Deck 5: Selecting Business-Level Strategies

Question 1

Cost leaders' emphasis on efficiency makes them vulnerable to price competition from rivals.

Answer 1

False

Question 2

Cost leaders are companies that sell inferior, poor quality goods and services for rock-bottom prices.

Answer 2

False

Question 3

Most cost leaders spend little on advertising, market research, or research and development in order to be efficient.

Answer 3

True

Question 4

One of the ways that cost leaders generally keep their costs low is by not spending much on advertising.

Question 5

A relative lack of market research can lead cost leaders to be not as skilled as other firms at detecting important environmental changes.

Question 6

The need for efficiency means that cost leaders' profit margins are often higher than the margins enjoyed by other firms.

Question 7

The presence of a cost leader in an industry encourages new firms to enter the business.

Question 8

Cost leaders are often large companies, and this allows them to demand price concessions from their suppliers.

Question 9

Focusing on generic strategies allows executives to concentrate on the core elements of firms' business-level strategies.

Question 10

The big risk when using a differentiation strategy is that customers will not be willing to pay extra to obtain the unique features that a firm is trying to build its strategy.

Question 11

A differentiation strategy helps break barriers to entry that protect the firm and its industry from new competition.

Question 12

A firm following a differentiation strategy attempts to convince customers to pay a premium price for its good or services by providing unique and desirable features.

Question 13

Customers, in many cases, may simply prefer a cheaper alternative to a unique product sold at a premium price.

Question 14

Effective differentiation creates an ability to obtain premium prices from customers.

Question 15

Markets that involve a lot of brand loyalty offer great opportunities to cost leaders to attract a large segment of customers.

Question 16

Firms that are not able to offer low prices or appealing unique features are said to be following the best-cost strategy.

Question 17

A firm may not match every characteristic that its generic strategy entails.

Question 18

Economies of scale occur because expenses are distributed across a greater number of items.

Question 19

A differentiation strategy also creates benefits relative to potential new entrants.

Question 20

Firms that are able to offer both low prices and unique features that customer find desirable are said to be stuck in the middle.

Question 21

In the case of focus differentiation, a company lacks the ability to charge high prices.

Question 22

The best cost strategy is difficult to execute in part because creating unique features and communicating them generally raises a firm's costs of doing business.

Question 23

A firm following a(n) _____ strategy offers products or services with acceptable quality and features to a broad set of customers at a low price.

A)pull
B)cost leadership
C)focused differentiation
D)adaptive
E)differentiation

Question 24

A focus strategy typically implies that a firm forgoes any attempt to develop expertise about the goods and services that it offers.

Question 25

Which of the following statements holds true for the cost leadership strategy?

A)Cost leaders, in general, encourage expensive advertising campaigns.
B)Cost leaders, in general, invest heavily in market research.
C)Cost leaders, in general, spend substantial funds on research and development.
D)Cost leaders, in general, make an effort to offer unique features to the customers.
E)Cost leaders, in general, emphasize on efficiency.

Question 26

A(n) _____ is a general way of positioning a firm within an industry.

A)micro-strategy
B)standard strategy
C)established strategy
D)generic strategy
E)marked strategy

Question 27

A company that sells dairy products purchases large quantities of milk from the local dairy farms.Since the quantity purchased is very high, the company is able to demand and get price concessions from the dairy farms.The company prices its dairy products at a lower rate than its competitors.The greater quantity of products sold compensates for the low price.This is an example of:

A)economies of scale.
B)economies of supply.
C)economies of demand.
D)economies of distribution.
E)economies of cost.

Question 28

In many cases, firms become stuck in the middle because firms are simply outmaneuvered by their rivals.

Question 29

Jeff wants to open a new coffee shop in his town where there are already two other coffee shops.In order to attract more customers, James decides to charge a lower price for each cup of coffee than what his competitors charge.This is an example of a(n) _____ strategy.

A)established
B)generic
C)marked
D)general
E)standard

Question 30

Which of the following are created when the costs of offering goods and services decreases as a firm is able to sell more items?

