Question 1

Pre-emption strategies can help sustain a firm's competitive advantage through:
A)Reducing the opportunities available to competitors to invade the firm's strategic space
B)Threatening competitors with retaliation
C)Engaging in limit pricing that makes entry unprofitable for would-be rivals
D)Reinforcing barriers of mobility

Accepted Answer

Pre-emption strategies involve actions that reduce the opportunities for competitors to enter or expand in the firm's strategic space, thereby sustaining the firm's competitive advantage.

Question 2

Firms pursuing differentiation advantages will implement their strategies differently from those pursuing cost advantage.The implementation of differentiation strategy is likely to feature:
A)Employee remuneration based upon individual productivity
B)Frequent performance reporting
C)High levels of outsourcing
D)Low levels of job specialization.

Accepted Answer

Differentiation strategies focus on creating unique products or services, which often require a broader range of skills and creativity from employees, leading to lower levels of job specialization. This approach contrasts with cost leadership strategies, where high job specialization can drive efficiency and lower costs.

Question 3

Compared with simple products like flour or toilet paper,complex products such as cars or hotels:
A)Require less efforts to create image differentiation
B)Greater potential for differentiation
C)Offer similar opportunities for differentiation--it all depends upon the creativity of product designers and marketers
D)Run the risk that differentiation will restrict them to a narrow market niche

Accepted Answer

Complex products like cars or hotels offer greater potential for differentiation as there are more features and attributes that can be modified or highlighted to create a unique selling proposition. This allows companies to target specific segments of the market with tailored marketing strategies that appeal to their particular needs and preferences. Additionally, as consumers are often willing to pay more for complex products, there is a greater incentive for companies to invest in creating a differentiated brand image.

Question 4

Most of the innovative business models deployed by e-commerce firms:
A)Could not have been conceived of prior to the advent of digital technology
B)Have their roots in in business models developed by firms in the pre-digital era
C)Exploit network externalities
D)Are dependent upon the ability to generate revenues from advertising

Accepted Answer

The answer of Most of the innovative business models deployed...

Question 5

Isolating mechanisms are:
A)Barriers to the erosion of interfirm profit differentials
B)Mechanisms that impede the equilibration of rents between industries
C)The same as "barriers to mobility"
D)Sources of disequilibrium that cause the profitability of different firms in an industry to diverge over time

Accepted Answer

The answer of Isolating mechanisms are:
A)Barriers to the erosion of...

Question 6

What is the difference between differentiation and segmentation?
A)There is no difference between the two3
B)Differentiation deals with the "how" a firm chooses to compete,while segmentation describes "where" in the entire market a firm chooses to compete
C)Differentiation is a firm's strategic choice,whereas segmentation is given by its environment
D)Segmentation is the head of the marketing department's responsibility,whereas the CEO is in charge of differentiation

Accepted Answer

Differentiation and segmentation are two different concepts in marketing. Differentiation refers to the process of creating a unique product or service that stands out from the competition. Segmentation, on the other hand, refers to dividing the market into groups of consumers with similar needs and characteristics. In simple terms, differentiation deals with "how" a firm chooses to compete, while segmentation describes "where" in the entire market a firm chooses to compete. Hence, option B is the correct answer.

Question 7

Which of the following product categories offers the greatest potential for differentiation?
A)Clothes and restaurants
B)Cement and wheat
C)Jet fuel for airline jets
D)Sulfur and ethylene

Accepted Answer

Clothes and restaurants offer the greatest potential for differentiation. Both products allow for various styles, designs, and unique features that can set them apart from competitors. In contrast, products like cement, wheat, jet fuel, sulfur, and ethylene are generally commoditized products for which differentiation is difficult.

Question 8

Conceiving of innovative business models typically involves:
A)Using analogies to transfer and adapt business models from other business sectors
B)Using brain storming to generate creative ideas
C)Deploying artificial intelligence
D)Exploring the interface between customer need and the firm's resources and capabilities

Accepted Answer

The answer of Conceiving of innovative business models typically involves:
A)Using...

