Deck 5: Business-Level Strategy: Creating and Sustaining Competitive Advantages

Question 1

The factors that lead to a low-cost position do not provide a substantial entry barriers position with respect to substitute products introduced by new and existing competitors.

Answer 1

False
Explanation: The factors that lead to a low-cost position also provide a substantial entry barriers position with respect to substitute products introduced by new and existing competitors.

Question 2

The three generic strategies that Michael Porter believes a firm can use to overcome the five forces and achieve competitive advantage include overall price leadership.

Answer 2

False
Explanation: Michael Porter presented three generic strategies that a firm can use to overcome the five forces and achieve competitive advantage. The strategies are: overall cost leadership, differentiation, and focus.

Question 3

An overall low-cost position protects a firm against rivalry from competitors,because higher costs allow a firm to earn returns even if its competitors eroded their profits through intense rivalry.

Answer 3

False
Explanation: An overall low-cost position protects a firm against rivalry from competitors, because lower costs allow a firm to earn returns even if its competitors eroded their profits through intense rivalry.

Question 4

Concentrating solely on one form of competitive advantage generally leads to the highest possible level of profitability.

Question 5

A firm can attain an overall cost leadership position by using automated technology to reduce scrappage rates.

Question 6

Zulily pays close attention to costs which helps to protect the company from buyer power and intense rivalry from competitors.

Question 7

A business-level strategy is a strategy designed for a multi-business company that competes across multiple businesses.

Question 8

A low-cost position provides more flexibility to cope with demands from powerful suppliers for input cost decreases.

Question 9

A low-cost position protects firms against powerful buyers.

Question 10

To generate above average returns,a firm following an overall cost leadership position should not be concerned with attaining parity or proximity on the basis of differentiation relative to its peers.

Question 11

Zulily keeps very little inventory.It orders products from vendors after their customer has completed the purchase.This is an example of how Zulily intends to enhance a cost leadership position.

Question 12

The Yugo car was cheap,but it was poorly made.Consumers did not purchase it.This is an example of failure to attain parity on the basis of differentiation.

Question 13

A firm striving for cost leadership will typically spend relatively more on product-related research and development than on process-related research and development.

Question 14

A firm can attain an overall cost leadership position by purchasing media in large blocks and maximizing sales force utilization through territory management.

Question 15

A firm can attain an overall cost leadership position by increasing the management layers in order to reduce overhead costs.

Question 16

An overall high-cost position enables a firm to achieve above-average returns despite strong competition.

Question 17

The experience curve is a way of looking at price benefits that come from studying sales figures.

Question 18

The French automobile maker,Renault,attains competitive advantage by revamping cars to be more cost efficient.

Question 19

The experience curve concept suggests that production costs tend to decrease as production increases.

Question 20

Competitive parity on the basis of differentiation permits a cost leader to maximize disadvantages and turn them into higher profits than competitors.

Question 21

A successful differentiation strategy lowers entry barriers because of customer loyalty and the ability of the firm to provide uniqueness in its products and services.

Question 22

A potential pitfall of a focus strategy is that highly focused product and service offerings are not subject to competition from new entrants and from imitation.

Question 23

The combination strategy of low-cost and differentiation provides lower prices and no differentiated attributes for customers.

Question 24

One potential pitfall of a differentiation strategy is that identification of the brand in the marketplace may become diluted through excessive product line extensions.

Question 25

Firms that compete on overall cost leadership are vulnerable if there is an increase in the cost of the inputs on which the advantage is based.

Question 26

A cost leadership strategy can be at risk of becoming obsolete and must be evaluated regularly in terms of current competitor responses.

Question 27

A potential pitfall of a focus strategy is that focusers can become too focused to satisfy buyer needs.

Question 28

Cheesecake Factory differentiates itself along several different dimensions at once by offering high-quality food,the widest and deepest menu in its class of restaurants,and premium locations.

Question 29

A successful differentiation strategy increases rivalry since buyers become more price-sensitive.

Question 30

A cost leadership strategy is not susceptible to the risk of reduced flexibility.

Question 31

A potential pitfall of a focus strategy is that cost advantages will not change over time.

Question 32

Too much focus on one or a few value-chain activities can be a pitfall of the overall cost leadership strategy.

Question 33

If a firm has a successful differentiation strategy,it is necessary to attain parity on cost.

Question 34

An important idea behind the profit pool concept is that there is always a strong relationship between the generation of revenues and the capturing of profits.

Question 35

Discount retailers like Walmart and dollar stores are prime substitutes for Aldi,because Aldi focuses on minimizing costs across its operations.

Question 36

Focus,by itself,often constitutes a competitive advantage.

Question 37

Renault both lessens the degree of rivalry it faces and increases entry barriers for new entrants by increasing productivity and lowering unit costs.

Question 38

Mass customization enables manufacturers to be more responsive to customer demands for high quality products.

Question 39

A disadvantage of firms that successfully integrate overall cost leadership and a differentiation strategy is that they are relatively easy for competitors to imitate.

Question 40

The supermarket,Aldi,places extreme focus on minimizing costs across its operations which ultimately makes it more vulnerable to substitutes.

