Deck 5: The Five Generic Competitive Strategies

Question 1

While there are many routes to competitive advantage,they all involve

A)building a brand name image that buyers trust.
B)delivering superior value to a broad or narrow market of buyers in ways rivals cannot readily match.
C)achieving lower costs than rivals and becoming the industry's sales and market share leader.
D)finding effective and efficient ways to strengthen the company's competitive assets and to reduce its competitive liabilities.
E)getting in the best strategic group and dominating it.

Answer 1

B

Question 2

The greatest and most important differences among the competitive strategies of different companies are essentially

A)whether a company's market target is broad or narrow and whether the company is pursuing a competitive advantage linked to low cost or differentiation.
B)the kinds of actions companies take to improve their competitive assets and reduce their competitive liabilities.
C)the relative emphasis they place on offensive versus defensive strategies.
D)the different ways the companies try to cope with the five competitive forces.
E)how they go about building a brand name image that buyers trust and whether they are a risk taker or risk avoider.

Answer 2

A

Question 3

The value to a company of pursuing a low-cost provider strategy is contingent upon

A)the leader's ability to combine the cost advantage with a reputation for good quality.
B)the leader's ability to excel in manufacturing innovation so as to continuously reduce its manufacturing costs.
C)the leader's ability to attain the biggest market share in the industry.
D)whether or not it is easy or inexpensive for rivals to copy the low-cost leader's methods or otherwise match its low costs.
E)the aggressiveness with which the low-cost leader pursues converting the cost advantage into the absolute lowest possible costs.

Answer 3

D

Question 4

A low-cost leader can translate its low-cost advantage over its rivals into superior profit performance by

A)cutting its price to levels significantly below the prices of its rivals.
B)using its low-cost edge to underprice competitors and attract price-sensitive buyers in large enough numbers to increase total profits or refraining from price cutting and using the low-cost advantage to earn a higher profit margin on each unit sold.
C)going all out to use its cost advantage to capture a dominant share of the market.
D)spending heavily on advertising to promote the fact that it charges the lowest prices in the industry.
E)outproducing its rivals and thus having more units available to sell.

Question 5

Although there are many routes to competitive advantage,the two biggest factors that distinguish one competitive strategy from another are

A)whether a company's overall costs are lower than a competitors' and whether the company can achieve strong product differentiation.
B)whether a company can offer the lowest possible prices and whether the company can get the best suppliers in the market.
C)whether a company's target market is broad or narrow and whether the company is pursuing a low cost or differentiation strategy.
D)whether a company can achieve lower costs than its rivals and whether the company is pursuing the industry's sales and market share leader's role.
E)whether a company can build a brand name and an image that buyers trust.

Question 6

In which of the following circumstances is a strategy to be the industry's overall low-cost provider not particularly well matched to the market situation?

A)When the offerings of rival firms are essentially identical,standardized,commodity-like products
B)When there are few ways to achieve differentiation that have value to buyers
C)When price competition is especially vigorous
D)When buyers have widely varying needs and special requirements,and when the costs of switching purchases from one seller to another are relatively high
E)When industry newcomers use introductory prices to build a customer base

Question 7

A low-cost leader's basis for competitive advantage is

A)lower prices than rival firms.
B)using a low-cost/low-price approach to gain the biggest market share.
C)high buyer-switching costs.
D)lower overall costs than competitors.
E)higher unit sales than rivals.

Question 8

A competitive strategy to be the low-cost provider in an industry typically does not work well when

A)price competition among rival sellers is especially vigorous.
B)commodity-based product prevails and minimal differentiation exists.
C)buyers incur low costs in switching their purchases from one seller or brand to another.
D)industry newcomers use low introductory prices to attract buyers and build a customer base.
E)emergent strategies are required to respond to changes in competitor power.

Question 9

The major avenues for achieving a cost advantage over its rivals include

A)eliminating or curbing nonessential cost-producing activities and performing essential value chain activities more cost-effectively than its rivals.
B)having a management team that accepts below-market salaries.
C)being a first mover in adopting the latest state-of-the-art technologies,especially those relating to low-cost manufacturing.
D)outsourcing high-cost activities to offshore vendors.
E)paying lower wages to its hourly workers than what rivals are paying their workers.

