Question 1

A risk of the differentiation strategy is that the firm's means of differentiation may eventually not provide value for which customers are willing to pay.

Accepted Answer

This is a known risk of a differentiation strategy. Customers may become less willing to pay a premium for the unique features or attributes that once differentiated the firm's product or service if competitors begin to offer similar benefits or if customer preferences change. This highlights the importance of continuous innovation and adaptation for companies pursuing a differentiation strategy.

Question 2

A low-cost position in the industry is not a valuable defense against rivals when competing on the basis of price.

Accepted Answer

A low-cost position in the industry can be a valuable defense against rivals when competing on the basis of price, as it allows the company to offer lower prices while still making a profit.

Question 3

Virtually anything can be a basis for a firm to create a differentiated product or service.

Accepted Answer

Differentiation is about offering customers something unique that sets a product or service apart from its competitors. This can be achieved through features, benefits, design, technology, customer service, branding, and many other factors. Therefore, virtually anything can be used as a basis for differentiation, as long as it meets the needs, preferences, and expectations of the target market.

Question 4

Counterfeit products are a serious problem for firms following the differentiation strategy.

Accepted Answer

Counterfeit products can mimic the appearance and branding of original products, which can weaken the unique value proposition of a firm that follows a differentiation strategy. It can damage the reputation of the authentic brand and cause confusion among customers, ultimately leading to a loss of market share and revenue. Therefore, counterfeit products are a significant concern for firms that rely on product differentiation to maintain a competitive advantage.

Question 5

The activities in the value chains of companies using focus strategies are quite different than the activities in the value chains of companies using industry-wide business strategies.

Accepted Answer

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Question 6

The differentiation strategy is effective for products that are expensive, luxury consumer goods. It is not effective for common, inexpensive products such as doughnuts.

Accepted Answer

While it may be more challenging to differentiate common, inexpensive products, it is not accurate to say that the differentiation strategy is ineffective for them. Companies can still differentiate based on factors such as quality, branding, packaging, or convenience. However, the impact of differentiation may be less significant compared to high-end luxury goods.

Question 7

The value-creating activities associated with the cost leadership strategy and differentation strategy are the same.

Accepted Answer

The value-creating activities associated with the cost leadership strategy and differentiation strategy are usually different. Cost leadership strategy aims to create value through cost minimization, while differentiation strategy aims to create value through unique and superior products or services. Therefore, the activities implemented to achieve these objectives may differ.

Question 8

A low-cost leader may create entry barriers to potential entrants by continually improving its levels of efficiency.

Accepted Answer

A low-cost leader can create entry barriers by continually improving its levels of efficiency, making it difficult for potential entrants to compete on price. This can be achieved through various measures such as economies of scale, streamlined supply chains, and optimized production processes. By keeping its costs low, a low-cost leader can maintain a price advantage over its competitors and discourage new entrants from entering the market.

Question 9

According to the Chapter 4 Strategic Focus, Walmart's change in strategy to attract more upscale customers was particularly successful especially against Family Dollar and Amazon.

Accepted Answer

Walmart's strategy to attract upscale customers has faced challenges, and it competes with different market segments than Family Dollar and Amazon, which have distinct customer bases and business models.

Question 10

Human resources and other support functions are not value-creating activities in the value chain; only the value chain activities create value.

Accepted Answer

Human resources and other support functions contribute to the overall value creation by providing necessary support to the primary value chain activities. For example, HR function can hire and train skilled employees which is necessary for the production process. Hence, support functions do create value in the value chain.

Question 11

The integrated cost leadership/differentiation strategy is superior to the other business-level strategies.

Accepted Answer

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Question 12

Low-cost leaders usually concentrate on the value chain activities of inbound logistics and outbound logistics as a means to reduce costs.

Accepted Answer

Low-cost leaders focus on reducing costs in all aspects of their value chain, but they often pay particular attention to inbound and outbound logistics as these activities involve the transportation, storage, and distribution of goods, and therefore offer opportunities to reduce costs.

Question 13

In general, firms can be most effective if they develop business-level strategies that will serve the needs of the "typical customer" in the industry.

Accepted Answer

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Question 14

A new generation of lunch trucks in cities such as New York, San francisco, and Los Angeles serving high-end fare such as hamburgers made from grass-fed cattle, escargot and crème brulee illustrate the focus cost leadership strategy.

Accepted Answer

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Question 15

Walmart's actions (Chapter 4 Strategic Focus) of becoming more upscale with the intent of taking sales away from Target provided an opening for competitors such as Amazon and Family Dollar to better compete on the basis of price and attract several of Walmart's customer.

Accepted Answer

Walmart's move towards becoming more upscale and focusing on taking sales away from Target left an opening for competitors such as Amazon and Family Dollar to compete on the basis of price and attract some of Walmart's customers.

Question 16

Firms implementing cost leadership strategies often sell no-frills standardized goods or services (but with competitive levels of differentation) to the industry's most typical customers.

Accepted Answer

Firms implementing a cost leadership strategy aim to offer the same or similar goods or services at a lower cost than their competitors. This often involves selling standardized products to typical or price-sensitive customers, but may also include some level of differentiation to remain competitive.

Question 17

Kazoo Toys has successfully implemented an integrated cost leadership /differentiation strategy by creating value for parents and children interested in purchasing unique toys while simultaneously having access to unique services.

Accepted Answer

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Question 18

The best of the generic business strategies is the integrated cost leadership/differentiation strategy.

Accepted Answer

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Question 19

Essentially, there are only two basic competitive advantages: lower cost than rivals and the ability to differentiate.

Accepted Answer

This statement is true. Companies can gain a competitive advantage over their rivals either by offering the same value at a lower cost or by offering a unique value that their rivals cannot match. These two strategies are known as cost leadership and differentiation.

Question 20

Unlike a cost leadership and a differentiation strategy, both focus strategies are less dependent on the completion of various value chain and support activities in order to compete in a superior manner.

Accepted Answer

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Quiz 4: Business Level Strategy