Question 1

In supplying "lifestyle" products which are designed to meet consumers' social and psychological needs,the key to differentiation advantage is:

Accepted Answer

The answer of In supplying "lifestyle" products which are designed...

Question 2

The examples of Ikea and Southwest Airlines demonstrate:

Accepted Answer

Both Ikea and Southwest Airlines rely on a cost-leadership strategy to offer products and services at a lower price than their competitors. However, they also achieve distinctive product differentiation by offering a unique customer experience and focusing on areas that are important to their target market. This combination allows them to stand out from their competitors while maintaining a low-cost focus.

Question 3

Banks spend more money on their head office buildings than most other large corporations because:

Accepted Answer

Banks offer intangible products such as financial security and stability. To signal this to customers, they invest more in their head office buildings to create an image of wealth, stability, and permanence, hence they need to offer an "experience" to their customers.

Question 4

The difference between a "generic" and a "contextual" management practices is:

Accepted Answer

Generic management practices are basic, standardized practices that are generally applicable to all firms. Contextual management practices, on the other hand, are tailored to the specific context of a firm, such as its industry, size, or culture. The performance impact of a generic practice is independent of other practices employed by the firm, whereas the impact of a contextual practice depends upon the firm's other practices. In other words, a contextual practice may have a positive impact if it is implemented in a way that complements the firm's other practices, but may have a negative impact if it is implemented in a way that conflicts with or undermines the firm's other practices.

Question 5

Which of the following product categories offers the greatest potential for differentiation?

Accepted Answer

Clothes and restaurants offer greater potential for differentiation as they are both highly dependent on factors such as style, quality, creativity, and customer service. These factors allow for differentiation and customization, unlike products such as cement or sulfur, which are commodities that are often bought solely based on price. Jet fuel and ethylene are also highly regulated and standardized products, leaving little room for differentiation.

Question 6

"Experience goods" are those which:

Accepted Answer

Experience goods are those which have performance attributes that are difficult to ascertain at the moment of purchase. This means that consumers may not be able to judge the value of the product until they have experienced it personally. Examples of experience goods include movies, books, and restaurants.

Question 7

Advertising costs as a percentage of sales revenue for soft drink brands with large market shares (such as Coca-Cola and Pepsi-Cola)are lower than for brands with small market shares (Dr.Pepper,Schweppes,Fresca).This is because:

Accepted Answer

Advertising campaigns often require a minimum budget, which means that larger brands can spread these fixed costs over a larger sales base, resulting in a lower percentage of sales revenue spent on advertising compared to smaller brands.

Question 8

According to Porter,cost leadership and differentiation are:

Accepted Answer

Cost leadership and differentiation are two distinct generic strategies outlined by Porter. A firm can either choose to focus on becoming the low-cost provider or differentiate itself in the market. Trying to pursue both strategies simultaneously can lead to being "stuck in the middle" and having a lack of competitive advantage in either aspect.

Question 9

What is the difference between differentiation and segmentation?

Accepted Answer

Differentiation and Segmentation are different concepts. Differentiation refers to how a firm chooses to compete, i.e., what unique benefits or features it offers to set itself apart from competitors. Segmentation, on the other hand, refers to where the firm chooses to compete in the market, i.e., which specific customer groups or market segments it targets. Therefore, B is the best answer as it accurately defines the difference between the two concepts.

Question 10

In retailing,the cost advantages of large retail chains (such as Wal-Mart in the US,Tesco in Britain,Metro in Germany,and Carrefour in France)is primarily the result of:

Accepted Answer

Large retail chains are able to negotiate lower prices from suppliers due to their superior bargaining power, which allows them to buy larger quantities of goods at lower prices. This results in cost savings that can be passed on to consumers and/or used to increase profits. While scale economies and higher capacity utilization may also contribute to cost advantages, they are not the primary drivers of the cost advantages enjoyed by large retail chains. Lower wage rates due to superior bargaining power would not be the primary source of cost advantages, as wages typically represent a relatively small portion of total costs for retail chains.

Question 11

Firms pursuing differentiation advantages will implement their strategies differently from those pursuing cost advantages.The implementation of differentiation strategy is likely to feature:

Accepted Answer

Differentiation strategies often involve offering unique products or services, which can require more creativity and flexibility from employees, leading to lower levels of job specialization.

Question 12

Compared with simple products like flour or toilet paper,complex products such as cars or hotels:

Accepted Answer

Complex products like cars or hotels offer greater potential for differentiation because their design and features can be customized to appeal to different target markets, creating a unique selling proposition. They also have higher profit margins, allowing for greater investment in marketing and product development.

Quiz 7: The Sources and Dimensions of Competitive Advantage