Lesson 1.1.
1. A creative, distinctive strategy that delivers a sustainable competitive advantage
is important because a strategy that yields a competitive advantage over rivals is a
company’s most reliable means of achieving above-average profitability and financial performance. True
2. A company achieves sustainable competitive advantage when?
A. It has a profitable business model.
B. A sufficiently large number of buyers have a lasting preference for its
products or services as compared to the offerings of competitors.
C. It is able to maximize shareholder wealth.
D. It is consistently able to achieve both its strategic and financial objectives.
E. Its strategy and its business model are well-matched and in sync.
3. Which of the following is a frequently used strategic approach to setting a
company apart from rivals and achieving a sustainable competitive advantage?
A. Striving to be the industry’s low-cost provider, thereby aiming for a cost-based competitive advantage
B. Outcompeting rivals on the basis of such differentiating features as higher quality,
wider product selection, added performance, better service, more attractive styling, or technological superiority
C. Developing competitively valuable resources and capabilities that rivals can’t
easily match, copy, or trump with capabilities of their own
D. Focusing on a narrow market niche and winning a competitive edge by doing a
better job than rivals of serving the special needs and tastes of buyers comprising the niche E. All of these
4. The need on the part of company managers to make regular adjustments in the
company’s business model is one of the basic reasons that a company’s strategy evolves over time. False
5. Which of the following statements about a company’s realized strategy is true?
A. A company’s realized strategy is mostly hidden to outside view and is deliberately
kept under wraps by top-level managers.
B. A company’s realized strategy is typically planned well in advance and usually
deviates little from the planned set of actions.
C. A company’s realized strategy generally changes very little over time unless a
newly appointed CEO decides to take the company in a new direction with a new strategy.
D. A company’s realized strategy is typically a blend of deliberate/planned
initiatives and emergent/ unplanned reactive strategy elements.
E. A company’s realized strategy is developed mostly on the fly because of the
constant efforts of managers to keep rival companies at a disadvantage.
6. The elements of a company’s business model are its business strategy, its
customer value proposition as well as the company’s profit formula. FALSE
7. A winning strategy is one that
A. Builds strategic fit, is socially responsible, and maximizes shareholder wealth.
B. Is highly profitable and boosts the company’s market share.
C. Results in a company becoming the dominant industry leader.
D. Fits the company’s internal and external situation, builds sustainable
competitive advantage, and improves company performance.
E. Can pass the ethical standards test, the strategic intent test, and the profitability test.
8. Which of the following questions ought to be used to distinguish a winning
strategy from a so-so or flawed strategy?
A. Does the strategy contain a sufficient number of emergent/reactive elements?
B. Is the company putting too little emphasis on growth and profitability and too
much emphasis on behaving in an ethical and socially responsible manner?
C. Is the strategy resulting in the development of additional competitive capabilities?
D. Is the strategy well-matched to the company’s situation, helping the company
achieve a sustainable competitive advantage, and resulting in better company performance?
E. Does the strategy strike a good balance between maximizing shareholder wealth
and maximizing customer satisfaction? Lesson 1.2:
1. The strategic management process is shaped by
A. Management’s strategic vision, strategic and financial objectives, and strategy.
B. The decisions made by the compensation and audit committees of the board of directors.
C. External factors such as the industry’s economic and competitive conditions
and internal factors such as the company’s collection of resources and capabilities.
D. A company’s customer value proposition and profit formula.
E. Actions to strengthen competitive capabilities and correct weaknesses, actions to
strengthen market standing and competitiveness by acquiring or merging with
other companies, and actions to enter new geographic or product markets.
2. The strategy-making, strategy-executing process is primarily the responsibility of
top executives and the board of directors; very few managers below this level are involved. False
3. Which one of the following is not an accurate attribute of an organization’s strategic vision?
A. A clearly articulated view of “where we are going”
B. Describing the company’s future product-customer-market-technology focus
C. Pointing an organization in a particular direction and charting a strategic path for it to follow
D. Providing managers with a reference point for making strategic decisions
E. Outlining how the company intends to implement and execute its business model
4. The difference between the concept of a company mission statement and the
concept of a strategic vision is that
A. A mission statement typically concerns a company’s present business scope
(“who we are and what we do”) whereas the principal concern of a strategic
vision is with the company’s future business scope (long term direction and
future product-customer-market- technology focus).
