Question 1

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

Accepted Answer

A differentiation strategy is used when the industry is fragmented into customer groups based on needs. This means that different customers have different needs and preferences which can be served by offering different products or services that are tailored to those needs. By offering unique or differentiated products, companies can charge a premium price and attract customers who are willing to pay for those benefits.

Question 2

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-level strategy?

Accepted Answer

Nick is pursuing a focus low-cost strategy by targeting a specific market (clients in his own city) and offering his services at a lower cost than other magicians in the city. This allows him to differentiate himself from competitors and attract clients who are looking for affordable entertainment options.

Question 3

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

Accepted Answer

The scenario illustrates a standardization strategy in which the company sells general haircare products rather than tailoring products to specific market segments.

Question 4

Which of the following is NOT true about the implications for cost and revenue and market segmentation?

Accepted Answer

The statement "A segmentation strategy is typically associated with lower costs than a standardization strategy" is not true. In fact, a segmentation strategy often involves higher costs associated with customizing products for different segments.

Question 5

Which of the following is NOT true of a company that follows a niche strategy?

Accepted Answer

A company following a niche strategy is focused on serving a specific segment of the market, rather than the average customer. Therefore, option D is not true.

Question 6

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

Accepted Answer

The advertisement implies a broad differentiation strategy, in which Delta focuses on providing high-quality services to distinguish itself from competitors and attract a wide range of customers.

Question 7

Which of the following is a difference between a standardization and segmentation strategy?

Accepted Answer

The main difference between a standardization strategy and a segmentation strategy is that the former offers the same product to all consumers while the latter offers different products to different groups of consumers based on their needs and preferences. As a result, a standardization strategy may lose sales from customers who desire more functions and features and are prepared to pay more for them while a segmentation strategy meets the needs of different groups of consumers and thus sells more in total.

Question 8

When a company offers a wide variety of products at lower prices than its rivals, it is most likely pursuing a(n) which of the following strategies?

Accepted Answer

When a company offers a wide variety of products at lower prices than its rivals, it is following a low-cost strategy. The aim of a low-cost strategy is to offer products at a lower price than competition without sacrificing quality, which helps the company to gain market share and competitive advantage.

Question 9

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

Accepted Answer

Focused companies have a smaller target market which allows them to understand customer needs and create customized offerings. By doing so, they can establish cost advantages and offer something unique to their niche market. This makes it more difficult for broad market rivals to replicate their offerings and compete on price alone. Focused companies are not necessarily able to respond to deep price discounts or initiate a price war as they do not have the same economies of scale as broader companies. They can, however, differentiate themselves on non-price factors such as design or customer service. They may also struggle to absorb cost increases from suppliers.

Question 10

Lucy's Swimwear Boutique offers swimwear 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?

Accepted Answer

Lucy's Swimwear Boutique is using a focus differentiation strategy by targeting affluent people who are willing to buy expensive, handmade swimsuits. This is a narrow market segment with specific needs and preferences, which is the focus of the business's marketing efforts.

Question 11

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

Accepted Answer

Differentiation and cost structure decisions are interdependent, as a company's differentiation strategy will impact its cost structure. For example, investing in research and development to create a unique, high-quality product may increase costs but also allow a company to charge a premium price and differentiate itself from competitors. Conversely, a company that focuses on low cost may have a simpler product offering with fewer features and benefits, which can limit differentiation. Ultimately, a company's cost structure will impact its profitability, so both differentiation and cost structure decisions are crucial in achieving long-term success.

Question 12

A company pursuing a focus strategy:

Accepted Answer

A company pursuing a focus strategy concentrates on building market share in one market segment. This means that the company focuses on serving a narrow, specific segment of the market rather than trying to serve multiple segments. By doing so, the company can tailor its products or services to the specific needs and preferences of that segment and potentially gain a competitive advantage.

Question 13

Which of the following is an example of a differentiated company's attention to efficiency?

Accepted Answer

All the options describe ways in which a differentiated company can pay attention to efficiency while maintaining its unique value proposition. This includes managing costs without compromising differentiation (A), controlling costs carefully (B), staying focused on their competitive strategy (C), and aligning organizational activities with their business-level strategy (D).

Question 14

The production of more product variety without a large cost penalty is known as:

Accepted Answer

Mass customization is the production of a large variety of products without incurring a significant cost penalty, as it uses flexible manufacturing and information technology systems to quickly and efficiently produce small batches of customized products. Market concentration refers to the dominance of a few companies in a particular market, while market segmentation involves dividing a market into smaller groups with similar needs and characteristics. Focus differentiation is a business strategy where a company targets a specific market niche with a unique product or service. Mass production, on the other hand, is the production of large quantities of the same product using assembly line methods.

Question 15

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?

Accepted Answer

Yankee Candle Company is following a differentiation strategy by offering a product that is unique and valued by customers, allowing them to charge a higher price.

Question 16

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 business-level strategy is Jordan pursuing?

Accepted Answer

Jordan's Ice Creams is following a focus differentiation strategy by targeting a specific group of customers (university students) and offering them a wide range of customized products to cater to their preferences.

Question 17

A differentiator has the advantage of:

Accepted Answer

A differentiator focuses on offering unique features, superior quality, exceptional design, and customer service that creates a distinctive impression in the minds of the customers. This can help the company sell their product or service on non-price factors, which is a significant advantage over their competitors.

Question 18

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

Accepted Answer

The broad low-cost strategy aims to achieve a lower cost of production compared to competitors in the same industry by optimizing operational efficiency, reducing waste, and streamlining the supply chain. This approach enables the company to set lower prices while still earning a profit, attracting price-sensitive customers who prioritize affordability over other product attributes.

Question 19

Which of the following matches the correct company with the generic business-level strategy that it practices?

Accepted Answer

The answer of Which of the following matches the correct...

Question 20

Acknowledging the demand for healthier drinking options, a large beverage company has developed a new line of beverages with no calories and no artificial sweeteners to add to its existing product line. Which of the following approaches to market segmentation is the beverage company using?

Accepted Answer

The beverage company is using a focus differentiation strategy because it is targeting a specific market segment (health-conscious consumers) and differentiating its product (no calories, no artificial sweeteners) from competitors' products.

Quiz 5: Business-Level Strategy