A)Economies of cost
B)Economies of demand
C)Economies of distribution
D)Economies of scale
E)Economies of supply

Question 31

The unique features provided by firms following a focused differentiation strategy are often very specialized.

Question 32

One route toward a best-cost strategy is for a firm to adopt a business model whose fixed costs and overhead are very low relative to the costs that competitors are absorbing.

Question 33

The nature of the narrow target market remains constant across firms that use a focused cost leadership strategy.

Question 34

A firm's business-level strategy should involve trying to serve the varied needs of every different segment of customers in an industry.

Question 35

In many cases, the target market is defined by the sales channel used to reach customers.

Question 36

A company introduces a new helmet for bikers.The company prices the helmets much lower than others offered in the market.This enables the company to attract a lot of customers.This is an example of a(n) _____ strategy.

A)focused differentiation
B)pull
C)cost leadership
D)adaptive
E)differentiation

Question 37

A company introduces a new product in the market.The company decides that the only way it could attract customers is to keep the price of the product lower than what its competitors offer in the market.Which of the statements would hold true for such a strategy?

A)The company invests heavily in market research.
B)The company makes an effort to offer unique features to the customers.
C)The company emphasizes on efficiency.
D)The company must spend substantial funds on research and development.
E)The company encourages expensive advertising campaigns.

Question 38

A national grocery chain sets up a store in a small town.It sources most of its produce from the local farmers.Since it sources the produce in bulk, it demands discounts from the suppliers.The store passes some of these savings to the customers in the form of low prices for the products.The price is lower than what is offered by the local grocery stores.The large quantities of products sold compensates for the lower price.This is an example of:

A)economies of distribution.
B)economies of cost.
C)economies of demand.
D)economies of supply.
E)economies of scale.

Question 39

A firm following the focused cost strategy necessarily charges the lowest prices in the industry.

Question 40

Mike opens a new gym in his hometown.He charges lower membership and monthly fees than what is offered by the other four gyms in town.This results in the migration of customers from the other gyms to Mike's gym.This enables the company to attract a lot of customers.This is an example of a(n) _____ strategy.

A)cost leadership
B)adaptive
C)differentiation
D)focused differentiation
E)pull

Question 41

A(n) _____ means that a firm is competing based on uniqueness rather than price and is seeking to attract a broad market.

A)focused cost leadership strategy
B)cost leadership strategy
C)pull strategy
D)adaptive strategy
E)differentiation strategy

Question 42

Which of the following statements holds true for companies following the differentiation strategy?

A)They offer generic and standardized products.
B)They do not invest in the field of market research.
C)They spend little on research and development.
D)Advertising in general and brand building in particular are very important to them.
E)They compete with their rivals on the basis of price.

Question 43

Mekcin is a company that regularly launches products with features that are different from what are offered in the market.It has now launched a new electronic device which can be fitted to vehicles.It can be programmed to automatically dial the police emergency number, provide them with all the required location details, and guide them to the location, in the case of an emergency.Which of the following statements would hold true for Mekcin?

A)It competes with rivals on the basis of price.
B)It offers generic and standardized products.
C)It does not invest in the field of market research.
D)It spends little on research and development.
E)It invests heavily in advertising and brand building.

Question 44

A company introduces a new product in the market.The company decides that the only way it could attract customers is to keep the price of the product lower than what its competitors charge.Which of the following disadvantage would the company face because of the strategy it proposes to follow?

A)Low prices for goods and services always lead to low customer base for the company.
B)Downplaying research and development can slow the company's ability to respond to changes once they are detected.
C)The company's strategy would make it vulnerable to price competition from rivals.
D)The company's strategy would break down barriers to entry that protects the firm from new competition.
E)The presence such a company would have the effect of discouraging new firms from entering the business.

Question 45

A health drink company is known for launching drinks with flavors which are different from what are offered in the market.It regularly indulges in experimentation to come up with new and exotically flavored drinks.It also charges higher than the other health drink companies.What disadvantage would the company face because of the strategy it follows?