Question 9

In strategic management,the expression "blue oceans" refers to:
A)Radical innovation
B)The potential offered by uncontested market space
C)The campaign to reduce pollution in the world's oceans
D)Cost reduction through offshoring production

Accepted Answer

"Blue oceans" in strategic management refers to the potential offered by uncontested market space, meaning areas where there is little or no competition. This can provide opportunities for companies to create new demand and differentiate themselves from competitors. Radical innovation (A) can certainly be a part of a strategy for creating blue oceans, but it is not the same as the concept itself. Reduction of pollution in the oceans (C) may be a socially responsible goal for companies to pursue, but it is not directly related to the strategic management concept of blue oceans. Cost reduction through offshoring production (D) is a separate strategy that may or may not be relevant to creating blue oceans, so it is not the best choice.

Question 10

According to Porter,cost leadership and differentiation are:
A)What leads a firm to "be stuck in the middle"
B)Two names for the same fundamental strategy
C)Distinct generic strategies
D)Strategies that can be pursued simultaneously

Accepted Answer

According to Porter, cost leadership and differentiation are two distinct generic strategies that a firm can choose to pursue in order to gain a competitive advantage over its rivals. Pursuing both strategies simultaneously can lead a firm to become "stuck in the middle" and lose its competitive edge.

Question 11

The examples of Ikea and Southwest Airlines demonstrate:
A)The power of brand as a factor of success
B)The quality of the top management of these firms
C)The power of advertising
D)How a cost-leadership strategy can be combined with distinctive product differentiation

Accepted Answer

Both Ikea and Southwest Airlines have successfully implemented a cost-leadership strategy by offering affordable products and services, while also differentiating themselves through distinctive features such as unique and trendy furniture designs in the case of Ikea and exceptional customer service and employee culture in the case of Southwest Airlines. This combination has led to their success in their respective industries. While brand power and effective management are also important factors of success, the example of these two companies specifically highlights the effectiveness of a cost-leadership and differentiation strategy.

Question 12

As markets become more turbulent and unpredictable,seizing opportunities to establish competitive advantage depends primarily upon:
A)Good forecasting
B)Quick identification of emerging changes
C)Speed of response
D)Agility: quick identification of emerging changes and speed in responding to them

Accepted Answer

The best answer is D, as it incorporates both the quick identification of emerging changes and the speed of response into one option. Good forecasting may be helpful, but in turbulent and unpredictable markets, it may not be reliable. Agility is essential for companies to adapt and stay competitive.

Question 13

Economies of scale in activities such as R&D,new product development,advertising,and government lobbying arise mainly because of:
A)Specialization-as these activities grow in scale,there are productivity gains from division of labor
B)Indivisibilities-these activities involve large fixed costs that can be spread over a larger volume of output
C)Technical input-output relationships-increases in output do not require proportionate increases in input
D)Increased bargaining power-large companies can negotiate lower input prices for these activities

Accepted Answer

Economies of scale in activities such as R&D, new product development, advertising and government lobbying arise mainly because these activities involve large fixed costs that can be spread over a larger volume of output. This is due to the presence of indivisibilities, whereby increases in output do not require proportionate increases in input. As the scale of these activities grows, there are productivity gains from division of labor, which further reinforces the economies of scale. However, specialization (A), technical input-output relationships (C), and increased bargaining power (D) are not the primary drivers of economies of scale in these activities.

Question 14

The usefulness of the strategy canvas in developing blue ocean strategies rests on its ability to:
A)Suggest possible applications of frontier technologies
B)Identify opportunities for recombining existing product attributes in novel ways
C)Identify unfulfilled customer needs
D)Reconfigure a firm's value chain

Accepted Answer

The strategy canvas is a tool used to visually analyze the competitive landscape of an industry and identify areas where an organization can differentiate itself from the competition. It does this by plotting the key features and attributes of competing products or services on a graph, allowing organizations to identify gaps in the market and opportunities to recombine existing product attributes in novel ways. While it may indirectly lead to identifying unfulfilled customer needs, it is primarily focused on identifying opportunities for differentiation and creating new market space through unique value propositions. It is not directly related to suggesting possible applications of frontier technologies or reconfiguring a firm's value chain.

