Deck 5: Building Competitive Advantage Through Business-Level Strategy

Question 1

The brand loyalty enjoyed by the differentiated company does not protect it from substitute goods and services.

Answer 1

False

Question 2

Companies that focus on the higher-income or higher-value end of the market will tend to have a higher cost structure.

Answer 2

True

Question 3

Companies with a differentiation advantage tend to charge a lower price for their prodncts.

Answer 3

False

Question 4

When a company decides to serve a limited number of segments, or just one segment, it is pursuing a segmentation strategy.

Question 5

An efficiency frontier shows all of the different positions that a company can adopt with regard to differentiation and cost.

Question 6

A low-cost company is often best positioned to survive price rivalry in its industry.

Question 7

Companies that follow a standardization strategy ignore the many different market segments in an industry and position their products to appeal to the average customer.

Question 8

The way a prodnet is differentiated from other prodncts of its type and the price of the prodnct determine which prodnct a cnstomer chooses to satisfy his or her needs.

Question 9

A product's appeal to customers' desires cannot be considered a source of differentiation.

Question 10

Market segmentation refers to the process of subdividing a market into clearly identifiable groups of customers with similar needs, desires, and demand characteristics.

Question 11

A company has a competitive advantage if it can increase costs relative to rivals.

Question 12

A generic business-level strategy is a strategy that gives a company a specific form of competitive position and advantage over its rivals that results in above-average profitability.

Question 13

Mike's Eatery, a fast food chain, neither customizes its product offerings nor sells new products based on market segments.Mike's Eatery is pursuing standardization strategy.

Question 14

A finn's bnsiness model shonld contain three components: what is to be satisfied, who is to be satisfied, and how they will be satisfied.

Question 15

Differentiation can help a company to grow overall demand and capture market share from its rivals.

Question 16

The generic business-level strategies are cost leadership, differentiation, and mass marketing.

Question 17

In commodity markets, competitive advantage goes to the company that has the lowest costs.

Question 18

All focus strategies entail serving a specific market segment using a differentiation approach.

Question 19

Differentiation leads to high brand loyalty, which in tum significantly increases the threat of new firms entering the industry.

Question 20

When a company already has a low-cost structure, it has to give up a lot of differentiation in its product offering to get additional cost reductions.

Question 21

Focus strategy can be defined as:

A)the strategy of merging with an established company in order to gain monopoly over the market.
B)the strategy a company uses when it decides to allocate the company resources equally among all the marketing segments
C)the strategy a company uses when it decides to serve a limited number of segments, or just one segment of the market.
D)the strategy a company uses when it decides to iguore the different needs of different market segments, and produce one standardized product for all the customers. e.the strategy of closing down one or more business units in order to minimize the losses.

Question 22

One of the great advantages of successful value innovation is that it can catch rivals off guard and make it difficult for them to catch up.

Question 23

By focusing on a niche, and customizing the offering to that segment, a differentiated company can often outsell differentiated rivals that target a broader market.

Question 24

When a company recognizes that the needs of one market segment is not the same as another and accordingly customizes its product offerings, it is said to be pursuing:

A)stuck-in-the-middle strategy.
B)rapid-growth strategy.
C)differentiation strategy.
D)focus strategy. e.low-cost strategy.

Question 25

Cool Looks produces a variety of clothing for various customer groups.Which of the following strategies is the finn most likely pursuing?

A)Cost leadership
B)Differentiation
C)Product substitution
D)Focus e.Share building

Question 26

The basic proposition of the blue ocean strategy is that many successful companies have built their competitive advantage by initiating price wars and driving weaker rivals out of the industry.

Question 27

Standardization describes what happens when innovation pushes out the efficiency frontier in an industry, allowing for greater value to be offered through superior differentiation at a lower cost than was previously thought possible.

Question 28

Which of the following generic competitive strategies is a producer of commodity steel most likely to pursue?

A)Exclusive dealing
B)Broad differentiation
C)Focus differentiation
D)Broad low-cost e.Horizontal integration

Question 29

Actions taken at the functional level should support the business-level strategy, as should the organizational arrangements of the enterprise.

