase. What type of business model does Duolingo use?
a. Both franchise and advertising
b. Both freemium and differentiation
c. Both freemium and advertising d. Peer-to-peer
79. The use of a differentiation strategy would likely be LEAST effective in which of the following markets? a. Commodity goods b. Motion pictures c. Popular music d. Writing instruments lOMoAR cPSD| 58511332
80. All of the following are ways that a good or service can be differentiated EXCEPT:
a. responsive customer service.
b. perceived prestige and status.
c. economies of scale and efficient operations.
d. engineering design and performance.
81. The differentiation strategy can be effective in controlling the power of rivalry with existing
competitors in an industry because:
a. customers will seek out the lowest-cost product.
b. customers of nondifferentiated products are sensitive to price increases.
c. customers are loyal to brands that are differentiated in meaningful ways.
d. the differentiation strategy benefits from rivalry because it forces the firm to innovate.
82. 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. If Wholesome's main
supplier of lamb announces that the price for lamb will be 15 percent higher next year, which of
the following is most likely?
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.
83. Which of the following is NOT a value-creating activity associated with the differentiation strategy?
a. Developing policies to ensure efficient hiring and retention to keep costs low and implement
training to ensure high employee efficiency
b. Providing accurate and timely delivery of goods to customers
c. Ensuring the receipt of high-quality supplies (raw materials and other goods)
d. Developing flexible systems that allow rapid response to customers' changing needs
84. 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.
85. 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 a compact vehicle
rather than a new SUV. This is an example of the competitive risk that: lOMoAR cPSD| 58511332
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.
86. 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 sensitivity to price differentials b. threat by the cost leader c. customer experience d. counterfeiting
87. The typical risks of a differentiation strategy do NOT include which of the following?
a. Customers may find the price differential between the low-cost product and the differentiated product too large.
b. Customers' experience with other products may narrow customers' perception of the value of a
product's differentiated features.
c. Counterfeit goods are widely available and acceptable to customers.
d. Suppliers of raw materials erode the firm's profit margin with price increases.
88. A __________ is a framework for how a firm will create, deliver, and capture value. a. segmentation b. basis for value c. business-level strategy d. business model
89. 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.
90. Chico's is a clothing retailer that targets middle-aged women who want stylish and appealing
clothes that are suitable for the mature figure. Chico's has an extensive customer list, a frequent-
buyer discount card, and frequent sales promotions to Chico's customers based on their spending
levels. Chico's uses a(n) __________ strategy. a. focused differentiation based on a buyer group
b. focused differentiation based on a product line segment c. generic differentiation
d. integrated cost leadership/differentiation lOMoAR cPSD| 58511332
91. The new generation of lunch trucks serving high-end fare in cities such as New York, San
Francisco, and Los Angeles share which of the following business strategies? a. Cost leadership
b. Focused differentiation
c. Integrated cost leadership/differentiation d. Differentiation
92. Monteleone Company pays large fees to a highly recognizable, prestigious individual to be the
spokesperson for the company's luxury private jets. Monteleone is probably following the: a.
focused cost leadership strategy.
b. focused differentiation strategy.
c. integrated cost leadership/differentiation strategy
d. total quality strategy.
93. The risks of a focus strategy include:
a. a competitor's ability to use its core competencies to out-focus the focuser by serving an even
more narrowly defined segment.
b. a competitor's ability to use its core competencies to out-focus 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.
94. 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 more types of risks than are industry-wide strategies.
d. more subject to failure than industry-wide strategies.
95. 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.
96. 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 providing the same service with the same sources of differentiation at a lower price. Which of
the following categories 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. lOMoAR cPSD| 58511332
b. A competitor may focus on a more narrowly defined segment and thereby "out-focus" 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 customers' perceptions of vthe alue of the firm's differentiated features.