B. The mission is to make a profit, whereas a strategic vision concerns how to attract customers.
C. A mission statement deals with what to accomplish on behalf of shareholders and
a strategic vision concerns what to accomplish on behalf of customers.
D. A mission concerns what to do to achieve short-run objectives and a strategic
vision concerns what to do to achieve long-run performance targets.
E. A mission statement deals with “where we are headed” whereas a strategic vision
provides the critical answer to “how will we get there.”
5. Strategic objectives relate to strengthening a company’s overall market standing and competitive vitality. True
6. A balanced scorecard that includes both strategic and financial performance
targets is a conceptually strong approach for judging a company’s overall performance because
A. financial performance measures are lagging indicators that reflect the results
of past decisions and organizational activities whereas strategic performance
measures are leading indicators of a company’s future financial performance.
B. It entails putting equal emphasis on good strategy execution and good business model execution.
C. A balanced scorecard approach pushes managers to avoid setting objectives that
reflect the results of past decisions and organizational activities and, instead, to set
objectives that will serve as leading indicators of a company’s future financial performance.
D. It assists managers in putting roughly equal emphasis on short-term and long-term performance targets.
E. It more or less forces managers to put equal emphasis on financial and strategic objectives. 7. Corporate strategy
A. Is primarily concerned with strengthening a company’s market position and
building competitive advantage.
B. Is subject to being changed much less frequently than either a company’s
objectives or its mission statement.
C. Should be based on a flexible strategic vision and mission.
D. Ensures consistency in strategic approach among businesses of a diversified,
multibusiness corporation.
E. Determines balanced scorecard financial and strategic objectives. Lesson 1.3:
1. Ethical principles as they apply to business conduct and business decisions are
materially different from ethical principles in general. False
2. The major drivers of unethical business behavior include
A. Greed, pervasive managerial immorality, and a general lack of scruples on the part
of top executives regarding how customers and suppliers should be treated.
B. Corporate cultures that put the bottom line ahead of ethics, heavy pressures
on company managers to meet or beat performance targets, and overzealous
or obsessive pursuit of wealth accumulation, power, status, and other selfish interests.
C. Widespread managerial belief in the ethical relativism school of thinking.
D. An aversion to ethical correctness on the part of top executives and a belief that
unethical behavior is unimportant and probably won’t be discovered.
E. Intense competitive pressures.
3. The costs incurred when ethical wrongdoing is done fall into three specific
categories and include all except
A. Intangible costs such as legal and investigative costs incurred by the company.
B. Internal administrative costs associated with ensuring future compliance.
C. Intangible costs such as customer defections.
D. Less visible costs such as costs of complying with often harsher government regulation.
E. Visible costs to shareholders such as lower stock price.
4. Which of the following is not generally on a company’s menu of actions to
consider in crafting a strategy of social responsibility?
A. Actions to ensure that the company operates in an honorable and ethical manner
B. Actions to build a workforce that is diverse with respect to gender, race, national
origin, and perhaps other personal characteristics
C. Actions to look out exclusively for the best interests of shareholders
D. Actions to protect or enhance the environment (apart from what is required by governmental authorities)
E. Actions to create a work environment that enhances the quality of life for employees
5. Good corporate citizens
A. Go beyond meeting society’s expectations for ethical strategies and business
behavior by fostering social benefit and balancing the interests of all.
B. Are active participants in the political process.
C. Identify up-and-coming managers who have a future in local- or state-level politics.
D. Create a democratic workplace whereby the voices of lower-level employees are
heard through representation on the board of directors. E. All of these
6. Environmental sustainability involves
A. A corporate commitment to go beyond society’s expectations for ethical strategies
and business behavior to addressing the unmet noneconomic needs of society.
