Deck 7: Business-Level Strategy

Question 1

A competitive shakeout usually occurs at the beginning of the growth stage of the product life cycle.

Answer 1

False

Question 2

The industry life cycle portrays how sales volume for a class of products changes over its lifetime.

Answer 2

True

Question 3

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

Answer 3

True

Question 4

Low-cost leaders usually concentrate on the primary activities of inbound logistics and outbound logistics as a means to reduce costs.

Question 5

At the maturity stage of the life cycle,revenue growth accelerates rapidly.

Question 6

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

Question 7

The differentiation strategy is effective for products that are expensive,luxury consumer goods. It is not effective for common,inexpensive products such as doughnuts.

Question 8

A business-level strategy is an integrated and coordinated set of commitments and actions designed to exploit core competencies and gain a competitive advantage in specific product markets.

Question 9

One of the benefits of the integrated cost leadership/differentiation strategy is that it is less risky than either the cost leadership or differentiation strategies.

Question 10

In differentiation strategies,the emphasis is on creating value through uniqueness.

Question 11

A company has chosen a focus strategy when it markets to a narrow customer segment or within a smaller geographic area.

Question 12

A best cost strategy combines the elements of low-cost leadership and differentiation.

Question 13

The choice of market scope by a company refers to whether it will do business just domestically or it will venture outside of its home country.

Question 14

Only one firm at a time can pursue a particular business-level strategy.

Question 15

A risk of the differentiation strategy is that the firm's means of differentiation may eventually not provide value for which customers are willing to pay.

Question 16

A business-level strategy consists of the competitive approach of a single line-of-business instead of the entire corporation.

Question 17

Typically two or three companies in an industry will share the low-cost leadership position,making rivalry among them very intense.

Question 18

When selecting a business level strategy,the firm determines who will be served,what customer needs will be satisfied,and how those needs will be satisfied.

Question 19

A low-cost strategy is designed to appeal to only those customers who are the most price-sensitive.

Question 20

A company pursuing a differentiation strategy must still achieve parity on costs in those areas where it is undifferentiated from rivals.

Question 21

Which of the following is an advantage of pursuing cost leadership?

A) Sales always increase with increasing amounts of output
B) Loss of sales does not reduce scale benefits
C) The strategy easily accommodates changes in the market
D) A firm may charge the same price as its competitors but make a higher profit

Question 22

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

Question 23

For a differentiation strategy to be considered successful:

A) The organization that is pursuing the differentiation must be highly innovative
B) Customers must be willing to pay more for the uniqueness of a product or service than the firm paid to create that uniqueness
C) Loss of sales cannot reduce the benefits from economies of scale
D) The organization must invest heavily in differentiating its products

Question 24

A business-level strategy describes:

A) The businesses in which the company intends to compete
B) All policies and procedures used in functional departments
C) The firm's actions to exploit its competitive advantage over rivals
D) A firm's resources, intent, and mission

Question 25

A strategy that is a combination of low cost leadership and differentiation is:

A) Unlikely to be successful because of limited resources
B) Best cost
C) Cost focus
D) None of the above

Question 26

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

Question 27

A business-level strategy can best be thought of as the overarching philosophy of value creation within the company.

Question 28

All of the following are ways that firms pursue a cost leadership strategy except:

A) Giving their product the most desirable and highest quality features
B) Using technology to cut costs
C) Experience effects
D) Economies of scale

Question 29

The risks associated with pursuing a cost leadership strategy include all of the following except:

A) Preoccupation with costs may lead a firm not to detect required product changes
B) The firm's products are likely to become targets for imitators
C) Efforts to cut costs could lead to unsafe products
D) Cost cutting could lead to products of very poor quality

Question 30

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

A) Customer needs and competitors' strategies
B) The match between the opportunities and threats in its external market and the strengths of its internal environment
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

Question 31

A company with a low-cost position generally needs to give little thought to economies of scale or capacity utilization. These are more important to firms that choose to differentiate.