Question 10

Achieving a cost advantage over its rivals entails

A)concentrating on the primary activities portion of the value chain and outsourcing all support activities.
B)being a first mover in pursuing backward and forward integration,and controlling as much of the industry value chain as possible.
C)performing value chain activities more cost-effectively than its rivals and finding ways to eliminate or bypass some cost-producing activities.
D)minimizing R&D expenses and paying below-average wages and salaries to conserve on labor costs.
E)producing a standard product,redesigning the product infrequently,and having minimal advertising.

Question 11

The generic types of competitive strategies include

A)the building,maintaining,and slowly surrendering of market share.
B)offensive strategies and defensive strategies.
C)low-cost provider,broad differentiation,focused low-cost,focused differentiation,and best-cost provider strategies.
D)low-cost/low-price strategies,high-quality/high-price strategies,medium-quality/medium-price strategies,low-cost/high-price strategies.
E)price leader strategies,price follower strategies,technology leader strategies,first-mover strategies,offensive strategies,and defensive strategies.

Question 12

Which of the following is not one of the five generic types of competitive strategy?

A)Best-cost provider strategy
B)Broad low-cost provider strategy
C)Focused differentiation provider strategy
D)Focused low-cost provider strategy
E)Focused best-cost provider strategy

Question 13

A competitive strategy of striving to be the low-cost provider is particularly attractive when

A)buyers are not price sensitive.
B)the industry is made up of a large number of or equal-sized rivals.
C)there are many ways to achieve product differentiation that have value to buyers.
D)price competition is especially vigorous,buyers have low switching costs,and the majority of industry sales are made to a few large-volume buyers.
E)switching costs are high,price competition is strong,and buyers tend to use the industry's products in many different ways.

Question 14

Which of the following is not an action that a company can take to do a better job than its rivals of performing value chain activities more cost-effectively?

A)Striving to capture all available economies of scale
B)Trying to operate facilities at full capacity
C)Taking full advantage of experience and learning curve effects
D)Improving supply chain efficiency
E)Redesigning products to eliminate features that might have market appeal,but excessively increase production costs

Question 15

Low-cost leaders who have the lowest industry costs are likely to

A)pursue backward or forward integration to detour suppliers or buyers with considerable bargaining power and leverage.
B)move the performance of most or all value chain activities to low-wage countries.
C)sell directly to users of their product or service and eliminate the use of wholesale and retail intermediaries.
D)have outmanaged its rivals in finding ways to perform value chain activities more cost-effectively
E)be considering exiting the current product market and using their competitive low-cost strength to gain a competitive advantage in other product arenas.

Question 16

A boutique hotel chain provides upscale rooms and superior customer service at value prices.What strategy is the hotelier using to gain competitive advantage?

A)Focused low-cost strategy
B)Low-cost provider strategy
C)Best-cost provider strategy
D)Broad differentiation strategy
E)Focused differentiation strategy

Question 17

Which of the following is not one of the ways that a company can achieve a cost advantage by revamping its value chain?

A)Eliminating distributors and dealers by selling direct to customers
B)Replacing certain value chain activities with faster and cheaper online technology
C)Increasing production capacity and then striving hard to operate at full capacity
D)Relocating facilities so as to curb the need for shipping and handling activities
E)Streamlining operations by eliminating low value-added or unnecessary work steps and activities

Question 18

The objective of competitive strategy is to

A)provide detail to the company's business model.
B)build a competitive advantage in the marketplace by giving buyers superior value relative to the offerings of rival sellers.
C)get the company into the best strategic group and then dominate it.
D)establish a competitively powerful value chain.
E)grow revenues at a faster annual rate than rivals are able to grow their revenues.

Question 19

A company's competitive strategy should

A)be well attuned to doing an outstanding job of satisfying the needs and expectations of niche buyers.
B)support its objective to become at least an average performer within its industry.
C)ensure it is designed to concentrate on a small range of products so it can react quickly to competitive moves.
D)be well matched to its resources and capabilities in order to incorporate standard attributes into its product offering.
E)be well matched to its internal situation and be predicated on leveraging its collection of competitively valuable resources and competencies.

