Question 1

Market segmentation refers to the process of subdividing a market into clearly identifiable groups of customers with similar needs, desires, and demand characteristics.

Accepted Answer

Market segmentation is the process of dividing a larger market into smaller groups of customers with similar needs and characteristics in order to target them more effectively with marketing efforts. This involves identifying groups of customers with similar demographic, geographic, psychographic, or behavioral characteristics and tailoring marketing strategies and messages to each segment.

Question 2

Mike's Eatery, a fast-food chain, neither customizes its product offerings nor sells new products based on market segments. Mike's Eatery is pursuing a standardization strategy.

Accepted Answer

Mike's Eatery is not customizing its product offerings or selling new products based on market segments, indicating a standardization strategy.

Question 3

A company develops a new innovative technique that improves efficiency within the industry. This improvement of performance through innovation causes the efficiency frontier to remain static and not deviate from its original curve.

Accepted Answer

The innovation that improves efficiency within the industry causes the efficiency frontier to shift outward, meaning that it moves away from its original curve. This shift indicates an increase in productivity and efficiency beyond current technological capabilities.

Question 4

Companies that follow a standardization strategy ignore the many different market segments in an industry and position their products to appeal to the average customer.

Accepted Answer

Companies that follow a standardization strategy aim to create a standardized product or service that can be offered to a large customer base, ignoring the differing needs and wants of individual market segments.

Question 5

A differentiation strategy allows a company to charge a low price for its products, if it chooses to do so.

Accepted Answer

A differentiation strategy involves offering unique and valuable features that distinguish a product or service from competitors and allows a company to charge a premium price. A low price strategy is associated with a cost leadership strategy.

Question 6

By focusing on a niche, and customizing the offering to that segment, a differentiated company can often outsell differentiated rivals that target a broader market.

Accepted Answer

Focusing on a niche allows a company to tailor its offering to meet the specific needs and preferences of that segment, which can lead to greater customer loyalty and higher sales. A company targeting a broad market may struggle to stand out and attract customers who are overwhelmed by the variety of options available to them. Thus, by tailoring the offering to a narrow segment, a differentiated company can often achieve a competitive advantage over rivals that target a broader market.

Question 7

The generic business-level strategies are cost leadership, differentiation, and mass marketing.

Accepted Answer

The generic business-level strategies are cost leadership, differentiation, and focus strategy, not mass marketing.

Question 8

In commodity markets, competitive advantage goes to the company that has the lowest costs.

Accepted Answer

In commodity markets, the products are largely undifferentiated, which means that price becomes the primary factor for consumers. Hence, the company that can produce and sell the commodity at the lowest cost will have a competitive advantage.

Question 9

A generic business-level strategy is a strategy that gives a company a specific form of competitive position and advantage vis-à-vis its rivals, resulting in above-average profitability.

Accepted Answer

A generic business-level strategy is designed to give a company a specific competitive position and advantage over its rivals, which can result in above-average profitability. These strategies include cost leadership, differentiation, and focus strategies.

Question 10

A company has a competitive advantage if it can increase costs relative to rivals.

Accepted Answer

A company has a competitive advantage if it can decrease costs relative to rivals, not increase costs. Increasing costs would actually put the company at a disadvantage.

Question 11

The brand loyalty enjoyed by the differentiated company does not protect it from substitute goods and services.

Accepted Answer

The answer of The brand loyalty enjoyed by the differentiated...

Question 12

An efficiency frontier shows of the complete picture of all the different positions that a company can adopt with regard to differentiation and low cost, assuming that its internal functions and organizational arrangements are configured efficiently to support a particular position.

Accepted Answer

An efficiency frontier, also known as a "productivity frontier" or "production possibility frontier," shows all of the possible combinations of cost and differentiation that a company can achieve given its internal functions and organizational arrangements. This includes positions that are both low cost and differentiated, as well as positions that prioritize one over the other. The efficiency frontier is an important tool for strategic planning and helps companies understand the trade-offs associated with different positioning strategies.

Question 13

The only way to exploit successful differentiation is to keep prices the same or only increase them moderately, leading to increased demand, economies of scale and lower costs which results in higher profitability and profit growth.

Accepted Answer

Differentiation can also allow a company to charge premium prices for its products or services, leveraging the unique value offered to justify higher prices, which can also lead to increased profitability without necessarily relying on lower costs or economies of scale.

Question 14

A company that already has a low-cost structure must relinquish much differentiation in its product offering to achieve additional cost reductions.

Accepted Answer

This is because low-cost structures usually involve minimizing expenses and maximizing efficiency, which can limit the resources available for investing in product differentiation.

Question 15

At its most basic, a firm's business-level strategy is about whom a company decides to serve, what customer needs and desires the company is trying to satisfy, and how the company decides to satisfy those needs and desires.

Accepted Answer

This statement accurately describes the basic components of a firm's business-level strategy.

Question 16

When a company decides to pursue a segmentation strategy, customization can cause costs to increase and it is difficult to achieve economies of scale.

Accepted Answer

Customization requires tailoring products and services to meet the unique needs of different segments, which can increase costs. Additionally, achieving economies of scale may be difficult as production and distribution processes may need to be adjusted to meet the specific demands of each segment.

Question 17

Differentiation can help a company grow overall demand and capture market share from its rivals.

Accepted Answer

By offering a unique product or service that sets them apart from competitors, a company can attract new customers and retain existing ones, ultimately resulting in overall demand growth and an increased market share. This is the concept of differentiation.

Question 18

Companies that focus on the higher-income or higher-value end of the market will tend to have a higher cost structure.

Accepted Answer

Companies that target higher-income or higher-value customers typically invest more in marketing, product research and development, and other costs that allow them to differentiate themselves from lower-cost competitors. This results in a higher cost structure.

Question 19

A low-cost company is often best positioned to survive price rivalry in its industry.

Accepted Answer

A low-cost company has a cost advantage over its competitors, allowing it to sell products at lower prices without sacrificing profit margins. This makes it difficult for competitors to compete solely on price, as they cannot match the low prices of the low-cost company without also reducing their own profit margins. Therefore, a low-cost company is often best positioned to survive price rivalry within its industry.

Question 20

A product's appeal to customers' desires cannot be considered a source of differentiation.

Accepted Answer

A product's appeal to customers' desires can be a source of differentiation if it meets a specific need or want that other products in the market do not. This can make the product more attractive and unique to customers, setting it apart from its competitors.

Quiz 5: Business-Level Strategy