Deck 5: Product Differentiation

Question 1

Product differentiation is a business strategy whereby firms attempt to gain a competitive advantage by increasing the perceived value of their products and services relative to the perceived value of other firms' products or services.

Answer 1

True

Question 2

The ability to use organization structure to facilitate coordination among scientific disciplines to conduct research is known as architectural competence.

Answer 2

True

Question 3

It is reasonable to expect that in the near future a marketing specialist will develop a definitive list of bases of product differentiation.

Answer 3

False

Question 4

Firms selling differentiated products face a horizontal demand curve.

Question 5

Timing-based product differentiation relies solely on being a first mover.

Question 6

Through advertising and other consumer marketing efforts,firms attempt to alter the perceptions of current and potential customers,but only when specific attributes of a firm's products or services are altered.

Question 7

A hedonic price is that part of a products' or services' actual price that is not attributable to a particular attribute of that product or service.

Question 8

While firms often alter the objective properties of their products or services in order to implement a product-differentiation strategy,the existence of product differentiation is always a matter of customer perception.

Question 9

When firms place their products in movies,this is known as co-branding.

Question 10

In the information technology business,interconnectivity is a relatively unimportant basis of potential product differentiation.

Question 11

The physical location of a firm cannot be a source of product differentiation.

Question 12

Products can be differentiated by the extent to which they are customized for particular customer applications.

Question 13

Chryslers' introduction of the "cab forward" design was an attempt at differentiation through product features.

Question 14

Once developed,a firm's reputation can last a long time,even if the basis for that reputation no longer exists.

Question 15

If products or services are perceived as being different in a way that is valued by customers,even if there is no physical differentiation,then product differentiation exists.

Question 16

To the extent that differences in product complexity lead customers to conclude that the products of some firms are more valuable than the product of other firms,then product complexity can be a basis of product differentiation.

Question 17

Edward Chamberlin described firms selling differentiated products and facing a downward-sloping demand curve as being in an industry characterized by monopolistic competition.

Question 18

Product differentiation is ultimately an expression of the creativity of individuals and groups within firms and is limited only by the opportunities that exist,or that can be created,in a particular industry and by the willingness and ability of firms to creatively explore ways to take advantage of those opportunities.

Question 19

Wal-Mart exemplifies a firm pursuing a product-differentiation strategy while Victoria's Secret exemplifies a firm pursuing a cost-leadership strategy.

Question 20

Attempts to create differences in the relative perceived value of a firm's products or services are rarely made by altering the objective properties of those products or services.

Question 21

Firms that pursue a product-differentiation strategy can choose whether or not they want to reveal this strategic choice to their competition by adjusting their prices.

Question 22

While product features,by themselves,are usually not a source of sustained competitive advantage,they can be a source of a temporary competitive advantage.

Question 23

In emerging industries,product-differentiation efforts often focus on product refinement as a basis for product differentiation.

Question 24

More recent work contradicts Porter's assertion about being "stuck in the middle" and suggests that firms that are successful in both cost leadership and product differentiation often can expect to gain a sustained competitive advantage.

Question 25

Knowing how a firm is differentiating its products necessarily means that competitors will be able to duplicate a firm's product-differentiation strategy at a lower cost.

Question 26

Firms able to successfully differentiate their products and services are likely to see a decrease in their volume of sales.

Question 27

While the U-form structure for a firm pursuing cost leadership is relatively simple,the U-form structure for a firm implementing a product-differentiation strategy can be somewhat more complex.

Question 28

McDonald's is an excellent example of a firm that simultaneously employs both a product-differentiation and a cost-leadership strategy since their product differentiation based on cleanliness,consistency and fun in its fast food outlets allowed the company to become the market share leader in the industry and to reduce its costs.

Question 29

Timing,location,distribution channels,and service and support are all very similar bases of product differentiation and can act as substitutes for each other.

Question 30

The concept of product differentiation generally assumes that the number of firms that have been able to differentiate their products in a particular way is,at some point in time,less than the number of firms needed to generate perfect competition dynamics.