Question 20

A company's competitive strategy deals with

A)management's game plan for securing a competitive advantage relative to rivals.
B)what its strategy will be in such functional areas as R&D,production,sales and marketing,distribution,finance and accounting,and so on.
C)its efforts to change its position on the industry's strategic group map.
D)its plans for entering into strategic alliances,utilizing mergers or acquisitions to strengthen its market position,outsourcing some in-house activities to outside specialists,and integrating forward or backward.
E)tweaking the value chain drivers to make them more cost competitive with rivals.

Question 21

Broad differentiation strategies are well-suited for market conditions where

A)there are many ways to differentiate the product or service and many buyers perceive these differences as having value.
B)most buyers have the same needs and use the product in the same ways.
C)buyers are susceptible to clever advertising.
D)barriers to entry are high and suppliers have a low degree of bargaining power.
E)price competition is especially vigorous.

Question 22

A differentiation strategy works best when

A)buyers' needs are homogeneous.
B)many rival firms are also pursuing a differentiation approach.
C)firms have ample excess cash to invest in R&D activities.
D)there are few other ways to make a product unique to buyers.
E)technological change is fast-paced and competition revolves around rapidly evolving product features.

Question 23

Examples of important cost drivers in a company's value chain do not include

A)input costs.
B)capacity utilization.
C)learning and experience.
D)production technology and design.
E)customer service.

Question 24

Opportunities to differentiate a company's product offering

A)are always dependent on the capabilities of the company's R&D staff.
B)are more likely to be captured by highly skilled marketers.
C)can exist in supply chain activities,R&D,manufacturing activities,distribution and shipping,or marketing,sales,and customer service.
D)usually are tied to product quality,durability,reliability,and proliferation.
E)are most frequently attached to a product's brand image,performance,and reliability.

Question 25

Domino's Pizza has a well-known slogan: "We'll deliver in 30 minutes or less,or it's free!" By using this slogan,what has the pizza maker achieved?

A)Given a sense of exclusivity to its customers
B)Increased its ability to charge a price premium for its product (because buyers see its differentiating features as worth something extra)
C)Coordinated with suppliers to better address customer needs
D)Created a new delivery system
E)Built a unique customer value proposition

Question 26

A broad differentiation strategy generally produces the best results in situations where

A)buyer brand loyalty is low.
B)few rivals are following a similar differentiation approach.
C)new and improved products are introduced only infrequently.
D)most rivals are seeking to differentiate their products on most of the same features and attributes.
E)price competition is vigorous.

Question 27

Companies can pursue differentiation from many angles except

A)providing a unique competitive product taste.
B)executing superior customer service.
C)ensuring engineering design and performance benefits.
D)providing products that ensue luxury and prestige.
E)investing in managerial productivity and enjoying experience curve effects.

Question 28

In which one of the following market circumstances is a broad differentiation strategy generally not well suited?

A)When buyer needs and preferences are diverse
B)When few rivals are pursuing a similar differentiation approach
C)When buyers are homogeneous in their needs and preferences,and are generally satisfied with standardized product
D)When there are many ways to differentiate the product or service and many buyers perceive these differences as having value
E)When technological change is fast-paced and competition revolves around rapidly evolving product features

Question 29

Which of the following is not a value driver of a broad differentiation strategy?

A)Seeking out the highest quality inputs
B)Utilizing just-in-time inventories and made-to-order products when customer demand rises
C)Emphasizing human resource management activities that improve the skills,expertise,and knowledge of company personnel
D)Improving customer service or add extra services
E)Creating product features that appeal to a wide range of buyers

Question 30

A broad differentiation strategy works best in situations characterized by

A)slow-paced technological change and infrequent new or improved product introductions.
B)similar buyer needs and uses of the product.
C)low switching costs to rival brands incurred by buyers.
D)low bargaining power and frequent purchases by buyers.
E)fast-paced technological change and rapidly evolving product features that drive competition.

Question 31

Easy-to-copy differentiating features

A)do not offer the promise of sustainable competitive advantage.
B)are less expensive to integrate into a product or service offering.
C)tend to create as much value for consumers as difficult-to-copy differentiating features.
D)should be patented before other companies follow suit.
E)lead to vigorous price competition.

Question 32

A fast-food restaurant stocks bread,meat,sauces,and other main ingredients,but does not assemble and cook its burgers and sandwiches until a customer places an order.Which cost driver is the restaurant efficiently using to cut costs?