B. Striking a balance between (1) the economic responsibility to reward shareholders
with profits, (2) the legal responsibility to follow the laws in countries where it
operates, (3) the ethical responsibility to abide by society’s moral norms, and (4)
the discretionary philanthropic responsibility to contribute to the noneconomic needs of society.
C. Deliberate actions to protect the environment and provide for the longevity of
resources, maintain ecological support systems for future generations, and
guard against the ultimate endangerment of the planet.
D. Developing strategies that yield a sustainable competitive advantage that will
allow the company to be sustainable for the long term. E. All of these
7. Companies committed to environmental sustainability consider the commitment
to shareholders as a “first-order” priority, commitment to employees as a “second-
order” priority, and commitment to the environmental protection as a “third- order” commitment. False Lesson 2:
1. A company’s “macro-environment” refers to
A. The industry and competitive arena in which the company operates.
B. General economic conditions plus the factors driving change in the markets being served.
C. All the relevant forces and factors outside a company’s boundaries–general
economic conditions, population demographics, societal values and lifestyles,
technological factors, and governmental legislation and regulation.
D. The competitive market environment that exists between a company and its competitors.
E. The dominant economic features of a company’s industry
2. Which one of the following is not part of a company’s macro-environment?
A. Conditions in the economy at large
B. Population demographics and societal values and lifestyles C. Technological factors
D. Governmental regulations and legislation
E. The company’s resource strengths, resource weaknesses, and competitive capabilities
1. Which of the following is not a major question to ask in thinking strategically
about industry and competitive conditions in a given industry?
A. How many companies in the industry have good track records for revenue
growth and profitability?
B. What strategic moves are rivals likely to make next?
C. What are the key factors for future competitive success?
D. Does the outlook for the industry offer good prospects for profitability?
E. What forces are driving changes in the industry, and what impact will these
changes have on competitive intensity and industry profitability?
2. Thinking strategically about industry and competitive conditions in a given
industry involves evaluating such considerations as
A. The forces driving change in the industry.
B. The dominant economic features of the industry in which the company operates.
C. The kinds and strengths of competitive forces industry members are facing.
D. The key factors of success in the industry. E. All of the above
1. Which of the following is not a factor to consider in identifying an industry’s
dominant economic features?
A. The market size, growth rate and prospects
B. The scope of competitive rivalry including geographic area
C. The market demand-supply conditions
D. How strong driving forces and competitive forces are
E. The role and pace of technological change
2. Which of the following is not a relevant consideration in identifying an industry’s
dominant economic features?
A. Market size and growth rate, the geographic scope of competitive rivalry, and demand-supply conditions
B. How many strategic groups the industry has and which ones are most profitable and least profitable?
C. The number and sizes of buyers, the number of rivals, and the pace of product innovation
D. The pace of technological change
E. The current industry position in its life cycle to reveal the industry’s growth prospects 1.
The state of competition in an industry is a function of
A. The competitive pressures associated with rivalry among competing sellers to attract customers.
B. Competitive pressures coming from the attempts of companies in other industries
attempting to win buyers over to their substitute products.