A)The firm needs to attract huge numbers of customers in order to have a good overall level of profit.
B)Differentiation lacks an ability to obtain premium prices from customers.
C)A differentiation strategy allows the entrance of new companies in the market.
D)A differentiation strategy lacks the capacity to generate buyer loyalty.
E)Competitors may be able to imitate the features well enough that they are no longer unique.

Question 46

A bike manufacturing company targets college going kids.The price of the bikes offered by this company is lower than what the other companies offer in the market.The fact that it offers low priced bikes to college going kids is an example of a(n):

A)adaptive strategy.
B)differentiation strategy.
C)focused cost leadership strategy.
D)pull strategy.
E)focused differentiation strategy.

Question 47

A company regularly launches products with features that are different from what are offered in the market.It has now launched a new electronic device which can be fitted to vehicles.It can be programmed to automatically dial the police emergency number, provide them with the required location details, and guide them to the location in the case of an emergency.This is an example of a(n) _____ strategy.

A)focused cost leadership
B)cost leadership
C)pull
D)adaptive
E)differentiation

Question 48

Which of the following constitutes an advantage of the differentiation strategy?

A)It creates an ability to obtain premium prices from customers.
B)Companies following this strategy do not need to spend significant funds on advertising.
C)Companies following this strategy depend on their ability to reduce the price to drive competition out of the market.
D)Customers always prefer a product with features rather than a cheaper alternative.
E)Customers are always eager to pay extra to obtain the unique features that a firm is trying to build its strategy around.

Question 49

Pete opens a new pizzeria in town.He promises home delivery of pizzas within a period of thirty minutes.He also makes a unique offer that if the pizzas are not delivered within thirty minutes of placing the order, then the customer will not be charged for the pizza.None of the other pizzerias in his town offer such a deal.This is an example of a(n) _____ strategy.

A)cost leadership
B)adaptive
C)differentiation
D)pull
E)focused cost leadership

Question 50

A health drink company is known for launching drinks with flavors which are different from what are offered in the market.It regularly indulges in experimentation to come up with new and exotic flavored drinks.It also charges higher than what other health drink companies charge.Which of the following statements would hold true for this company?

A)It offers generic and standardized products.
B)It does not invest in the field of market research.
C)It spends little on research and development.
D)It invests heavily in advertising and brand building.
E)It competes with its rivals on the basis of price.

Question 51

Which of the following is a disadvantage of cost leadership?

A)The presence of a cost leader in an industry tends to discourage new firms from entering the business.
B)Low prices for goods and services always lead to low customer base.
C)Downplaying research and development can slow cost leaders' ability to respond to changes once they are detected.
D)Cost leadership strategy makes companies vulnerable to price competition from rivals.
E)Cost leadership strategy breaks down barriers to entry that protect the firm from new competition.

Question 52

Mekcin is a company that regularly launches products with features that are different from what are offered in the market.It has now launched a new electronic device which can be fitted to vehicles.It can be programmed to automatically dial the police emergency number, provide them with all the required location details, and guide them to the location, in the case of an emergency.It also charges higher for its products than what other companies charge for their products.What disadvantage would the company face because of the strategy it follows?

A)The firm needs to attract huge numbers of customers in order to have a good overall level of profit.
B)This company lacks an ability to obtain premium prices from customers.
C)This differentiation strategy allows the entrance of new companies in the market.
D)This strategy lacks the capacity to generate buyer loyalty.
E)Competitors may be able to imitate the features well enough that they are no longer unique.

Question 53

Which of the following is an advantage of cost leadership?

A)It makes a firm following this strategy well positioned to withstand price competition from rivals.
B)The need for high sales volume requires low upfront investments in production and/or distribution capacity.
C)In markets that involve a lot of brand loyalty, cost leadership companies command the largest share in the market.
D)Low expenditure on market research helps firms following the cost leadership strategy to detect important environmental changes at a lower cost.
E)Highly fragmented markets offer firms following this strategy greater opportunities to attract a large segment of customers.

Question 54

_____ refers to the extent to which an increase in the cost of the product makes a buyer less likely to purchase an item.