A)Economies of scale
B)Capacity utilization
C)Supply chain efficiencies
D)Bargaining power
E)Incentive systems and culture

Question 33

A route to take in developing a differentiation advantage includes

A)signaling value by targeting sophisticated buyers.
B)incorporating intangible features that enhance buyer satisfaction in economic ways.
C)emphasizing high quality and performance of products through a standard and simple,no-fuss packaging.
D)incorporating product attributes and user features that raise the buyer's overall costs,but keep the price low.
E)incorporating tangible features that add functionality,increase customer satisfaction with the product specifications,functions,and styling.

Question 34

Broad differentiation strategies generally work best in market circumstances where

A)buyer needs and preferences are too diverse to be fully satisfied by a standardized product.
B)most buyers have similar needs and use the product in similar ways.
C)the products of rivals are weakly differentiated and most competitors are resorting to clever advertising to try to set their product offerings apart.
D)buyers are price sensitive and buying switching costs are quite low.
E)the five competitive forces are strong.

Question 35

A differentiation-based competitive advantage

A)nearly always is attached to the quality and service aspects of a company's product offering.
B)most often is the result of highly effective marketing and advertising campaigns designed to build awareness and recognition of the product or service offering.
C)requires developing at least one distinctive competence that buyers consider valuable.
D)hinges on a company's success in developing top-of-the-line product features that will command the biggest price premium in the industry.
E)often hinges on incorporating features that: (1)raise the performance of the product, (2)lower the buyer's overall costs of using the company's product, (3)enhance buyer satisfaction in intangible or noneconomic ways,or (4)deliver value to customers by exploiting competitive capabilities that rivals cannot match.

Question 36

The most appealing approaches to differentiation are those that

A)are the most costly to incorporate.
B)match the differentiating features offered by rivals in the industry.
C)can be made even more attractive to buyers via clever advertising.
D)appeal to the most affluent consumers.
E)are hard or expensive for rivals to duplicate and have considerable buyer appeal.

Question 37

Which of the following is not one of the pitfalls of a low-cost provider strategy?

A)Overly aggressive price cutting
B)Using a cost-based advantage to improve the company's bargaining position with high-volume buyers
C)Using approaches to reducing costs that can be easily copied by rivals
D)Cutting prices more than the size of a company's cost advantage
E)Becoming so fixated on cost reductions that products become too features-poor

Question 38

A low-cost provider strategy can defeat a differentiation strategy

A)when a company can offset thinner profit margins per unit by selling sufficient additional units to increase total profits.
B)when there are few ways to differentiate a product or a service and many buyers perceive these differences as valuable.
C)when customers are basically satisfied and do not think extra attributes are worth a higher price feature.
D)when there are many ways to differentiate the product or service and many buyers perceive these differences as having value.
E)when technological change is fast-paced and competition revolves around rapidly evolving product features.

Question 39

Successful differentiation allows a firm to

A)command the largest market share in the industry.
B)set the industry ceiling on price.
C)avoid being overly concerned about whether entry barriers into the industry are high or low.
D)command a premium price for its product and/or increase unit sales and/or gain buyer loyalty to its brand.
E)take sales and market share away from rivals by undercutting them on price.

Question 40

A strategy to be the industry's overall low-cost provider tends to be more appealing than a differentiation or focus strategy when

A)there are many ways to achieve product differentiation that buyers find appealing.
B)buyers use the product in a variety of different ways.
C)the offerings of rival firms are essentially identical,standardized,commodity-like products.
D)buyers have high switching costs in changing from one seller's product to another.
E)the market is composed of many buyer types,all with varying needs and expectations.

Question 41

A pitfall to avoid in pursuing a differentiation strategy is

A)charging a premium price for the differentiating features.
B)spending on activities to differentiate the company's product to enhance profitability.
C)meeting and exceeding the meaningful gaps in quality,performance,service,and other attractive differentiating attributes offered by rivals.
D)choosing a product offering that supports buyers' indifference to rival brands' offerings.
E)trying to differentiate on the basis of attributes or features that are easily copied.

Question 42

Which one of the following does not represent market circumstances that make a focused low-cost or focused differentiation strategy attractive?