Question 32

A firm that pursues a cost leadership strategy:

A) Seeks cost efficiency in a broad market setting
B) Is too interested in lowering costs to bother with technological advances
C) Always has the lowest price
D) Uses differentiation to attract customers

Question 33

The biggest risk to a focus strategy is that the small market that is being targeted will simply disappear should the environment change.

Question 34

Companies have little to gain from trying to create psychological or cognitive identification by customers with the company's products.

Question 35

Effective differentiation often shields incumbents from competition presented by new entrants and substitutes.

Question 36

Strategy formulation responsibilities at the business level include all of the following except:

A) Establishment and communication of goals
B) Identification of strengths and weaknesses
C) Identification of opportunities and threats
D) Management of the corporate portfolio

Question 37

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 38

Business-level strategy formulation pertains to:

A) Domain direction and navigation
B) Domain definition
C) Domain recognition
D) Domain precondition

Question 39

A best cost strategy is most like which of the other generic business strategies?

A) Differentiation
B) Cost leadership
C) Cost focus
D) Differentiation combined with cost leadership

Question 40

A firm that caters to a very specific segment of its market is pursuing which generic strategy?

A) Differentiation
B) Focus
C) Cost leadership
D) Best cost

Question 41

Business-level strategies are also known as ________ strategies.

A) Value chain
B) Divisional
C) Executional
D) Generic

Question 42

The integration of a cost leadership and a differentiation strategy:

A) Is challenging because the firm must become competent in more primary and support activities
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

Question 43

Which of the following is a driver that permits a low-cost strategy to be successful?

A) When customers tend to expect different features and benefits from products within a category
B) When buyers and suppliers have weak bargaining power, lowering the pressure on the industry's profit margins
C) When there are high industry entry barriers, diminishing the potential need for incumbents to compete on price
D) When there is a standardization of products or services among industry rivals

Question 44

When a firm chooses a business-level strategy,it must ANS the questions "Who? What? and How?" What are these questions and why are they important?

Question 45

What are some of the risks associated with a low-cost strategy?

Question 46

What are the drivers of an effective differentiation strategy?

Question 47

Define strategy and business-level strategy. What is the difference between these two concepts?

Question 48

Define strategy and business-level strategy. What is the difference between these two concepts?

Question 49

What are the risks of an integrated cost leadership/differentiation strategy?

Question 50

A company that simultaneously pursues the two basic competitive approaches but ends up with costs that are too high and a product that does not command a premium price may find itself:

A) With profit margins higher that the industry norm
B) Unable to purge its customer list quickly enough
C) Having to invest in other companies to become more profitable
D) "Stuck in the middle"

Question 51

IKEA offers young customers a selection of home furnishings featuring good design,function,and acceptable quality at low prices.IKEA is using which business level strategy?

A) Cost leadership
B) Focused cost leadership
C) Differentiation
D) Focused differentiation

Question 52

A crucial condition upon which the success of a business-level strategy rests is:

A) The fact that as customer expectations change the business must be searching for new customers who favour the company's existing products or services
B) Always bearing in mind that competition evolves; existing competitors change and new ones arise
C) Being able to identify and participate in those industries that are stable
D) Allowing all employees the freedom to adjust the strategy from day-to-day as business conditions change

Question 53

How can a firm be successful by pursuing a differentiation strategy and what are some of the risks associated with it?

Question 54

When a company chooses to have another firm perform a business process or service that is part of the company's value chain this is called:

A) Offshoring
B) Disaggregating
C) Outsourcing
D) Disintermediation

Question 55

Describe the risks of a differentiation strategy.

Question 56

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

Question 57

Describe the advantages of integrating cost leadership and differentiation strategies.

Question 58

The degree to which a company competes broadly or narrowly within geographic or customer segments characterizes its decision about ________.

A) Economies of scale
B) Market scope
C) The learning curve
D) Switching costs

Question 59

Drivers of an effective differentiation strategy include:

A) Product and service features
B) The cost-efficient production of a commodity
C) The relative importance of search goods in the industry
D) Economies of scale

Question 60

What is a cost leadership strategy? How might a firm pursue it? What are some of the risks associated with this strategy?

Question 61

What are the factors that can lead to a low-cost position?

Question 62

What are the five generic business-level strategies? Briefly describe each one.