97. Zara has pioneered "cheap chic" in clothing apparel. Zara offers current and desirable
fashion goods at relatively low prices. To implement the strategy, Zara uses sophisticated
designers and effective means of managing costs. These are all characteristics of which of the
following business-level strategies? a. Cost leadership b. Differentiation
c. Integrated cost leadership/differentiation d. Stuck in the middle
98. 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 a 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.
99. The integration of a cost leadership and a differentiation strategy:
a. is challenging because it increases the number of value-chain activities and support functions
in which the firm must become competent.
b. forces a firm to adapt more slowly to changes in its environment.
c. allows the firm to avoid being "stuck in the middle."
d. requires such a large customer base that it is most practical for firms in the global marketplace.
100. Target's brand promise "Expect More. Pay Less" and appeal to higher-income, fashion-
conscious discount shoppers illustrates the __________ strategy. a. cost leadership b. differentiation c. focused differentiation
d. integrated cost leadership/differentiation
101. Blue Apron is committed to helping customers make good choices in what they eat by
delivering food directly to consumers. Blue Apron had a __________ model and uses a __________ strategy.
a. subscription; differentiation
b. focused differentiation; franchise
c. cost leadership; subscription
d. subscription; freemium
102. Three sources of flexibility in completing primary and support activities are particularly
useful for firms using the integrated strategy. These are:
a. flexible manufacturing systems, reengineering, and total quality management. lOMoAR cPSD| 58511332
b. outsourcing, reengineering, and flexible manufacturing systems.
c. outsourcing, total quality management, and information networks.
d. flexible manufacturing systems, total quality management, and information networks.
103. One benefit of a flexible manufacturing system is that:
a. the lot size needed to manufacture a firm's product efficiently is reduced.
b. the necessary skill levels of workers are reduced, allowing the firm to reduce costs.
c. it lends itself to the empowerment of employees.
d. it captures the cost savings of economies of scale.
104. A flexible manufacturing system is:
a. based on the use of temporary and part-time employees as well as outsourcing.
b. a computer-controlled process that is used to produce a variety of products in moderate, flexible
quantities with a minimum of manual intervention.
c. based on a 360-degree view of the company's relationships with customers.
d. a system that identifies "the one best way" to produce each product in the company's line.
105. A nationwide chain of pet stores wishes to identify the trade-offs that its customers are willing
to make between low-cost products such as generic pet foods and differentiated features such as
pick-up and delivery of pets for grooming. The best technique for this firm to learn this
information would be to use: a. information networks.
b. a flexible manufacturing system.
c. differentiation development planning.
d. enterprise resource planning.
106. By linking companies with their suppliers, distributors, and customers, __________ provide
a company with flexibility.
a. flexible manufacturing systems
b. information networks
c. total quality management systems d. capabilities
107. TQM is most helpful to firms following the __________ business strategy. a. cost leadership
b. integrated cost leadership/differentiation
c. focused cost leadership
d. focused differentiation
108. The term "stuck in the middle":
a. means adhering to a middle-of-the-road strategy in the face of negative outcomes.
b. indicates that the customers of the firm are willing to pay only a mid-range price for the product.
c. reflects the fact that the customers of the firm have only moderate expectations regarding product quality. lOMoAR cPSD| 58511332
d. means that the firm's cost structure is not low enough to allow it to attractively price its
products and that its products are not sufficiently differentiated to create value for its target customer.
109. All of the following describe strategies EXCEPT that they: a. are purposeful.
b. cannibalize the old strategy.
c. precede the taking of actions to which they apply.
d. demonstrate a shared understanding of the firm's vision and mission.
110. 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
111. The __________ dimension of relationships with customers is concerned with the firm's
access and connection to customers. a. loyalty b. reach c. richness d. affiliation
112. Reach is an especially critical dimension for which of the following firms? a. Twitter b. JCPenney c. Blockbuster d. Colgate-Palmolive
113. Customer ratings of products they bought online is an example of: a. loyalty. b. reach. c. richness. d. affiliation.