Question 41

Big Data efforts have the potential to allow firms to better customize their product and service offerings to customers but are less efficient at using the resources of the company.Kaiser Permanente is an example of how big data does not lead to cost-conscious treatment patterns.

Question 42

An important issue in evaluating the sustainability of a unique strategy is whether or not rivals will be able to imitate its strategy or create a viable substitute.

Question 43

Using information systems to streamline and automate the primary activities of a manufacturing company value chain does not provide competitive advantage.

Question 44

Rapid changes in technology,globalization,and actions by rivals cannot erode company advantages.

Question 45

The increasing use of technology in low tech industries has made competitive advantages more sustainable.

Question 46

Integration of information systems,logistics,and transportation at Walmart helps it to drive down costs and provide outstanding product selection.This serves to erect low entry barriers to potential competitors.

Question 47

If a car manufacturer focuses a lot on downstream activities such as warranty fulfillment and financing operations,but also considers the differentiation and cost of the cars themselves,the resulting strategy is likely to be a failed strategy.

Question 48

The overall value proposition of Walmart makes potential substitute products such as Internet competitors a more viable threat.

Question 49

Due to its size with over 475 billion USD in sales in 2014,Walmart has enormous bargaining power over its suppliers.

Question 50

In the textbook example of Atlas Door,it integrated many value-chain activities with the firm in order to support its just-in-time strategy.This,however,did not provide sustainable competitive advantage.

Question 51

An important potential pitfall of an integrated overall cost leadership and differentiation strategy is that firms may fail to implement either one and become stuck in the middle.

Question 52

Competitive advantage can be found in just-in-time manufacturing processes.

Question 53

By separating the value of the actual flight from the services associated with flying,airlines have greatly expanded the profit pool associated with flying.This combines the advantages of integrating overall low cost and differentiation strategies.

Question 54

Many companies have a tight integration among their value-creating activities and have implemented just-in-time manufacturing.The textbook example of Atlas Door suggests that this is a competitive advantage,but it is easily imitated and therefore may not be sustainable in the long run.

Question 55

Firms may fail to accurately assess sources of revenue and profits in their value chain.This might be a result of an unbiased manager.

Question 56

The reason Dell lost its competitive advantage is that it focused too much on operational efficiency and not enough on innovations demanded by the changing market.

Question 57

Firms can underestimate the challenges and expenses associated with coordinating value-creating activities in the extended value chain.This is an advantage of integrated overall cost leadership and differentiation.

Question 58

Competitive advantage is not affected by actions by rivals from within and outside of the industry.

Question 59

In technology intensive industries,the duration of competitive advantages is declining.

Question 60

In the textbook example of Atlas Door,it created low entry barriers for new entrants through its development of competitive advantages.

Question 61

As markets mature the magnitude of differentiation and cost leadership advantages among competitors decrease.

Question 62

As markets mature,competition on the basis of differentiation is preferable to price competition.

Question 63

In the textbook example of Atlas Door,the threat of new rivals who could bring new technologies and processes to a similar business model diminishes the sustainability of the Atlas Door just-in-time model.

Question 64

The market life cycle should be used for short run forecasting,because it provides a conceptual framework for understanding what changes typically occur over the life of an industry.

Question 65

A need for turnaround occurs only during the maturity or declining stage of the life cycle.

Question 66

During the decline stage of the product life cycle,a harvesting strategy means that a firm keeps a product going without significantly reducing marketing support,technological development,or other investments,while hoping that competitors will exit the market.

Question 67

Swatch defined its watches as playful fashion accessories which were showily promoted.This is an example of reverse positioning.

Question 68

An important advantage of first movers in a market is that they may establish brand recognition that may later serve as an important switching cost.

Question 69

With reverse positioning,a strategy to be used during the mature stage of the industry life cycle,a product escapes its category by deliberately associating with a different one.

Question 70

The decline stage of the industry life cycle stage is inevitably followed by death.

Question 71

Mature firms tend to have assets that continue to produce significant returns.

Question 72

The Commerce Bank gains customers by using reverse positioning to structure its offers.It pared down its offers to just four checking accounts.

Question 73

Businesses that compete in markets that are in decline should simply be harvested or divested since they are no longer profitable.

Question 74

During the growth stage of the market life cycle,customers are very likely to establish brand loyalty.

Question 75

Many firms facing a turnaround situation try to reduce their costs by outsourcing the production of many inputs.

Question 76

Few turnarounds require firms to analyze both the external and internal environments relevant to their firm.

Question 77

Given the attractiveness of premium pricing during the growth stage of the market life cycle,managers should emphasize short-term results to increase profits.

Question 78

The desktop computer is in the decline stage of the industry life cycle,but it is not dead because companies have found ways to improve the price-performance trade-off.

Question 79

In the textbook example of Atlas Door,human talent trained in the new just-in-time systems have little reason to leave the company and therefore this is a sustainable competitive advantage.

Question 80

Procter and Gamble successfully implemented a turnaround strategy by discontinuing brands and focusing all resources on a few core brands.