Question 15

The principal strategy implication of the experience curve is that:
A)Firms should aim to drive volume growth through increasing their market shares.
B)To reduce costs firms should prioritize learning
C)Firms should concentrate on those products with the greatest sales potential
D)Firms that aim to become cost leaders need to focus on mass production and mass marketing

Accepted Answer

The experience curve suggests that as firms increase their production volume, they gain experience, leading to lower costs. Therefore, driving volume growth through increased market share is a key strategy to leverage the experience curve.

Question 16

Which of the following is not an isolating mechanism?
A)Private ownership of a company which means that it is not obliged to publish its financial statements
B)Competitive advantage which is based upon the interaction of a number of different resources and capabilities
C)Competitive advantage based upon exploiting pricing anomalies
D)Competitive advantage based upon resources that are difficult to transfer and slow to replicate.

Accepted Answer

The answer of Which of the following is not an...

Question 17

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:
A)Scale economies in operating large individual retail units
B)Lower costs of bought-in products as a result of superior bargaining power
C)Higher capacity utilization in retailing and distribution
D)Using superior bargaining power to pay lower wage rates.

Accepted Answer

Large retail chains like Wal-Mart and Tesco have significant bargaining power over suppliers due to their large scale and market share. As a result, they are often able to negotiate lower prices for the products they buy, which allows them to sell those products at lower prices than their competitors. This creates a cost advantage for the retailer and attracts more customers, leading to further cost advantages through economies of scale. While scale economies and capacity utilization may also contribute to cost advantages for large retail chains, the primary driver is their ability to negotiate lower prices with suppliers. The idea that large retail chains use their bargaining power to pay lower wage rates is a contentious issue and not a universally accepted reason for their cost advantage.

Question 18

"Experience goods" are those which:
A)Have performance attributes that are difficult to ascertain at the moment of purchase
B)Only customers with previous experience of using these goods would rationally consider purchasing
C)Only firms with wide experience in an industry would rationally consider making
D)Have been produced by the firm furthest down the learning curve

Accepted Answer

Experience goods are goods whose quality is difficult to determine before they are purchased and experienced. For example, a restaurant meal or a movie. Customers may rely on recommendations or reviews from others, or they may need to purchase and try the good themselves to determine its quality.

Question 19

In supplying "lifestyle" products which are designed to meet consumers' social and psychological needs,the key to effective differentiation is:
A)A relentless pursuit of quality
B)Thorough market research
C)Product integrity
D)Market segmentation.

Accepted Answer

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

Question 20

Banks spend more money on their head office buildings than most other large corporations because:
A)They tend to be located in financial centers where property prices are high
B)They offer "experience goods",hence they need to signal wealth and stability
C)Their CEOs are more committed to the display of wealth than other CEOs
D)Because their products are essentially commodities,they need to find alternative ways of differentiating.

Accepted Answer

Banks offer "experience goods" such as trust and reliability. To signal these qualities, they need to display wealth and stability, which requires substantial investment in head office buildings.

Quiz 7: B :The Sources and Dimensions of Competitive Advantage

Pre-emption strategies can help sustain a firm's competitive advantage through:

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

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

Most of the innovative business models deployed by e-commerce firms:

Isolating mechanisms are:

What is the difference between differentiation and segmentation?

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

Conceiving of innovative business models typically involves:

In strategic management,the expression "blue oceans" refers to:

According to Porter,cost leadership and differentiation are:

The examples of Ikea and Southwest Airlines demonstrate:

As markets become more turbulent and unpredictable,seizing opportunities to establish competitive advantage depends primarily upon:

Economies of scale in activities such as R&D,new product development,advertising,and government lobbying arise mainly because of:

The usefulness of the strategy canvas in developing blue ocean strategies rests on its ability to:

The principal strategy implication of the experience curve is that:

Which of the following is not an isolating mechanism?

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:

"Experience goods" are those which:

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

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