Question 31

Product differentiation can lead to high market share and low costs.

Question 32

Product features as a basis for product differentiation are generally not easy to duplicate.

Question 33

Product differentiation increases the threat of substitutes by making a firm's current products appear less attractive than substitutes.

Question 34

When a firm sells a highly differentiated product,it enjoys a quasi-monopoly in that segment of the market.

Question 35

In fragmented industries firms can use product differentiation to help consolidate a market.

Question 36

Product differentiation effectively reduces rivalry to zero.

Question 37

Firms with highly differentiated products may have loyal customers,or customers who are unable to purchase similar products or services from other firms and are therefore more likely to accept increased prices due to a firm passing on increased costs by a powerful supplier.

Question 38

Firms pursuing a differentiation strategy often use temporary cross-divisional and cross-functional teams to manage the development and implementation of new,innovative and highly differentiated products.

Question 39

Product features,product customization,and product complexity have few obvious close substitutes and may be sources of sustained competitive advantages.

Question 40

Product differentiation helps reduce the threat of new entry by forcing potential entrants to an industry to absorb not only the standard costs of beginning business but also the additional costs associated with overcoming incumbent firms' product-differentiation advantages.

Question 41

Which of the following bases of product differentiation attempts to create the perception that a firm's products or services are unusually valuable by focusing directly on the attributes of the products or services a firm sells?

A) Product complexity
B) Product customization
C) Consumer marketing
D) Reputation

Question 42

Which of the following statements regarding the impact of product differentiation on the threat of new entry is accurate?

A) Product differentiation helps reduce the threat of new entry by forcing potential new entrants to absorb costs associated with overcoming incumbent firms' product-differentiation advantages.
B) Product differentiation increases the threat of new entry by allowing potential new entrants to avoid costs associated with overcoming incumbent firms' product-differentiation advantages.
C) Product differentiation has no impact on the threat of new entry.
D) It is not possible to determine the impact of product differentiation on the threat of new entry.

Question 43

In emerging industries

A) firms that are first movers are unlikely to gain product-differentiation advantages based on buyer loyalty and high switching costs.
B) firms that are first movers can gain product-differentiation advantages based on perceived technological leadership.
C) product-differentiation efforts are focused on product refinement as a basis of product differentiation.
D) firms can sometimes be tempted to exaggerate the extent to which they have refined and improved their products and services.

Question 44

With regard to the threat of suppliers,product differentiation

A) reduces the threat of suppliers because a firm with a highly differentiated product can pass increased costs on to customers.
B) increases the threat of suppliers because a firm with a highly differentiated product is unable to pass increased costs on to customers.
C) has no impact on the threat of suppliers.
D) can either increase or reduce the threat of suppliers.

Question 45

The ability of companies that produce complex software packages to tailor these packages to the specific needs of their customers is an example of product differentiation through

A) complexity.
B) consumer marketing.
C) product customization.
D) timing.

Question 46

Which of the following bases of product differentiation attempts to create the perception that a firm's products or services are unusually valuable by focusing on links within and between firms?

A) Reputation
B) Product complexity
C) Consumer marketing
D) Product mix

Question 47

If an individual is considering purchasing a Toyota Camry or a Ferrari and decides that it is worth paying the extra money for the prestige that is associated with the Ferrari,the additional money the customer is willing to pay for the prestige is know as a(n)

A) altruistic price.
B) hedonic price.
C) fair market value.
D) margin price.

Question 48

While firms often alter the ________ of their products or services in order to implement a product-differentiation strategy,the existence of product differentiation,in the end,is always a matter of ________.

A) customer perceptions; objective properties
B) objective properties; price
C) customer perceptions; price
D) objective properties; customer perception

Question 49

Product differentiation is ultimately an expression of the ________ of individuals and groups within firms and is limited only by the ________ that exist,or that can be created,in a particular industry.

A) creativity; resources
B) resources; opportunities
C) creativity; opportunities
D) opportunities; resources

Question 50

A firm's ________ is really no more than a socially complex relationship between a firm and its customers and can serve as a basis for product differentiation.