Question 30

A differentiation strategy is based on creating a product that customers perceive as being:

A)the same as other available products.
B)distinct from other available products.
C)the least costly product in the industry.
D)the most costly product in the industry. e.cheaper, but inferior to the available products.

Question 31

When a company is able to pioneer process innovations that lead to value innovation, it effectively changes the game in an industry and may be able to outperform its rivals for a long period of time.

Question 32

A differentiated company is protected from intense price rivalry within its industry by its brand loyalty.

Question 33

The efficiency frontier is not static; it is continually being pushed outwards by the efforts of managers to improve their firm's performance through innovation.

Question 34

When a company targets a certain segment or niche, and tries to be the low-cost player in that niche, it is pursuing a broad low-cost strategy.

Question 35

Companies that successfully differentiate a product often charge prices for them.

A)prermum
B)exorbitant
C)low
D)average e.steep

Question 36

A segmentation strategy requires that a company:

A)standardize its products.
B)offer its products at low costs.
C)customize its products.
D)produce one basic offering. e.attain high economies of scale by achieving a high volume of sales.

Question 37

A market segment consists of a group of:

A)similar products.
B)customers who have similar needs.
C)products that are considered obsolete.
D)diverse products produced by the same manufacturer.
E)customers who have diverse needs.

Question 38

A differentiated product is a product that:

A)has a greater resale value than rival products.
B)provides greater reliability than rival products.
C)is offered free of cost on purchase of a company's standard product.
D)always costs more than rival products.
E)always costs less than rival products.

Question 39

When a company produces a wide range of products for various customer groups, it is following a strategy.

A)cost leadership
B)differentiation
C)customer retention
D)market concentration
E)share building

Question 40

Compared to a differentiator, the company that follows a low-cost strategy has the advantage of:

A)distinguishing its products from those of rivals by offering something that they fmd hard to match.
B)absorbing cost increases by powerful suppliers while keeping to their lower pricing.
C)allowing the company to charge a premium price for its good or service.
D)using perceived superior value to generate growth in demand among customers. e.creating entry barriers for rivals with greater brand loyalty to the specific products offered.

Question 41

The main difference between companies following a broad low-cost strategy and those following a focus low-cost strategy is in the:

A)standardized market price.
B)industry life cycle stage.
C)degree of market segmentation.
D)age of the market. e.market trajectory.

Question 42

Delta Airlines used to advertise its high-quality air travel service by saying it flew "anywhere, anytime." What generic strategy is represented by this advertisement?

A)Broad low-cost
B)Broad differentiation
C)Vertical integration
D)Right-time marketing e.Rapid growth

Question 43

The advantage that focused companies have over their broad market rivals is that they:

A)can sells on non-price factors, such as design or customer service.
B)can respond to demands for deep price discounts.
C)sell fewer products in bulk to outsell their rivals.
D)can initiate a price war in order to grow volume and drive its weaker rivals out of the industry.
E)can absorb cost increases that may be passed on downstream by powerful suppliers.

Question 44

When a company targets a certain segment or niche, and customizes its offering to the needs of that particular segment through the addition of features and functions, the company is pursuing a strategy.

A)broad low-cost
B)broad differentiation
C)product substitution
D)focus low-cost
E)focus differentiation

Question 45

A company that follows a low-cost strategy could reasonably be expected to reduce costs by:

A)broadening the business processes.
B)adopting lean production and flexible manufacturing technologies.
C)implementing first-in-first-out inventory control systems.
D)taking steps to increase customer chum.
E)abandoning economies of scale and learning effects.

Question 46

Lucy's Swirnwear Boutique offers swirnwear that is targeted at affluent people who can afford to buy expensive, handmade swimsuits.Which of the following approaches to market segmentation is Lucy's Swimwear Boutique using?

A)Broad differentiation strategy
B)Low market segmentation
C)Medium market segmentation strategy
D)Broad high-cost strategy e.Focus differentiation strategy

Question 47

A company that follows the strategy customizes its offering to a particular niche in order to outsell its rivals.