C. Competitive pressures associated with the threat of new entrants into the marketplace.
D. Competitive pressures associated with the bargaining power of suppliers and customers. E. All of these
2. The nature and strength of the competitive forces that prevail in an industry is
generally a joint product of the
A. Pressures associated with rivalry among sellers to attract buyer patronage.
B. Threat that firms outside the industry will decide to enter the market.
C. Attempts of companies in other industries to win buyers over to their own substitute products.
D. Competitive pressures stemming from the bargaining power of both suppliers and buyers. E. All of these
3. Which of the following is not one of the five typical sources of competitive pressures?
A. The power and influence of industry driving forces
B. The bargaining power of suppliers and seller-supplier collaboration
C. The threat of new entrants into the market
D. The attempts of companies in other industries to win customers over to their own substitute products
E. The market maneuvering and jockeying for buyer patronage that goes on among rival sellers in the industry
4. Whether buyer bargaining power poses a strong or weak source of competitive
pressure on industry members depends in part on
A. Whether most buyers possess roughly equal or varying degrees of bargaining power.
B. How many buyers are engaged in collaborative partnerships with sellers?
C. Whether entry barriers are high or low.
D. Whether the overall quality of the items being furnished by industry members is rising or falling.
E. Whether buyer demand is strong or declining.
1. The “driving forces” in an industry
A. Are usually triggered by changing technology or stronger learning/experience curve effects.
B. Usually are spawned by growing demand for the product, the outbreak of price-
cutting, and big reductions in entry barriers.
C. Are major underlying causes of change in industry and competitive
conditions and have the biggest influences in reshaping the industry
landscape and altering competitive conditions.
D. Appear when an industry begins to mature but are seldom present during early
stages of the industry life cycle.
E. Are usually triggered by shifting buyer needs and expectations or by the
appearance of new substitute products.
2. Industry conditions change
A. Because of such powerful driving forces as swings in buyer demand, changing
interest rates, ups and downs in the economy, and higher/lower entry barriers.
B. Because of newly emerging industry threats and industry opportunities that alter
the composition of the industry’s strategic groups.
C. Because new industry key success factors emerge.
D. Because forces create pressures or incentives for industry participants
(competitors, customers, suppliers) to alter their actions in important ways.
E. Chiefly because of changes in the barriers to entry and the degree of competition from substitute products.
3. The steps involved in driving forces analysis are
A. Developing a comprehensive list of all the potential causes of changing industry conditions.
B. Predicting which new driving forces will emerge next.
C. Determining which of the five competitive forces is the biggest driver of industry change.
D. Identifying the driving forces, assessing whether their impact will make the
industry more or less attractive, and determining what strategy changes are
needed to prepare for the impact of the driving forces. E. All of these
4. Driving forces analysis
A. Involves identifying the driving forces, assessing whether their impact will
make the industry more or less attractive, and determining what strategy
changes a company may need to make to prepare for the impact of the driving forces.
B. Identifies which strategic group is the most powerful.
C. Helps managers identify which industry member is likely to become (or remain) the industry leader and why.
D. Helps managers identify which key success factors are most likely to help their
company gain a competitive advantage.
E. Helps managers identify which of the five competitive forces will be the strongest driver of industry change. 1. A strategic group
A. Consists of those industry members that are growing at about the same rate and
have similar product line breadth.
B. Includes all rival firms having comparable profitability.
C. Is a cluster of industry rivals that have similar competitive approaches and market positions?
D. Consists of those firms whose market shares are about the same size.
E. Is made up of those firms having comparable profit margins. 2.
A strategic group consists of those firms in an industry that
A. Are subject to the same driving forces.
B. Are placing about the same emphasis on each distribution channel.
C. Use the same key success factors to differentiate their products.
D. Employ similar competitive approaches and occupy similar positions in the market.
E. Have similar size market shares.
3. Which of the following is not an appropriate guideline for developing a strategic
group map for a given industry?
A. The variables chosen as axes for the map should indicate big differences in how
rivals have positioned themselves to compete in the marketplace.
B. The variables chosen as axes for the map can be quantitative, qualitative, or
discrete and defined in terms of distinct classes and combinations.
C. The variables chosen as axes for the map should be highly correlated.
D. Several maps should be drawn if more than one pair of variables can help
illuminate differences in the competitive positioning of industry members.
E. The sizes of the circles on the map should be drawn proportional to the combined
sales of the firms in each strategic group.
4. Not all positions on a strategic group map are equally attractive because
A. Entry and exit barriers are different for each strategic group.
B. Key success factors are usually quite different for differently positioned industry participants.
C. Small strategic groups are always less profitable than large strategic groups.
D. Across-group rivalry is strongest at the outer edges of the strategic group map.
E. Industry driving forces and competitive pressures favor some companies or groups
and hurt others and the profit potential of different strategic groups varies because
of strengths and weaknesses in each strategic group’s position.