A)When it is costly or difficult for multisegment competitors to meet the specialized needs of the target market niche and at the same time satisfy the expectations of their mainstream customers
B)When the industry has many different segments and market niches,thereby allowing a focuser to pick an attractive niche suited to its resource strengths and capabilities
C)When industry leaders have chosen not to compete in the niche
D)When the target market niche is big enough to be profitable and offers good growth potential
E)When buyers are not strongly brand loyal and a large number of other rivals are attempting to specialize in the same target segment

Question 43

A company's biggest vulnerability in employing a best-cost provider strategy is

A)relying too heavily on outsourcing.
B)getting squeezed between firms employing low-cost provider strategies and those using high-end differentiation strategies.
C)getting trapped in a price war with low-cost leaders.
D)being timid in cutting its prices far enough below high-end differentiators to win away many of their customers.
E)not having a sustainable distinctive competence in cost reduction.

Question 44

Success with a best-cost provider strategy designed to outcompete high-end differentiators requires.

A)achieving significantly lower costs in providing the upscale features.
B)motivating buyers to purchase upscale features that match those of the rivals.
C)achieving the lowest costs in the industry.
D)matching the company's resources and capabilities to a low-cost provider status.
E)providing significantly better product attributes in order to justify a price above what low-cost leaders are charging.

Question 45

A focused differentiation strategy aims at securing competitive advantage

A)by providing niche members with a top-of-the-line product at a premium price.
B)by catering to buyers looking for an upscale product at an attractively low price.
C)with a product or service offering carefully designed to appeal to the unique preferences and needs of a narrow,well-defined group of buyers.
D)by developing product attributes that no other company in the industry has.
E)by convincing affluent buyers that the company has a true world-class product.

Question 46

What sets focused (or market niche)strategies apart from low-cost leadership and broad differentiation strategies is

A)the extra attention paid to top-notch product performance and product quality.
B)their concentrated attention on a narrow piece of the overall market.
C)greater opportunity for competitive advantage.
D)their suitability for market situations where most industry rivals have weakly differentiated products.
E)their objective of delivering more value for the money.

Question 47

The advantages of focusing a company's entire competitive effort on a single market niche allows for

A)going after a national customer base with a "something for everyone" lineup of models.
B)scaling operations to serve the customer market segment.
C)utilizing the full depth of the company's resources across a broad base of customers.
D)executing competencies and capabilities better than competitors.
E)developing offensive strategies that address company weaknesses and environmental threats.

Question 48

A firm pursuing a best-cost provider strategy

A)seeks to offer more value-adding features than the industry's low-cost providers and lower prices than those pursuing differentiation.
B)achieves competitive advantage because its operating activities are best-in-class or best-in-world.
C)tries to have the best cost (as compared to rivals)for each activity in the industry's value chain.
D)opts for a middle-of-the-road strategic approach that attempts to satisfy the product or service needs of consumers with average household incomes.
E)follows a hybrid strategy based upon superior resources and a narrow market niche.

Question 49

A focused low-cost strategy seeks to achieve competitive advantage by

A)outmatching competitors in offering niche members an absolute rock-bottom price.
B)delivering more value for the money than other competitors.
C)performing the primary value chain activities at a lower cost per unit than can the industry's low-cost leaders.
D)dominating more market niches in the industry via a lower cost and a lower price than any other rival.
E)serving buyers in the target market niche at a lower cost and lower price than rivals.

Question 50

For a best-cost provider strategy to be successful,a company must have

A)excellent marketing and sales skills in convincing buyers to pay a premium price for the attributes/features incorporated in its product.
B)the capability to incorporate upscale attributes at lower costs than its rivals whose products have similar upscale attributes.
C)access to greater learning and experience curve effects and scale economies than its rivals.
D)one of the best-known and most respected brand names in the industry.
E)a short,low-cost value chain.

Question 51

The target market of a best-cost provider is

A)value-conscious buyers.
B)brand-conscious buyers.
C)price-sensitive buyers.
D)middle-income buyers.
E)young adults (in the 18-to-35 age group).

Question 52

The aim of the best-cost provider strategy is to create a competitive advantage by

A)incorporating attractive or upscale product attributes at a lower cost than rivals.
B)offering buyers the industry's best-performing product at the best cost and best (lowest)price in the industry.
C)attracting buyers on the basis of having the industry's overall best-performing product at a price that is slightly below the industry-average price.
D)outcompeting rivals using low-cost provider strategies.
E)translating its best-cost status into achieving the highest profit margins of any firm in the industry.