A)focused differentiation
B)broad low-cost
C)market standardization
D)rapid growth e.stuck in the middle

Question 48

Yankee Candle Company offers customers candles that burn for 50-60 hours, much longer than most department store candle brands.Therefore, customers are willing to pay a higher price for these candles.Which of the following strategies is Yankee Candle Company following?

A)Cost leadership
B)Rapid growth
C)Market segmentation
D)Differentiation e.Stuck in the middle

Question 49

Which of the following is NOT a main approach to market segmentation?

A)Marketing a product targeted toward average or typical customers
B)Marketing a product to a group of people who are more likely to purchase it
C)Making customized products to suit the unique requirements of customers
D)Making products to meet the specific needs of a narrow group of customers e.Making one product aimed toward a general, rather than a specific subset of customers

Question 50

Lilly's Beauty Company sells haircare products such as shampoo, conditioner, and hairspray.The company does not sell new or customized products in order to meet the specific needs of certain groups of people.Which of the following approaches is illustrated in this scenario?

A)Standardization strategy
B)Focus strategy
C)Medium market segmentation
D)High market segmentation e.Focused market segmentation

Question 51

A company pursuing a focus strategy:

A)attempts to serve all market segments.
B)concentrates on building market share in one market segment.
C)typically has more resources at its disposal than a differentiator does.
D)has a greater impact on costs and revenues. e.produce different offerings for different segments.

Question 52

A focused differentiator has the advantage of:

A)selling on non-price factors, such as design or customer service.
B)producing a large product variety without a large cost penalty.
C)producing a basic offering that is relatively inexpensive to produce and deliver.
D)being able to respond to demands for deep price discounts. e.being able to initiate a price war in order to grow volume and drive its weaker rivals out of the industry.

Question 53

Nick, a professional magician, is often invited to perform magic tricks at birthday parties and other social gatherings from across the country.However, he offers his services only to clients who stay in the same city as him.He is also known to charge less than other magicians in the city.Nick is pursuing which generic business strategy?

A)Improved services
B)Right-time marketing
C)Focused low-cost
D)Broad low-cost e.Deterrence strategy

Question 54

Which of the following statements is true of differentiation and cost structure?

A)Differentiation and cost structure decisions affect one another.
B)Differentiation and cost structure decisions do not affect one another.
C)Companies that focus on the higher-value end of the market have a lower cost structure.
D)Differentiation decisions do not affect a company's profitability. e.Cost structure decisions do not affect a company's profitability.

Question 55

At The Luxury Hotel in Miami, Florida, three hotel employees serve the needs of each guest.In every room, a guest can summon a chef, a maid, or a valet by pressing a button at his/her bedside.Which generic business-level strategy is The Luxury Hotel utilizing?

A)Cost leadership
B)Differentiation
C)Vertical integration
D)Razor and blade e.Brand loyalty

Question 56

Which of the following is NOT a generic business-level strategy?

A)Broad differentiation strategy
B)Broad low-cost strategy
C)Focused low-cost strategy
D)Focused differentiation strategy
E)Focused innovation strategy

Question 57

Differentiation allows a company to:

A)respond to demands of deep price demands from powerful buyers and still make money.
B)lower its cost structure.
C)charge a premium price for its good or service.
D)charge low prices and still make profits. e.initiate a price war in order to grow volume and drive its weaker rivals out of the industry.

Question 58

Which of the following generic business-level strategies is based on the intent to lower costs so that a company can lower prices and still make a profit?

A)Broad low-cost strategy
B)Price differentiation strategy
C)Broad differentiation strategy
D)Focused differentiation strategy
E)Focused low-cost strategy

Question 59

Production of a large product variety without a large cost penalty is known as:

A)market concentration.
B)market segmentation.
C)focused differentiation.
D)mass production. e.mass customization.

Question 60

When a company offers a wide variety of products at lower prices than its rivals, it is most likely:

A)pursuing a low-cost strategy.
B)pursuing a differentiation strategy.
C)pursuing a focus strategy.
D)pursuing an exit strategy. e.pursuing a rapid growth strategy.

Question 61

In which of the following situations is a differentiation strategy used?