114. A company selling diapers knows the market is for people with infants and toddlers.
However, within that segment, it can further divide the market by a demographic factor like: a. culture b. lifestyle. c. consumption pattern. d. income.
115. When firms use core competencies to implement value-creating strategies, they are answering
the "__________" question. a. who b. what c. why lOMoAR cPSD| 58511332 d. how
116. Stage in the family life cycle is a __________ factor. a. demographic b. socioeconomic c. psychological d. perceptual
117. 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
118. Religious beliefs are an example of customer segmentation by __________ factors. a. demographic b. socioeconomic c. geographic d. psychological
119. 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
120. Chelsea Milling Company makes Jiffy packaged baking mixes. It was established in 1930. It
has never spent one cent on advertising, which is one reason it is able to pursue a(n) __________
strategy. a. differentiation b. focused differentiation
c. integrated cost leadership/differentiation d. cost leadership
121. Mercedes mass produces luxury vehicles at a premium price. It uses a(n) __________ strategy. a. differentiation
b. focused differentiation
c. integrated cost leadership/differentiation
d. focused cost leadership
122. 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 lOMoAR cPSD| 58511332
d. integrated cost leadership/differentiation
123. Define strategy and business-level strategy. What is the difference between these two concepts?
In general, a strategy consists of the choices an organization makes in an attempt to gain
strategic competitiveness and earn above-average returns. The organization's strategic choices are
influenced by threats and opportunities in the external environment and by the nation and the quality of
its internal resources, capabilities, and core competencies. The strategy reflects the firm's vision and
mission. Business-level strategy is concerned with a particular product market. Business-level strategy
is an integrated and coordinated set of commitments and actions the firm uses to gain a competitive
advantage by exploiting core competencies in specific product markets. It is the organization's core
strategy. Every firm, no matter how small, will have at least one business-level strategy. A diversified
firm will have several types of corporate-level strategies as well as a separate business-level strategy in
each product market area in which the company competes. The essence of a firm's business-level
strategy is choosing to perform activities differently or to perform different activities than competitors.
124. When a firm chooses a business-level strategy, it must answer the who, what, and how
questions. What are these questions, and why are they important?
The firm must decide (1) who will be served, (2) what needs those target customers have that it
will satisfy, and (3) how those needs will be satisfied. The choice of target customer (who) usually
involves segmenting the market to cluster people with similar needs into groups. The target customers'
needs drive "what" benefits and features the firm's product will have. This involves a choice and balance
between cost and differentiation of the product. Finally, firms use their core competencies (how) to
implement value-creating strategies and satisfy customers' needs.
125. Discuss how a cost leadership strategy can allow a firm to earn above-average returns in
spite of strong competitive forces. Address each of the five competitive forces.
1. Rivalry with Existing Competitors: Having a low-cost position serves as a valuable defense
against rivals. Because of the cost leader's advantageous position, especially in logistics, rivals
cannot reduce their costs lower than the cost leaders, and so they cannot earn above-average returns.
2. Bargaining Power of Buyers: The cost leadership strategy also protects against the power of
customers. Powerful customers can drive prices lower, but they are not likely to be driven below
that of the next-most- efficient industry competitor. Prices below this would cause the next-
most-efficient competitor to leave the market, leaving the cost leader in a stronger position relative to the buyer.
3. Bargaining Power of Suppliers: The cost leadership strategy also allows a firm to better
absorb any cost increases forced on it by powerful suppliers because the cost leader has greater
margins than its competitors. In fact, a cost leader may be able to force its suppliers to keep prices low for them. lOMoAR cPSD| 58511332
4. Potential Entrants: The cost leadership strategy also discourages new entrants because the
new entrant must be willing to accept no better-than-average returns until they gain the
experience and core competencies required to approach the efficiency of the cost leader.
5. Product Substitutes: For substitutes to be used, they must not only perform a similar function
but also be cheaper than the cost leader's product. When faced with substitute products, the cost leader can reduce its price.