Question 53

Which of the following are not distinguishing features of a company's successful best-cost provider strategy?

A)It develops core competencies that allow differentiating attributes to be incorporated at a low cost.
B)It has unmatched efficiency in managing essential value chain activities.
C)It seeks to deliver superior value to buyers by satisfying their expectations on key quality/service/features/performance attributes and beating their expectations on price (given what rivals are charging for much the same attributes).
D)It seeks to be the low-cost provider in the largest and fastest-growing (or best)market segment.
E)It enjoys a competitive advantage based on more value for the money.

Question 54

The chief difference between a low-cost leader strategy and a focused low-cost strategy is

A)whether the product is strongly differentiated or weakly differentiated from rivals.
B)the degree of bargaining power that buyers have.
C)the size of the buyer group that a company is trying to appeal to.
D)the production methods being used to achieve a low-cost competitive advantage.
E)the number of upscale attributes incorporated into the product offering.

Question 55

Focusing provides the ability to secure a competitive edge,but it also carries some risks that will be detrimental to the focused firm,such as

A)the chance that competitors will not find effective ways to match the focused company's capabilities in serving the market niche.
B)the potential for the preferences and needs of niche members to shift over time toward mainstream provider product attributes.
C)the potential for the niche to become so attractive that it will not attract new competitors,thereby providing excessive market segment profits.
D)the likelihood that a focused company will become so cost efficient that it will achieve excessive profits.
E)the possibility that a broad low-cost strategy will always trump a firm's best-cost provider strategy.

Question 56

What are the distinctive features of a focused low-cost strategy? How does a focused low-cost strategy differ from a low-cost leadership strategy?

Question 57

Which of the following is not one of the pitfalls of pursuing a differentiation strategy?

A)Trying to strongly differentiate the company's product from those of rivals rather than be content with weak product differentiation
B)Overdifferentiating so that the features and attributes incorporated exceed buyer needs and requirements
C)Trying to charge too high a price premium for the differentiating features
D)Differentiating on features or attributes that rivals can easily copy
E)Overspending on efforts to differentiate the company's product offering

Question 58

The greatest danger or risk of an unsound best-cost provider strategy is

A)that buyers will be highly skeptical about paying a relatively low price for upscale attributes/features.
B)not establishing strong alliances and partnerships with key suppliers.
C)that low-cost leaders will be able to steal away some customers on the basis of a lower price,and high-end differentiators will be able to steal away customers with the appeal of better product attributes.
D)that it will be unable to achieve top-notch quality at a rock-bottom cost.
E)becoming too highly integrated and not relying enough on outsourcing.

Question 59

A focused differentiation strategy can lead to attractive competitive advantage when

A)industry leaders have chosen not to compete in the niche.
B)buyers are not strongly loyal to a brand and a large number of other rivals are attempting to specialize in the same target segment.
C)the industry has many different segments and market niches,thereby allowing a focuser to pick an attractive niche suited to its resource strengths and capabilities.
D)the target market niche is big enough to be profitable and offers good growth potential.
E)it is costly or difficult for multisegment competitors to meet the specialized needs of the target market niche and at the same time satisfy the expectations of their mainstream customers.

Question 60

Best-cost provider strategies are appealing in those market situations where

A)buyers are more quality-conscious than price-conscious.
B)diverse buyer preferences make product differentiation the norm and where a large number of value-conscious buyers can be induced to purchase mid-range products.
C)there are numerous buyer segments,buyer needs are diverse across these segments,only a few of the segments are growing rapidly,and sellers' products are strongly differentiated.
D)buyers are more performance-conscious than value-conscious.
E)a company is positioned between rivals who have ultra-low prices and rivals who have top-notch products in terms of both quality and performance.

Question 61

In what market and competitive circumstances are focused low-cost and focused differentiation strategies attractive?

Question 62

One of the big pitfalls in crafting a competitive strategy is that managers,who are torn about the pros and cons of the various generic strategies,will opt for "stuck-in-the-middle" strategies that represent compromises between lower costs and greater differentiation,and between broad and narrow market appeal.True or false? Explain your answer.

Question 63

Which one of the five generic competitive strategies is most likely to be best suited for an industry whose product is a commodity? Explain.

Question 64

What are the distinctive features of a focused differentiation strategy? How is it different from a broad differentiation strategy?