1. The payoff of good scouting reports on rivals is improved ability to
A. Predict what strategic moves rivals are likely to make next, thereby allowing
a company to prepare defensive countermoves and develop strategies to
exploit rivals’ missteps.
B. Determine which rivals are in the best strategic group.
C. Figure out how many key success factors a rival has.
D. Determine whether a rival is gaining or losing market share, whether rivals are
increasing or decreasing r&d spending, and what new marketing promotions are in the works.
E. Determine whether a rival has the best strategy and is the industry leader.
2. Having good competitive intelligence about rivals’ strategies, latest actions and
announcements, resource strengths and weaknesses, and moves to improve their
situation is important because
A. It identifies who the industry’s current market share leaders are.
B. It helps a company to anticipate what moves rivals are likely to make next
and to craft its own strategic moves.
C. Good scouting reports help identify which rival is in which strategic group.
D. It enables company managers to determine which rival has the worst strategy and
how to avoid making the same strategy mistakes.
E. It enables more accurate predictions about how long it will take a particular rival
to copy most of what the strategy leader is doing.
1. The key success factors in an industry
A. Are the strategy elements, intangible assets, and competitive capabilities that
most affect industry members’ abilities to prosper in the marketplace.
B. Are determined by the industry’s driving forces.
C. Hinge on how many different strategic groups the industry has.
D. Depend on how many rivals are trying to move from one strategic group to another.
E. Are a function of such considerations as how many firms are in the industry, how
many have market shares above 5%, and whether the business models being used are similar or diverse.
2. An industry’s key success factors
A. Are a function of market share, entry barriers, economies of scale, degree of
vertical integration, and industry profitability.
B. Vary according to whether an industry has high or low long-term attractiveness.
C. Can be determined through identifying an industry’s dominant economic
characteristics, assessing the five competitive forces, considering the impacts
of the driving forces, comparing the market positions of industry members,
and forecasting the likely next moves of industry rivals.
D. Can be determined from studying the “winning” strategies of the industry leaders
and ruling out as potential key success factors the strategy elements of those firms
considered to have “losing” strategies.
E. Depend on the relative competitive strengths of the industry leaders and how
vulnerable they are to competitive attack.
1. Which of the following factors should a company consider when determining if an
industry offers good prospects for attractive profits?
A. The industry’s growth potential, whether competition appears destined to
become stronger or weaker, how the industry’s driving forces might affect
overall industry profitability, the company’s competitive position relative to
rivals, and the company’s proficiency in performing industry key success factors
B. An assessment of which firms in the industry have the best and worst competitive
strategies, whether the number of strategic groups in the industry is increasing or
decreasing, and whether economies of scale and experience curve effects are a key success factor
C. Whether there are more than five key success factors and more than five barriers to entry
D. Constructing a strategic group map and assessing the attractiveness of the
competitive position of each strategic group
E. Whether the market leaders enjoy competitive advantages and how hard it is to
develop a strongly differentiated product
2. Evaluating whether an industry presents a sufficiently attractive business
opportunity usually does not involve a consideration of which of the following factors?
A. The industry’s growth potential
B. Whether competitive pressures will likely grow stronger or weaker
C. Whether the industry’s future profitability will be favorably or unfavorably
affected by the prevailing driving forces
D. The company’s competitive position in the industry and its ability to perform industry key success factors
E. Whether the industry’s product is strongly or weakly differentiated Short answer
1. One important indicator of how well a company’s present strategy is working is whether
A. It has more core competencies than close rivals.
B. Its strategy is built around at least two of the industry’s key success factors.
C. The company is achieving gains in financial strength.
D. It has been able to create new industry demand through the use of a blue ocean strategy.
E. It is subject to weaker competitive forces and pressures than close rivals (a good sign).
2. Which one of the following is not a reliable measure of how well a company’s
current strategy is working?
