Deck 5: Business-Level Strategy

Question 1

Unlike a cost leadership and a differentiation strategy,the focus strategy is less dependent on the completion of various primary and secondary activities in order to compete in a superior manner.

Answer 1

False

Question 2

Firms can be most effective if they develop business-level strategies that will serve the needs of the "average customer."

Answer 2

False

Question 3

Business-level strategies are concerned with a firm's ability to reach its maximum profit potential.

Answer 3

False

Question 4

Business-level strategy can be thought of as the firm's core strategy.

Question 5

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

Question 6

Companies without the core competencies to link primary and support activities are still able to implement successfully a differentiation strategy.

Question 7

The finance and R&D functions are emphasized in the differentiation strategy's functional structure.

Question 8

Firms implementing cost leadership strategies often sell no-frills standardized goods or services to the industry's most typical customers.

Question 9

Common characteristics on which customers' needs vary include demographic variables and physical characteristics.

Question 10

The functional structure is most appropriate for larger firms implementing a strategy that includes high levels of diversification.

Question 11

Because firms need to respond quickly to environmental opportunities and threats,the implementation of the differentiation strategy is positively affected when the firm is centralized and formalized.

Question 12

A business-level strategy reflects a firm's beliefs about what products and services it should be offering to customers,how to manufacture or create them,and how to distribute them to the marketplace.

Question 13

Once a competitor has achieved a cost leadership position,the firm must continue a consistent focus on driving costs lower.

Question 14

A differentiator's premium price is typically less than that of a cost leader.

Question 15

Human Resources and other support activities are not value-creating activities in the value chain,only the primary activities create value.

Question 16

The primary factors that cause firms to change from a functional structure to a multidivisional structure are the CEO's increasingly limited ability to set a strategic direction for the firm and the focus of functional managers on local issues.

Question 17

A strategy is an integrated and coordinated set of commitments and actions designed to exploit core competencies and gain a competitive advantage.

Question 18

Specialization refers to the extent to which authority for decision-making is retained at higher managerial levels.

Question 19

A cost leadership strategy is not a valuable defense against rivals when competing on the basis of price.

Question 20

The means to differentiate a product is limited to only three central issues.

Question 21

Business-level strategies are concerned specifically with:

A) creating differences between the firm's position and its rivals.
B) 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.

Question 22

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

Question 23

Among college students,Subway is targeting a more narrow market segment than the segment on which McDonald's focuses.Subway is focusing on students interested in healthy fast food.This is a result of studying all EXCEPT which of the following?

A) demographic factors.
B) psychological factors.
C) consumption-pattern factors.
D) geographic factors.

Question 24

A firm's core strategy is its ____.

A) corporate strategy
B) business strategy
C) acquisitions and restructuring strategy
D) international strategy

Question 25

Which of the following is NOT considered a generic strategy?

A) Product diversification
B) Cost leadership
C) Focused differentiation
D) Integrated cost leadership/differentiation

Question 26

A company using a narrow scope 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 product segments served.
D) likely to earn only average returns.

Question 27

The effectiveness of any of the generic business-level strategies is contingent upon:

A) customer needs and competitors' strategies.
B) the firm's resources,capabilities,and core competencies and the opportunities/threats of the environment.
C) product line scope and national economic conditions.
D) management's leadership style and the wealth of the firm's target market.

Question 28

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 as a whole.

Question 29

A firm is "stuck in the middle" when its industry is in the middle of a rapid technological change.

Question 30

Customer needs are related to the:

A) characteristics that can be used to subdivide a large market into segments.
B) set of values exhibited by a group of customers.
C) use of core competencies to implement a strategy.
D) benefits and features of a good or service that customers want to purchase.

Question 31

An integrated and coordinated set of commitments and actions designed to exploit core competencies and gain a competitive advantage is the definition of:

A) strategy.
B) core competencies.
C) sustained competitive advantage.
D) strategic mission.

Question 32

In evaluating its customers,which of the following questions should the firm NOT ask?

A) How will core competencies meet the customer's needs?
B) Who is the customer?
C) What are the customers' needs?
D) How will our top management team interact with the customer?

Question 33

One of the benefits of the integrated cost leadership/differentiation strategy is that it is NOT associated with substantial risk.

Question 34

A ____ reflects where and how the firm has an advantage over its rivals.

A) business-level strategy
B) strategy
C) differentiated-cost strategy
D) core competence profile

Question 35

Business-level strategies detail commitments and actions taken to provide value to customers and gain competitive advantage by exploiting core competencies in:

A) the selection of industries in which the firm will compete.
B) specific product markets.
C) specific functional departments.
D) specific plant locations.

Question 36

SAS Institute is the world's largest privately owned software company.Its core competence is ____ on which it allocates over 30 percent of its revenues.

A) research and development
B) marketing and sales
C) employee training
D) inbound and outbound logistics

Question 37

Firms following a "stuck in the middle" strategy are able to successfully deal with the five competitive forces and earn above-average returns.

Question 38

Firms successfully implementing an integrated cost leadership/differentiation strategy earn above-average returns because the benefits of the strategy are additive.

