Question 1

When individuals gain knowledge of the most efficient ways to perform particular tasks, they are saving costs through

Accepted Answer

Learning effects refer to cost savings that come from learning by doing. Labor, for example, learns by repetition how to carry out a task, such as assembling airframes, most efficiently.

Question 2

Learning effects tend to be

Accepted Answer

Learning effects tend to be more significant when a technologically complex task is repeated, because there is more that can be learned about the task. Thus, learning effects will be more significant in an assembly process involving 1,000 complex steps than in one of only 100 simple steps.

Question 3

It has been observed that a product's production costs decline by some quantity about each time cumulative output

Accepted Answer

The experience curve refers to systematic reductions in production costs that have been observed to occur over the life of a product. A number of studies have observed that a product's production costs decline by some quantity about each time cumulative output doubles.

Question 4

________ enable a firm to reduce the costs of value creation and/or to create perceived value in such a way that premium pricing is possible.

Accepted Answer

Core competencies are the bedrock of a firm's competitive advantage. They enable a firm to reduce the costs of value creation and/or to create perceived value in such a way that premium pricing is possible.

Question 5

When companies disperse different stages of the value chain to those locations around the world where perceived value is maximized or where the costs of value creation are minimized, companies create

Accepted Answer

The creation of a global web of value creation activities results with different stages of the value chain being dispersed to those locations around the globe where perceived value is maximized or where the costs of value creation are minimized.

Question 6

Global expansion offers companies the opportunity to generate greater profits than companies that focus strictly on

Accepted Answer

Expanding globally allows firms to increase their profitability and rate of profit growth in ways not available to purely domestic enterprises.

Question 7

Learning effects

Accepted Answer

Learning effects tend to be more significant when a technologically complex task is repeated, because there is more that can be learned about the task. No matter how complex the task, however, learning effects typically disappear after a while.

Question 8

The term ________ refers to skills within the firm that competitors cannot easily match or imitate and that may exist in the firm's value creation activities.

Accepted Answer

The term core competence refers to skills within the firm that competitors cannot easily match or imitate. These skills may exist in any of the firm's value creation activities-production, marketing, R&D, human resources, logistics, general management, and so on. Such skills are typically expressed in product offerings that other firms find difficult to match or imitate. Core competencies are the bedrock of a firm's competitive advantage. They enable a firm to reduce the costs of value creation and/or to create perceived value in such a way that premium pricing is possible.

Question 9

Lenovo's ThinkPad laptop computers are designed in the United States; the case, keyboard, and hard drive are made in Thailand; the display screen and memory in South Korea; the built-in wireless card in Malaysia; and the microprocessor in the United States. In each case, these components are manufactured and sourced from the optimal location given current factor costs. In this example, Lenovo has

Accepted Answer

Locating a value creation activity in the optimal location for that activity can have one of two effects. It can lower the costs of value creation and help the firm to achieve a low-cost position, and/or it can enable a firm to differentiate its product offering from those of competitors. One result of this kind of thinking is the creation of a global web of value creation activities, with different stages of the value chain being dispersed to those locations around the globe where perceived value is maximized or where the costs of value creation are minimized.

Question 10

Economies that arise from performing a value creation activity in the optimal location are known as

Accepted Answer

Location economies are the economies that arise from performing a value creation activity in the optimal location for that activity, wherever in the world that might be (transportation costs and trade barriers permitting).

Question 11

________ activities of the value chain provide inputs that allow the primary activities to occur.

Accepted Answer

The support activities of the value chain provide inputs that allow the primary activities to occur.

Question 12

Cost savings that come from learning by doing are known as

Accepted Answer

Learning effects refer to cost savings that come from learning by doing. Labor, for example, learns by repetition how to carry out a task, such as assembling airframes, most efficiently.

Question 13

________ refer(s) to systematic reductions in production costs that have been observed to occur over the life of a product.

Accepted Answer

The experience curve refers to systematic reductions in production costs that have been observed to occur over the life of a product.

Question 14

It has been suggested that learning effects are important only during the start-up period of a new process and that they cease after two or three years. Any decline in the experience curve after such a point is due to

Accepted Answer

No matter how complex the task, learning effects typically disappear after a while. It has been suggested that they are important only during the startup period of a new process and that they cease after two or three years. Any decline in the experience curve after such a point is due to economies of scale.

Question 15

Location economies are the economies that arise from performing a ________ activity in the optimal location for that activity.

Accepted Answer

Location economies are the economies that arise from performing a value creation activity in the optimal location for that activity, wherever in the world that might be. For a firm that is trying to survive in a competitive global market, basing each value creation activity it performs at that location where economic, political, and cultural conditions are most conducive to the performance of that activity will provide benefits to the firm. As firms pursue location economies, they may also be in the process of creating a global web of value creation activities, with different stages of the value chain being dispersed to those locations around the globe where perceived value is maximized or where the costs of value creation are minimized.

Question 16

________ allows a firm to reduce its cost of creating value and increase its profitability.

Accepted Answer

Moving down the experience curve allows a firm to reduce its cost of creating value and increase its profitability. The firm that moves down the experience curve most rapidly will have a cost advantage vis-à-vis its competitors.

Question 17

Michael Porter argues that

Accepted Answer

According to Michael Porter, low cost and differentiation are two basic strategies for creating value and attaining a competitive advantage in an industry.
Porter argues that those firms that create superior value will achieve superior profitability. Porter notes that it is not necessary for a firm to have the lowest cost structure or create the most valuable product; rather it is only important that the gap between value and the cost of production be greater than that of competitors.

Question 18

A firm benefits by basing each value creation activity it performs at that location where economic, political, and cultural conditions, including relative factor costs, are most conducive to the performance of that activity. Firms that pursue such a strategy can realize

Accepted Answer

For a firm that is trying to survive in a competitive global market, this implies that trade barriers and transportation costs permitting, the firm will benefit by basing each value creation activity it performs at that location where economic, political, and cultural conditions, including relative factor costs, are most conducive to the performance of that activity.

Question 19

The ________ refers to systematic reductions in production costs that have been observed to occur over the life of a product.

Accepted Answer