A. Trends in the company’s sales and earnings growth
B. The company’s development of human capital, organizational capital, and information capital
C. Changes in the firm’s image and reputation with its customers
D. The company’s overall financial strength
E. Evidence of improvement in internal processes such as defect rate, order
fulfillment, and employee productivity.
1. A resource-based strategy
A. Is often based on cross-department combinations of intellectual capital and expertise.
B. Uses a company’s valuable and rare resources and competitive capabilities to
deliver value to customers that rivals have difficulty matching.
C. Is typically based on a stand-alone resource strength such as technological expertise.
D. Refers to a company’s most efficiently executed value-chain activity.
E. Uses industry key success factors to provide a company with a core competence
that rivals cannot effectively imitate.
2. A resource-based strategy
A. Focuses on exploiting a company’s best-executed operating strategy.
B. Is based upon efficient performance of the company’s primary value chain activities.
C. Concentrates on minimizing the costs associated with the design of a product or service.
D. Attempts to exploit resources in a manner that offers value to customers in
ways rivals are unable to match.
E. Focuses on working with forward channel allies to develop capabilities to
outmatch the capabilities of rivals.
1. One of the most telling signs of whether a company’s market position is strong or precarious is
A. Whether its product is strongly or weakly differentiated from rivals.
B. Whether its prices and costs are competitive with those of key rivals.
C. Whether it has a lower stock price than key rivals.
D. The opinions of buyers regarding which seller has the best product quality and customer service.
E. Whether it is in a bigger or smaller strategic group than its closest rivals.
2. Two analytical tools useful in determining whether a company’s prices and costs are competitive are
A. SWOT analysis and key success factor analysis.
B. SWOT analysis and benchmarking.
C. Value chain analysis and benchmarking.
D. Competitive position assessment and competitive strength assessment.
E. Driving forces analysis and SWOT analysis.
1. The value of doing competitive strength assessment is to
A. Determine how competitively powerful the company’s core competencies are.
B. Learn if the company’s market opportunities are better than those of its rivals.
C. Learn whether a company has a distinctive competence.
D. Learn how the company ranks relative to rivals on each of the important
factors that determine marketsuccess and ascertain whether the company has
a net competitive advantage or disadvantage vis-à-vis key rivals.
E. Determine whether a company’s resource strengths are sufficient to allow it to
earn bigger profits than rivals.
2. Doing a competitive strength assessment entails
A. Determining whether a company has a cost-effective value chain.
B. Ranking the company against major rivals on each of the important factors
that determine market success and ascertaining whether the company has a
net competitive advantage or disadvantage versus major rivals.
C. Identifying a company’s core competencies and distinctive competencies (if any).
D. Analyzing whether a company is well positioned to gain market share and be the industry’s profit leader.
E. Developing quantitative measures of a company’s chances for future profitability.
1. Identifying the strategic issues a company faces and compiling a “worry list” of
problems and roadblocks is an important component of company situation analysis because
A. Without a precise fix on what problems/issues a company confronts, managers
cannot know what the industry’s key success factors are.
B. The “worry list” sets the management agenda for taking actions to improve
the company’s performance and business outlook.
C. Without a precise fix on what problems/roadblocks a company confronts,
managers are less clear about what value chain activities to benchmark.
D. The “worry list” helps company managers clarify their thinking about how best to
modify the company’s value chain.
E. These issues and obstacles must be cleared before management can focus clearly
on what is the best strategy for the company to pursue.
2. Which of the following is not accurate as concerns the task of identifying the
strategic issues and problems that merit front-burner managerial attention?
A. It entails drawing upon the results and conclusions from analyzing the company’s external environment.
B. It entails drawing on the results and conclusions from evaluating the company’s
own resources and competitive position.
C. It entails developing a “worry list” of problems and issues for managerial strategy making.
D. Identifying the strategic issues and problems that the company faces is the
first thing that company managers need to do before starting to analyze the
company’s internal and external environment.