A) location
B) reputation
C) consumer marketing
D) architectural competence

Question 51

According to Chamberlin,firms selling differentiated products and facing a downward sloping demand curve are in an industry described as

A) perfect competition.
B) monopolistic competition.
C) oligopolistic competition.
D) semi-structured competition.

Question 52

In general,firms selling differentiated products face a demand curve that is

A) upward sloping.
B) horizontal.
C) vertical.
D) downward sloping.

Question 53

________ is a business strategy whereby firms attempt to gain a competitive advantage by increasing the perceived value of their products or services relative to the perceived value of other firms' products or services.

A) Product differentiation
B) Related diversification
C) Cost leadership
D) Best-cost provider

Question 54

The most obvious way that firms can try to differentiate their products is by

A) making the product more complex.
B) introducing the product at the right time.
C) customizing the product for a particular segment.
D) altering the features of the products they sell.

Question 55

When the television show "American Idol" shows the judges drinking beverages from cups with the Coca-Cola label,or when a corporate sponsor places its logo on a NASCAR car,this is an attempt at product differentiation by linking with other firms through

A) product placements.
B) reputation.
C) product mix.
D) architectural competence.

Question 56

When considering the impact of product differentiation on the threat of rivalry,product differentiation

A) reduces the threat of rivalry to zero.
B) increases the threat of rivalry by forcing each firm in an industry to compete directly with one another instead of allowing them to carve out their own unique product niche.
C) has no impact on the threat of rivalry.
D) reduces the threat of rivalry because each firm in an industry attempts to carve out its own unique product niche.

Question 57

Through which bases of competitive advantage do firms attempt to alter the perceptions of current and potential customers,whether or not specific attributes of a firm's products or services are altered?

A) Reputation
B) Location
C) Product customization
D) Consumer marketing

Question 58

Which of the following bases of product differentiation attempts to create the perception that a firm's products or services are unusually valuable by focusing on the relationship between a firm and its customers?

A) Linkages between functions
B) Product customization
C) Location
D) Product complexity

Question 59

________ is the ability to use organizational structure to facilitate coordination among specific disciplines to conduct research.

A) Architectural competence
B) Cross-functional linking
C) Organizational coordination
D) Managerial leverage

Question 60

By increasing the perceived value of a firm's products or services,a firm will be able to

A) charge a lower price than it would otherwise be able to do.
B) charge a higher price than it would otherwise be able to do.
C) sell its products at lower prices than firms pursuing a cost-leadership strategy.
D) gain significantly more market share than firms pursuing a cost-leadership strategy.

Question 61

The Lockheed Corporation Skunk Works is an example of a(n)

A) cross-divisional or cross-functional team.
B) M-form structure.
C) U-form structure.
D) multidivisional structure.

Question 62

Cross-functional product development teams are suitable for a firm pursuing a ________ strategy.

A) cost-leadership
B) confrontation
C) product-differentiation
D) stuck-in-the-middle

Question 63

Which bases of product differentiation is by far the most popular way for firms to try to differentiate their products but is identified as almost always being easy to duplicate?

A) Product mix
B) Product features
C) Customization
D) Distribution channels

Question 64

The U-form structure used to implement a product-differentiation strategy

A) rarely uses temporary cross-divisional and cross-functional teams to manage the development and implementation of new,innovative,and highly differentiated products.
B) has simple reporting relationships.
C) often uses temporary cross-divisional and cross-functional teams to manage the development and implementation of new,innovative,and highly differentiated products.
D) has a small corporate staff.

Question 65

Product features,by themselves,are

A) usually not a source of temporary competitive advantage,but they can be a source of a sustainable competitive advantage.
B) usually not a source of either a temporary competitive advantage,or a source of a sustainable competitive advantage.
C) usually can be a source of both a temporary competitive advantage and a source of a sustainable competitive advantage.
D) usually not a source of sustained competitive advantage,but they can be a source of a temporary competitive advantage.