A)Affective conflict
B)Palming off
C)Party selling
D)Price sensitivity
E)All-you-can-afford budgeting

Question 55

A company introduces a new product in the market.The company decides that the only way it could attract customers is to keep the price of the product lower than what its competitors charge.What advantage would the company enjoy because of the strategy it proposes to follow?

A)If the market involves a lot of brand loyalty, the company would command the largest share in the market.
B)Low expenditure on market research would help it to detect important environmental changes at a lower cost.
C)If the market is highly fragmented the company would avail greater opportunities to attract a large segment of customers.
D)It makes them well positioned to withstand price competition from rivals.
E)The need for high sales volume would require low upfront investments in production and/or distribution capacity.

Question 56

A(n) _____ strategy requires competing based on price to target a narrow market.

A)focused cost leadership
B)pull leadership
C)focused differentiation
D)adaptive
E)differentiation

Question 57

Which of the following constitutes a disadvantage of the differentiation strategy?

A)A differentiation strategy lacks the capacity to generate buyer loyalty.
B)Competitors are able to imitate the features well enough that they are no longer unique.
C)The firm needs to attract huge numbers of customers in order to have a good overall level of profit.
D)Differentiation lacks an ability to obtain premium prices from customers.
E)A differentiation strategy allows the entrance of new companies in the market.

Question 58

A health drink company is known for launching drinks with flavors which are different from what are offered in the market.It regularly indulges in experimentation to come up with new and exotic flavored drinks.It also charges higher than what other health drink companies charge.What advantage would the company enjoy because of the strategy it follows?

A)It can depend on its ability to reduce the price to drive competition out of the market.
B)Customers always prefer a product with features rather than a cheaper alternative.
C)It has an ability to obtain premium prices from customers.
D)It does not need to spend significant funds on advertising.
E)Customers are always eager to pay extra to obtain the unique features that a firm is trying to build its strategy around.

Question 59

A sneaker manufacturing company targets teenagers.It sells the sneakers to these teenagers at a price which is lower than what is offered in the market.The fact that it offers low sneakers to teenagers is an example of a(n):

A)focused cost leadership strategy.
B)pull strategy.
C)focused differentiation strategy.
D)adaptive strategy.
E)differentiation strategy.

Question 60

Healthie is a health drink company that is known for launching drinks with flavors which are different from what are offered in the market.It regularly indulges in experimentation to come up with new and exotically flavored drinks.It also charges higher than the other health drink companies.Another company offers the same drinks a lower price.Customers who were once loyal to Healthie immediately switch over to the new company which is charging a lower price for the same drinks.This is an example of _____.

A)price sensitivity
B)affective conflict
C)party selling
D)palming off
E)all-you-can-afford budgeting

Question 61

A company that manufactures laundry detergent makes use of salespersons for door-to-door selling to directly sell the products to the customers.The company allows customers to make payments for the products within a period of one month.This is an example of a(n):

A)focused differentiation strategy.
B)focused cost leadership strategy.
C)cost leadership strategy.
D)pull strategy.
E)adaptive strategy.

Question 62

Firms that charge relatively low prices and offer substantial differentiation are following a _____ strategy.

A)generic cost
B)best-cost
C)standardized cost
D)stuck in the middle
E)marked

Question 63

According to Porter, which two competitive dimensions are the keys to business-level strategy?

Question 64

Car manufacturers such as Lamborghini compete in the small super car category.These cars offer more than just transportation.They are known for their styling and state of art technology.Which of the following is an advantage for such a company?

A)It depends on its ability to reduce the price to drive competition out of the market.
B)It does not face damaging attacks from larger firms.
C)It growth is never stymied irrespective of the fact that it serves a niche market.
D)Its area of operation cannot be made to disappear or be taken over by larger competitors.
E)It can charge very high prices.

Question 65

A hotel chain offers rooms which are priced higher than what other hotels in the same category offer.The services provided by the hotel are similar in quality when compared to the other firms.This situation makes it impossible for the hotel chain to compete either on the basis of price or on the basis of standout features.This hotel chain is a _____ organization.