E. Developing a list of what issues and problems that managements needs to address
(and to resolve) should always precede deciding upon a strategy and what actions
to take to improve the company’s position and prospects.
The five generic competitive strategies Multiple choice
1. Which of the following is not one of the five generic types of competitive strategy?
A. Focused low-cost provider strategy
B. Broad differentiation strategy
C. Overall low-cost provider strategy
D. Focused differentiation strategy
E. Market share dominator strategy
2. The generic types of competitive strategies include
A. Build market share, maintain market share, and slowly surrender market share.
B. Offensive strategies and defensive strategies.
C. Low-cost provider, broad differentiation, focused low-cost, focused
differentiation, and best-cost provider strategies.
D. Low-cost/low-price strategies, high-quality/high-price strategies, medium-
quality/medium-price strategies, low-cost/high-price strategies.
E. Price leader strategies, price follower strategies, technology leader strategies, first-
mover strategies, offensive strategies, and defensive strategies. 3.
A company’s competitive strategy deals with
A. Management’s game plan for securing a competitive advantage relative to rivals.
B. What its strategy will be in such functional areas as r&d, production, sales and
marketing, distribution, finance and accounting, and so on.
C. Its efforts to change its position on the industry’s strategic group map.
D. Its plans for entering into strategic alliances, utilizing mergers or acquisitions to
strengthen its market position, outsourcing some in-house activities to outside
specialists, and integrating forward or backward. E. All of these 1.
Competitive Strategy represents the firm’s specific efforts to provide superior
value to customers by offering an equally good product at a lower price True 2.
A company achieves competitive advantage whenever it has some different
way of delivering way of delivering superior value to customers. F alse 1.
A low-cost leader’s basis for competitive advantage is A. Lower prices than rival firms. B.
Using a low-cost/low-price approach to gain the biggest market share. C. High buyer switching costs. D.
Lower overall costs than competitors. E. Higher unit sales than rivals. 2.
A competitive strategy of striving to be the low-cost provider is particularly attractive when
A. Buyers are not price sensitive.
B. The industry is made up of a large number or equal-sized rivals.
C. There are many ways to achieve product differentiation that have value to buyers.
D. Price competition is especially vigorous, buyers have low switching costs, and
the majority of industry sales are made to a few, large volume buyers.
E. Switching costs are high, price competition is strong, and buyers tend to use the
industry’s products in many different ways. 3.
To succeed with a low-cost provider strategy, company managers have to
A. Pursue backward or forward integration to detour suppliers or buyers with
considerable bargaining power and leverage.
B. Move the performance of most all value chain activities to low-wage countries.
C. Sell direct to users of their product or service and eliminate use of wholesale and retail intermediaries.
D. Do two things: (1) perform value chain activities more cost-effectively than
rivals and (2) be proactive in revamping the firm’s overall value chain to
eliminate or bypass “nonessential” cost-producing activities.
E. Outsource the majority of value chain activities. 1.
A company achieves low-cost leadership when it becomes the industry’s
lowest-cost provider rather than just being one of perhaps several competitors with comparatively low costs. T rue 2.
In striving for a cost advantage over rivals, managers don’t need to take care
to include features that buyers consider essential. F alse 1.
Successful differentiation allows a firm to
A. Command the largest market share in the industry.
B. Set the industry ceiling on price.
C. Avoid being overly concerned about whether entry barriers into the industry are high or low.
D. Command a premium price for its product and/or increase unit sales and/or
gain buyer loyalty to its brand.
E. Take sales and market share away from rivals by undercutting them on price. 2.
Perceived value and signaling value are often an important part of a
successful differentiation strategy when
A. The nature of differentiation is hard to quantify.
B. Buyers are making a first-time purchase.
C. Repurchase of the product or service is infrequent.
D. Buyers are unsophisticated and unfamiliar with the capabilities of competing brands. E. All of these 3.
Broad differentiation strategies generally work best in market circumstances where
A. Buyer needs and preferences are too diverse to be fully satisfied by a standardized product.
B. Most buyers have similar needs and use the product in the same ways.
C. The products of rivals are weakly differentiated and most competitors are resorting
to clever advertising to try to set their product offerings apart.