Question 39

The four generic business-level strategies a firm can implement include all of the following EXCEPT:

A) focused cost leadership.
B) cost leadership.
C) differentiation.
D) leadership.

Question 40

The example of General Motors dropping the Oldsmobile brand illustrates the fact that

A) brands are ultimately unimportant to the customer,regardless of their history.
B) this brand appealed to a generation which is no longer actively spending money.
C) this brand no longer conveyed specific benefits and features that satisfied target customer needs.
D) brands are fungible properties of products.

Question 41

Firms implementing a cost leadership strategy should use a ____ structure.

A) highly formalized,simple
B) specialized multidivisional
C) product line
D) highly centralized,functional

Question 42

A simple structure can be described by all of the following EXCEPT:

A) informal relationships.
B) limited task specialization.
C) active involvement by a chief executive officer.
D) few rules.

Question 43

A cost leadership strategy can be summarized as:

A) providing products with features acceptable to customers at the lowest competitive price.
B) providing products with features that are very inexpensive so that the price of the product is very low.
C) providing products that are so unique that customers are willing to pay a premium.
D) focusing on a few unique features for which customers are willing to pay a premium.

Question 44

Research suggests that having a competitive advantage in ____ creates more value in the cost leadership strategy than in the differentiation strategy.

A) marketing and sales
B) technology development
C) inbound and outbound logistics
D) human resource management

Question 45

The firm successfully implementing the cost leadership strategy would expect:

A) competitors to compete against it primarily on the basis of prices charged.
B) to constantly face challenges from a steady stream of new entrants to the industry.
C) to be able to fend off the challenge of product substitutes.
D) to focus on its own cost structure,but not its competitors' cost structures.

Question 46

All of the following are examples of differentiated products EXCEPT:

A) Toyota's Lexus.
B) Acer Computer Corporation's PCs.
C) McKinsey & Co's consulting services.
D) Caterpillar's heavy equipment.

Question 47

The products or services that differentiate often have qualities that are:

A) perceived by the customer to add value.
B) valued by the typical industry customer.
C) appealing to the customer regardless of price.
D) seen as classic attributes rather than passing fads.

Question 48

The risks of a cost leadership strategy include all of the following EXCEPT:

A) manufacturing equipment can become obsolete due to innovation.
B) firms may fail to understand customers' perceptions of competitive levels of differentiation.
C) competitors may learn how to successfully imitate their strategy.
D) firms may fail to include enough unique features in the product.

Question 49

Wal-Mart's effective strategy/structure configuration is:

A) cost leadership/functional structure.
B) related-linked/SBU multidivisional structure.
C) unrelated diversification/competitive form multidivisional structure.
D) cost leadership/differentiation/functional structure.

Question 50

When the costs of supplies increase in an industry,the low-cost leader may:

A) continue competing with rivals on the basis of product features.
B) lose customers as a result of price increases.
C) make it difficult for new entrants to the industry to achieve above-average returns.
D) be the only firm able to pay the higher prices and continue to earn average or above-average returns.

Question 51

The differentiation strategy calls for a firm to provide products that:

A) are at the lowest cost possible.
B) have acceptable features.
C) incorporate features for which the customer will pay a premium.
D) solve the problem of being "stuck in the middle."

Question 52

One disadvantage of the functional structure is that:

A) career paths and professional development are not facilitated.
B) it does not allow for functional specialization.
C) the CEO cannot coordinate and control the efforts of functional level employees.
D) communication is hindered among organizational functions.

Question 53

____ is the degree to which rules and procedures govern the activities of an organization.

A) Formalization
B) Centralization
C) Specialization
D) Unification

Question 54

Firms pursuing a differentiation strategy want to be differentiated from competitors:

A) on only one central dimension.
B) only to the point where the features of their products are adequate.
C) along as many dimensions as possible.
D) on only two or three central dimensions.

Question 55

To achieve strategic competitiveness,Ryanair has relied upon:

A) becoming the low-cost provider.
B) adding services that make the airline more like large carriers.
C) offering luxury-based in-flight amenities.
D) cutting down on fuel costs.

Question 56

When a product's unique attributes provide value to customers,the firm is implementing:

A) a differentiation strategy.
B) a cost leadership strategy.
C) an integrated cost leadership/differentiation strategy.
D) a single-product strategy.

Question 57

Which of the following does NOT cause a firm to move from a functional structure to a multidivisional structure?

A) Increasing diversification
B) Coordination and control issues
C) Decreasing sales revenues
D) Greater amounts of data and information to process

Question 58

Functional structures work best for firms with:

A) diversified products.
B) diversified markets.
C) single and dominant business strategies.
D) conglomerate strategies.

Question 59

The risks of a cost leadership strategy include:

A) becoming "stuck in the middle."
B) production and distribution processes becoming obsolete.
C) the ability of competing firms to provide similar features in a product.
D) customers deciding the product isn't worth what the firm must charge for it.

Question 60

The functional structure allows for effective:

A) control of strategic issues by functional managers.
B) control of potentially time-consuming activities by the chief executive.
C) control of any myopic vision.
D) development of professional expertise in functional areas.