126. Describe the risks of a differentiation strategy.
The risks of a differentiation strategy include the fact that the price differential between the
differentiator’s product and the cost leader’s product is too large. The differentiated products may
exceed the target customers' needs. Additionally, differentiation may cease to provide value for which
customers are willing to pay. This can occur if rivals imitate the firm's product and offer it at a lower
price. A third risk is that experience can narrow the customer's perception of the value of a product’s
differentiated features. If customers have positive experience with low-cost products, they may decide
the additional cost for the differentiated product is too high. Finally, counterfeit products are a risk to a
differentiation strategy if these products provide the same differentiated features to customers at significantly reduced prices.
127. Why is it important for a firm to develop and implement a business-level strategy?
The purpose of a business-level strategy is to create differences between the firm's position and
those of its competitors. To position itself differently from competitors, a firm must decide if it intends
to perform activities differently or if it will perform different activities. Strategy defines the path that
provides the direction of actions organizational leaders take to help their firm achieve success. The
firm's business-level strategy is a deliberate choice about how it will perform the value chain's primary
and support activities to create unique value. In the current complex competitive landscape, successful
use of a business-level strategy results from the firm learning how to integrate the activities it performs
in ways that create superior value for customers.
128. Describe the additional risks undertaken by firms pursuing a focus strategy.
Focus firms face three additional risks beyond the general risks of industry-wide strategies.
First, a competitor may be able to focus on a more narrowly defined competitive segment and thereby
"out-focus" the focuser. Second, a firm competing on an industry-wide basis may decide that the market
segment served by the firm using a focus strategy is attractive and worthy of competitive pursuit. Finally,
the needs of customers within a narrow competitive segment may become more similar to those of
industry-wide customers as a whole over time.
129. Describe the advantages of integrating cost leadership and differentiation strategies.
Customers have increasingly high expectations for products, wanting products that are both
low-priced and differentiated. So a number of firms are trying to simultaneously follow both a cost
leadership and a differentiation strategy. This requires the firm to perform the primary and support
activities required of both strategies, which is challenging. Successful integration of strategies allows
firms to adapt quickly to environmental changes and learn new technologies. The firm gains more skills
which makes it more flexible. Evidence suggests that the successful use of integrated strategies is related
to above-average returns. A number of firms, including Target, owe their success to the integrated cost
leadership/differentiation strategy. lOMoAR cPSD| 58511332
130. Describe the relationship between a business model and a business-level strategy and explain
why a business model might need to be changed or adjusted.
A business model is a framework for how the firm will create, deliver, and capture value while
a business-level strategy is the set of commitments and actions that yields the path a firm intends to
follow to gain a competitive advantage by exploiting its core competencies in a specific product market.
Understanding customers in terms of who, what, and how is foundational to developing and using
successfully both a business model and a business-level strategy. Regardless of the business model
chosen, those leading a company should view that selection as one that will require adjustment in
response to conditions that change from time to time in the firm’s external environment (e.g., an
opportunity to enter a new region surfaces) and its internal environment (e.g., the development of new
capabilities). Particularly because it is involved primarily with implementing a business-level strategy,
the operational mechanics of a business model should change given the realities a firm encounters while
engaging rivals in marketplace competitions.
131. Describe how a differentiation strategy can help a firm earn above-average returns.
The differentiation strategy is an integrated set of actions taken to produce goods or services (at
an acceptable cost) that customers perceive as being different in ways that are important to them.
Product innovation is critical to the successful use of the differentiation strategy. If the firm has a
thorough understanding of what its target customers value, the relative importance they attach to the
satisfaction of different needs, and for what they are willing to pay a premium, the differentiation
strategy can be effective in helping it earn above-average returns.
132. Describe a firm with which you are familiar. Which business-level strategy does it use, and
what are the risks to that particular firm?
Student answers will vary, but they are most likely to choose a firm with a cost-leader or
differentiation strategy because they are simpler to describe.