Question 66

Small entrepreneurial firms

A) have numerous bureaucratic controls that impede cross-functional communication and thus slow innovation.
B) have relatively few bureaucratic controls that allow information and ideas to flow freely and to facilitate innovation.
C) have relatively few bureaucratic controls that impede cross-functional communication and thus slow innovation.
D) have numerous bureaucratic controls but information and ideas still flow freely and facilitate innovation.

Question 67

Which of the following bases of product differentiation is almost always easy to duplicate?

A) Product features
B) Product mix
C) Product customization
D) Consumer marketing

Question 68

Which of the following bases of product differentiation is usually costly to duplicate?

A) Product features
B) Links with other firms
C) Reputation
D) Product mix

Question 69

Under which of the following conditions is the product mix advantage as a basis of product differentiation the least difficult to duplicate?

A) When the base of a product mix advantage is a common customer
B) When the mix of products is highly integrated with each other
C) If each of the products in a product mix has unique features
D) If a firm brings a series of products to market

Question 70

In a declining industry

A) product-differentiation efforts are focused on product refinement as a basis of product differentiation.
B) firms that are first movers can gain product-differentiation advantages based on perceived technological leadership.
C) highly differentiated firms may be able to gain product-differentiation advantages by preempting strategically valuable assets.
D) highly differentiated firms may be able to discover a viable market niche that will enable them to survive despite the overall decline in the market.

Question 71

Which of the following bases of product differentiation is generally viewed as the most difficult to duplicate?

A) Product features
B) Reputation
C) Linkages with other firms
D) Location

Question 72

More recent work in the area of strategic management regarding Porter's assertion about being stuck in the middle

A) supports Porter's argument that firms that attempt to simultaneously pursue cost leadership and product differentiation will find themselves at a competitive disadvantage.
B) contradicts Porter's argument and finds that firms that successfully pursue cost leadership and product differentiation simultaneously can often expect to gain a sustained competitive advantage.
C) partially contradicts Porter's argument and finds that firms that successfully simultaneously pursue cost leadership and product differentiation can only expect to gain a temporary competitive advantage.
D) partially contradicts Porter's argument and finds that only firms in certain select industries can successfully simultaneously pursue cost leadership and product differentiation and gain a temporary competitive advantage.

Question 73

A ________ structure exists when individuals in a firm have two or more bosses simultaneously.

A) U-form
B) multidivisional
C) cross-divisional
D) matrix

Question 74

In developing a compensation policy used to implement a product-differentiation strategy,firms will

A) hold individuals responsible for experiments that fail.
B) punish individuals for taking risks when their projects are not successful.
C) simultaneously use multiple dimensions to examine employee performance.
D) provide appropriate incentives for managers and employees to reduce costs.

Question 75

Research on architectural competence in pharmaceutical firms suggests that

A) not only do some firms possess this competence,but that other firms do not; firms without this competence have,on average,been able develop it with minimal investment.
B) very few firms possess this competence,but firms without this competence,on average,are able to develop it.
C) not only do some firms possess this competence,but also that other firms do not and firms without this competence have,on average,been unable to develop it.
D) virtually every firm possesses this competence to some extent.

Question 76

While cost leadership requires rewards for cost reduction,product differentiation requires rewards for ________.

A) creative flair
B) efficiency
C) quantitative goals
D) production goals

Question 77

According to Porter,firms that are stuck in the middle attempt to sell

A) high-priced products and gain small market share.
B) low-priced products and gain large market share.
C) high-priced products and gain a large market share.
D) medium-priced products and gain medium market share.

Question 78

Recent research shows that firms can simultaneously implement cost-leadership and product-differentiation strategies if they learn how to manage the ________ inherent in these two strategies.

A) consistencies
B) similarities
C) contradictions
D) superfluousness

Question 79

Recent research suggests that ________ firms must have competitive levels of cost to survive.

A) low-cost
B) all
C) domestic
D) product-differentiation

Question 80

A ________ exists when firms are committed to engage in several related product-differentiation strategies simultaneously.

A) policy of substitution
B) policy of extrapolation
C) policy of exploration
D) policy of experimentation