A)The industry is fragmented into customer groups based on needs.
B)Customer needs are primarily satisfied by the price of the product.
C)A company's cost structure needs to be reduced.
D)There is a demand for deep price discounts from powerful buyers.
E)The industry is not allowed to charge a premium price for its products.

Question 62

A company pursuing a low-cost strategy:

A)Improves non-price factors such as design and customer service
B)Produces a basic offering to reduce cost structures
C)Keeps advertising expenses at a maximum
D)Relies on patent protections to keep costs low
E)Customizes marketing mix to different market segments

Question 63

List the features that need to be included in functional strategies to improve differentiation.

Question 64

Describe how business-level strategies give a company a competitive advantage over actual and potential rivals.

Question 65

Which of the following allows a company to lower cost through functional strategy and organization?

A)hnplernentingjust-in-tirne inventory control systems
B)Customizing the product offering and marketing mix to different market segments
C)Focusing marketing efforts on brand building and perceived differentiation from rivals
D)Designing strategies to ensure that employees act in a manner that is consistent with the image that the company is trying to project to the world
E)Adopting rigid manufacturing technologies

Question 66

Jordan's Ice Creams is strategically located near a university.After realizing that most of its customers, who are mostly students, prefer a wide range of flavors, it started offering different combinations of premium flavors, cones, and toppings to create hundreds of extravagant, customized products.Which generic strategy is Jordan pursuing?

A)Broad low-cost strategy
B)Broad differentiation strategy
C)Focused low-cost strategy
D)Focused differentiation strategy
E)Product substitution strategy

Question 67

Functional strategies to improve differentiation should include:

A)product offerings designed to be can be produced and delivered at as low a cost as possible
B)standardization of the product offering and marketing mix to different market segments.
C)hiring and employee development strategies designed to ensure that employees act in a manner that is consistent with the image that the company is trying to project to the world.
D)initiation of a price war in order to grow volume and drive its weaker rivals out of the industry.
E)products that have lower prices to allow a company to erect an economic moat around its business that keeps higher-cost rivals out.

Question 68

Define the generic business-level strategies companies pursue.

Question 69

The term value innovation is used to describe:

A)the way a company decides to group customers based on important differences in their needs to gain a competitive advantage.
B)a business's overall competitive theme, the way it positions itself in the marketplace to gain a competitive advantage, and the different positioning strategies that can be used in different industry settings.
C)what happens when innovation pushes out the efficiency frontier in an industry, allowing for greater value to be offered through superior differentiation at a lower cost than was previously thought possible.
D)what happens when a company decides to ignore different segments, and produce a standardized product for the average consumer.
E)what happens when a company decides to serve many segments, or even the entire market, producing different offerings for different segments.

Question 70

A low-cost position is most appropriate when:

A)the power of buyers is low and barriers to entry are high.
B)economies of scale are relatively unimportant in manufacturing products.
C)customers have very different needs and uses for the industry's products.
D)product innovation is the key competitive factor.
E)industry rivalry is high and customers are very sensitive to prices.

Question 71

The basic proposition of the blue ocean strategy is that many successful companies have built their competitive advantage by:

A)redefming their product offering through value innovation and creating a new market space.
B)initiating a price war in order to grow volume and drive its weaker rivals out of the industry.
C)developing brand loyalty to protect them from intense price rivalry within their industry.
D)charging premium prices for their goods or services.
E)adopting lean production and flexible manufacturing technologies.

Question 72

A disadvantage of pursuing a low-cost strategy is that:

A)it makes it difficult for fmns to customize their product offerings .
B)price wars make it hard to compete with differentiators.
C)it costs more than a differentiation strategy because of the necessity of high capital investments.
D)powerful buyers are a major threat.
E)it reduces customer retention.

Question 73

Info Tech, Inc.makes complex telecommunications products, such as cellular telephones.Since this company has a distinctive competency in research and development, it should try to differentiate its product through:

A)reliability.
B)innovation.
C)advertising.
D)service.
E)low pricing.

Question 74

Which of the following is NOT a principal danger of a low-cost position approach?

A)Powerful buyers
B)Technological change
C)hnitation of production techniques
D)Changes in consumer tastes
E)Rivals lowering their costs