D. Buyers are price sensitive and buying switching costs are quite low.
E. The five competitive forces are strong. 1.
Differentiation strategies are attractive whenever buyers’ needs and
preferences are too diverse to be fully satisfied by a standardized product or by
sellers with identical capabilities. T rue 2.
Successful differentiation allows a firm to command a premium price for its product False 1.
What sets focused (or market niche) strategies apart from low-cost leadership
and broad differentiation strategies is
A. The extra attention paid to top-notch product performance and product quality.
B. Their concentrated attention on a narrow piece of the overall market.
C. Greater opportunity for competitive advantage.
D. Their suitability for market situations where most industry rivals have weakly differentiated products.
E. Their objective of delivering more value for the money. 2.
A focused low-cost strategy seeks to achieve competitive advantage by
A. Outmatching competitors in offering niche members an absolute rock-bottom price.
B. Delivering more value for the money than other competitors.
C. Performing the primary value chain activities at a lower cost per unit than can the industry’s low-cost leaders.
D. Dominating more market niches in the industry via a lower cost and a lower price than any other rival.
E. Serving buyers in the target market niche at a lower cost and lower price than rivals. 3.
A focused differentiation strategy aims at securing competitive advantage A.
By providing niche members with a top-of-the-line product at a premium price. B.
By catering to buyers looking for an upscale product at an attractively low price. C.
With a product or service offering carefully designed to appeal to the unique
preferences and needs of a narrow, well-defined group of buyers. D.
By developing product attributes that no other company in the industry has. E.
By convincing affluent buyers that the company has a true world-class product. 1.
A focused strategy based on differentiation aims at securing a competitive
advantage by offering niche members a product they perceive is better suited to
their own unique tastes and preferences. T rue 2.
The target segment or niche can be defined by specialized requirements in using the product T rue 1.
A firm pursuing a best-cost provider strategy
A. Seeks to be the low-cost provider in the largest and fastest-growing (or best) market segment.
B. Tries to have the best cost (as compared to rivals) for each activity in the industry’s value chain.
C. Tries to outcompete a low-cost provider by attracting buyers on the basis of charging the best price.
D. Seeks to deliver superior value to buyers by satisfying their expectations on
key quality/service/features/ performance attributes and beating their
expectations on price (given what rivals are charging for much the same attributes).
E. Seeks to achieve the best costs by using the best operating practices and
incorporating the best features and attributes. 2.
The aim of the best-cost provider strategy is to create a competitive advantage by
A. Incorporating attractive or upscale product attributes at a lower cost than rivals
B. Offering buyers, the industry’s best-performing product at the best cost and best
(lowest) price in the industry.
C. Attracting buyers on the basis of having the industry’s overall best-performing
product at a price that is slightly below the industry-average price.
D. Outcompeting rivals using low-cost provider strategies.
E. Translating its best-cost status into achieving the highest profit margins of any firm in the industry. 3.
For a best-cost provider strategy to be successful, a company must have
A. Excellent marketing and sales skills in convincing buyers to pay a premium price
for the attributes/ features incorporated in its product.
B. The capability to incorporate upscale attributes at lower costs than rivals
whose products have similar upscale attributes.
C. Access to greater learning/experience curve effects and scale economies than rivals.
D. One of the best-known and most respected brand names in the industry.
E. A short, low-cost value chain. 1.
A company achieves best-cost status from an ability to incorporate attractive
attributes at a higher cost than rivals. F alse 2.
A best-cost provider strategy is very appealing in markets where buyer
diversity makes product differentiation the norm and where many buyers are also
sensitive to price and value. T rue 1.
Which of the following is not among the principal offensive strategy options
that a company can employ?
A. Leapfrogging competitors by being the first adopter of next-generation
technologies or being first to market with next-generation products