A)runner
B)preretailing
C)paste-up
D)rack jobber
E)stuck in the middle

Question 66

A watch manufacturing company has priced its goods at a rate which is higher than what other companies offer.The watches made by this company do not have any stand out feature to differentiate itself from the other companies or justify its high price.This company would be considered as a _____ firm.

A)rack jobber
B)stuck in the middle
C)paste-up
D)runner
E)preretailing

Question 67

A real estate company provides housing services to retired individuals.It basically helps individuals above the age of sixty to search for houses with peaceful surroundings.Which of the following statements holds true for the real estate company?

A)It depends on its ability to reduce the price to drive competition out of the market.
B)It does not face damaging attacks from larger firms.
C)It growth is never stymied irrespective of the fact that it serves a niche market.
D)Its area of operation cannot be made to disappear or be taken over by larger competitors.
E)It can charge very high prices.

Question 68

Which of the following is an advantage of a company following a focused strategy?
A)Companies following the focused differentiation strategy can charge very high prices.

A)Companies following the focused differentiation strategy never have their growth stymied irrespective of the fact that they serve a niche market.
B)Damaging attacks never comes from larger firms
C)The companies are protected from the damaging attacks of smaller firms that adopt an even narrower focus.
D)The niche that is an area of operation of one company cannot be made to disappear or be taken over by larger competitors.

Question 69

A sneaker manufacturing company targets teenagers.It sells the sneakers to these teenagers at a price which is lower than what is offered in the market.It also has a website where customers can design their own shoes.They then can order the shoes and they will be delivered to them.This is an example of a (n) _____ strategy.

A)generic cost
B)best-cost
C)standardized cost
D)stuck in the middle
E)marked

Question 70

Explain the disadvantages of a cost leadership strategy.

Question 71

A firm is said to be _____ if it does not offer features that are unique enough to convince customers to buy its offerings and its prices are too high to effectively compete on based on price.

A)paste-up
B)runner
C)rack jobber
D)stuck in the middle
E)preretailing

Question 72

A real estate company provides housing services to retired individuals.It basically helps individuals above the age of sixty to search for houses with peaceful surroundings.The fact that the company provides housing services to retired individuals is an example of a(n):

A)adaptive strategy.
B)pull strategy.
C)focused cost leadership strategy.
D)cost leadership strategy.
E)focused differentiation strategy.

Question 73

Which of the following holds true for companies following the focused differentiation strategy?

A)The niche that is an area of operation of one company cannot be made to disappear or be taken over by larger competitors.
B)Companies following the focused differentiation strategy can charge very high prices.
C)Companies following this strategy depend on their ability to reduce the price to drive competition out of the market.
D)Damaging attacks do come not from larger firms.
E)Companies following the focused differentiation strategy

Question 74

Car manufacturers such as Lamborghini and Ferrari compete in the small super car category.These cars offer more than just transportation.They are known for their styling and state of art technology.This is an example of a(n):

A)adaptive strategy.
B)pull strategy.
C)focused cost leadership strategy.
D)cost leadership strategy.
E)focused differentiation strategy.

Question 75

What are the limitations of generic strategies?

Question 76

A(n) _____ strategy requires offering unique features that fulfill the demands of a narrow market.

A)focused cost leadership
B)cost leadership
C)focused differentiation
D)adaptive
E)pull

Question 77

What are the advantages of a differentiation strategy?

Question 78

A company sells computers only over the internet.Customers can decide their own computer configuration at the company's website and then place the order for the computer.This is an example of:

A)focused differentiation strategy.
B)focused cost leadership strategy.
C)cost leadership strategy.
D)pull strategy.
E)adaptive strategy.

Question 79

What are the advantages of a cost leadership strategy?

Question 80

A company provides baby sitting services to single working mothers.This is the example of a(n):

A)adaptive strategy.
B)pull strategy.
C)cost leadership strategy.
D)focused differentiation strategy.
E)focused cost leadership strategy.