Question 61

The risks of a focus strategy do NOT include:

A) a competitor outfocuses the focuser.
B) a firm pursuing an industry-wide strategy decides that the segment being served by the focuser is attractive.
C) the needs of customers in the narrow segment served by the focuser grow more similar to those of customers in the entire industry.
D) the top management team deciding to change strategies.

Question 62

Which of the following is a true statement about organizational structures for implementing business-level strategies?

A) A cost leadership strategy requires a simple structure emphasizing high specialization,centralization,and structured job roles.
B) A differentiation strategy requires a functional structure with limited formalization,broad job descriptions,and an emphasis on the R&D and marketing functions.
C) An integrated cost leadership/differentiation strategy requires a multidivisional structure using high formalization,decentralized decision-making,and vertical coordination.
D) A focused strategy requires a functional structure featuring high levels of both specialization and formalization.

Question 63

The risks of a differentiation strategy do NOT include which of the following?

A) Customers may find the price differential between the low-cost producer and the differentiated product too large.
B) Customers' learning can narrow a customer's perception of the value of a firm's differentiated features.
C) The means of differentiation no longer provide value to the customer.
D) The differentiation strategy is built on product features that the customer values.

Question 64

A focus strategy seeks to exploit core competencies:

A) on an industry-wide basis.
B) by serving the needs of a certain industry segment.
C) by servicing one particular corporation within a given industry.
D) by servicing several professions.

Question 65

Firms seeking to differentiate particularly need support from the ____ and ____ functions.

A) finance,accounting
B) finance,record keeping
C) product R&D,marketing
D) management information,finance

Question 66

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 automatically have high levels of power over suppliers.

Question 67

The risks of the differentiation strategy include:

A) being "stuck in the middle."
B) other firms being able to match the low cost.
C) customers being willing to pay a premium for the features.
D) a decision that the differentiated features are not worth the price.

Question 68

Some believe integrated strategies (combining attributes of both cost leadership and differentiation strategies):

A) have been used successfully in the U.S.since the end of World War II.
B) are essential to establishing and exploiting competitive advantage in a global economy.
C) can only be implemented in specific,competitive industries.
D) blend perfectly with the types of corporate-level strategies implemented by many of today's large diversified companies.

Question 69

Companies successfully implementing an integrated cost leadership/differentiation strategy are better positioned to do all of the following EXCEPT:

A) learn new skills.
B) adapt quickly to a changing environment.
C) continue using current technology.
D) leverage core competencies across business units.

Question 70

Focus strategies are:

A) associated only with cost leadership.
B) associated only with differentiation.
C) associated with both cost leadership and differentiation strategies.
D) typically avoided due to their high risk.

Question 71

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' specialized needs than the focuser has been serving.
D) decisions by focused competitors to use their resources to serve a wider range of customers' needs.

Question 72

Successful implementation of the differentiation strategy requires that:

A) decision making be centralized.
B) decision making be decentralized.
C) the finance function be the dominant function.
D) the accounting function be the dominant function.

Question 73

The integration of a cost leadership and a differentiation strategy will:

A) not be used extensively in the future.
B) allow a firm to adapt more quickly.
C) slow the ability of a firm to respond.
D) lower the risks of the firm.

Question 74

The firm successfully implementing a differentiation strategy would expect all of the following EXCEPT:

A) customers to be more sensitive to price increases.
B) to be able to charge a premium price for its product.
C) to be able to pass additional costs of supplies to the customer.
D) to be partially insulated from competitive rivalry.

Question 75

Which of the following is NOT a value-creating activity associated with the differentiation strategy?

A) intensive training programs to improve employee effectiveness and efficiency
B) strong capability in basic research.
C) rapid and timely deliveries to customers.
D) procurement systems focused on finding the highest quality raw materials.

Question 76

Typically,a successful firm pursuing a differentiation strategy will:

A) have a very hierarchical structure.
B) require a structure which is very formal.
C) use cross-functional development teams.
D) develop free-standing business units.

Question 77

The differentiation strategy can be effective in controlling the power of rivalry in an industry because:

A) customers will seek out the lowest cost product.
B) customers have no loyalty.
C) customers are loyal to brands that are differentiated in meaningful ways.
D) the differentiation strategy benefits from rivalry.

Question 78

A differentiation strategy can be effective in controlling the power of substitutes in an industry because:

A) buyers are not brand loyal.
B) substitute products are from a different industry.
C) customers want the low-cost product.
D) customers are loyal to a brand offering differentiated features that they value.

Question 79

When implementing a focus strategy,the firm seeks:

A) to be the lowest cost producer in an industry.
B) to offer products with unique features for which customers will pay a premium.
C) to avoid being stuck in the middle.
D) to serve the specialized needs of a market segment.

Question 80

One risk of the differentiation strategy is that:

A) a competitor may generate process innovations.
B) equipment may quickly become obsolete.
C) the firm may offer differentiated features that exceed the customers' needs.
D) the firm may fail to detect competitors' efforts to differentiate the commodity product.