Question 1

Explain the disadvantages of a cost leadership strategy.

Accepted Answer

In some settings, the need for high sales volume is a critical disadvantage of a cost leadership strategy. Highly fragmented markets and markets that involve a lot of brand loyalty may not offer much of an opportunity to attract a large segment of customers. In both the soft drink and cigarette industries, for example, customers appear to be quite willing to pay a little extra to enjoy the brand of their choice. A related concern is that achieving a high sales volume usually requires significant upfront investments in production and/or distribution capacity. Not every firm is willing and able to make such investments. Cost leaders tend to keep their costs low by minimizing advertising, market research, and research and development, but this approach can prove to be very expensive in the long run. A relative lack of market research can lead cost leaders to be not as skilled as other firms at detecting important environmental changes. Meanwhile, downplaying research and development can slow cost leaders' ability to respond to changes once they are detected. Lagging rivals in terms of detecting and reacting to external shifts can prove to be a deadly combination that leaves cost leaders out of touch with the market and out of answers.

Question 2

Which of the following holds true for companies following the focused differentiation strategy?

Accepted Answer

A)  The niche that is an area of operation of one company cannot be made to disappear or be taken over by larger competitors. 
B)  Companies following the focused differentiation strategy can charge very high prices. 
C)  Companies following this strategy depend on their ability to reduce the price to drive competition out of the market. 
D)  Damaging attacks do not come from larger firms. 
E)  Companies following the focused differentiation strategy hardly have their growth stymied irrespective of the size of the market. 
A)  The niche that is an area of operation of one company cannot be made to disappear or be taken over by larger competitors. 
B)  Companies following the focused differentiation strategy can charge very high prices. 
C)  Companies following this strategy depend on their ability to reduce the price to drive competition out of the market. 
D)  Damaging attacks do not come from larger firms. 
E)  Companies following the focused differentiation strategy hardly have their growth stymied irrespective of the size of the market. B

Question 3

A(n) _____ strategy requires competing based on price to target a narrow market.

Accepted Answer

A)  focused cost leadership 
B)  pull leadership 
C)  focused differentiation 
D)  adaptive 
E)  differentiation 
A)  focused cost leadership 
B)  pull leadership 
C)  focused differentiation 
D)  adaptive 
E)  differentiation A

Question 4

One of the ways that cost leaders generally keep their costs low is by not spending much on advertising.

Accepted Answer

A) True 
 B)False

Question 5

The unique features provided by firms following a focused differentiation strategy are often very specialized.

Accepted Answer

A) True 
 B)False

Question 6

Cost leaders are companies that sell inferior, poor quality goods and services for rock-bottom prices.

Accepted Answer

A) True 
 B)False

Question 7

Describe any route toward a best-cost strategy.

Accepted Answer

One route toward a best-cost strategy is

Question 8

A company regularly launches products with features that are different from what are offered in the market. It has now launched a new electronic device which can be fitted to vehicles. It can be programmed to automatically dial the police emergency number, provide them with the required location details, and guide them to the location in the case of an emergency. This is an example of a(n) _____ strategy.

Accepted Answer

A)  focused cost leadership 
B)  cost leadership 
C)  pull 
D)  adaptive 
E)  differentiation 
A)  focused cost leadership 
B)  cost leadership 
C)  pull 
D)  adaptive 
E)  differentiation

Question 9

A focus strategy typically implies that a firm forgoes any attempt to develop expertise about the goods and services that it offers.

Accepted Answer

A) True 
 B)False

Question 10

_____ refers to the extent to which an increase in the cost of the product makes a buyer less likely to purchase an item.

Accepted Answer

A)  Affective conflict 
B)  Palming off 
C)  Party selling 
D)  Price sensitivity 
E)  All-you-can-afford budgeting 
A)  Affective conflict 
B)  Palming off 
C)  Party selling 
D)  Price sensitivity 
E)  All-you-can-afford budgeting

Question 11

Firms that compete based on price and target a narrow market are following a focused cost leadership strategy. All of the below firms are focused cost leaders except:

Accepted Answer

A)  Cinnabon 
B)  Redbox 
C)  Papa Murphy's 
D)  Claire's 
E)  Checkers 
A)  Cinnabon 
B)  Redbox 
C)  Papa Murphy's 
D)  Claire's 
E)  Checkers

Question 12

A company provides baby sitting services to single working mothers. This is the example of a(n):

Accepted Answer

A)  adaptive strategy. 
B)  pull strategy. 
C)  cost leadership strategy. 
D)  focused differentiation strategy. 
E)  focused cost leadership strategy. 
A)  adaptive strategy. 
B)  pull strategy. 
C)  cost leadership strategy. 
D)  focused differentiation strategy. 
E)  focused cost leadership strategy.

Question 13

Which of the following statements holds true for companies following the differentiation strategy?

Accepted Answer

A)  They offer generic and standardized products. 
B)  They do not invest in the field of market research. 
C)  They spend little on research and development. 
D)  Advertising in general and brand building in particular are very important to them. 
E)  They compete with their rivals on the basis of price. 
A)  They offer generic and standardized products. 
B)  They do not invest in the field of market research. 
C)  They spend little on research and development. 
D)  Advertising in general and brand building in particular are very important to them. 
E)  They compete with their rivals on the basis of price.

Question 14

A watch manufacturing company has priced its goods at a rate which is higher than what other companies offer. The watches made by this company do not have any stand out feature to differentiate itself from the other companies or justify its high price. This company would be considered as a _____ firm.

Accepted Answer

A)  rack jobber 
B)  stuck in the middle 
C)  paste-up 
D)  runner 
E)  preretailing 
A)  rack jobber 
B)  stuck in the middle 
C)  paste-up 
D)  runner 
E)  preretailing

Question 15

Healthie is a health drink company that is known for launching drinks with flavors which are different from what are offered in the market. It regularly indulges in experimentation to come up with new and exotically flavored drinks. It also charges higher than the other health drink companies. Another company offers the same drinks a lower price. Customers who were once loyal to Healthie immediately switch over to the new company which is charging a lower price for the same drinks. This is an example of _____.

Accepted Answer

A)  price sensitivity 
B)  affective conflict 
C)  party selling 
D)  palming off 
E)  all-you-can-afford budgeting 
A)  price sensitivity 
B)  affective conflict 
C)  party selling 
D)  palming off 
E)  all-you-can-afford budgeting

Question 16

One route toward a best-cost strategy is for a firm to adopt a business model whose fixed costs and overhead are very low relative to the costs that competitors are absorbing.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following statements holds true for the cost leadership strategy?

Accepted Answer

A)  Cost leaders, in general, encourage expensive advertising campaigns. 
B)  Cost leaders, in general, invest heavily in market research. 
C)  Cost leaders, in general, spend substantial funds on research and development. 
D)  Cost leaders, in general, make an effort to offer unique features to the customers. 
E)  Cost leaders, in general, emphasize on efficiency. 
A)  Cost leaders, in general, encourage expensive advertising campaigns. 
B)  Cost leaders, in general, invest heavily in market research. 
C)  Cost leaders, in general, spend substantial funds on research and development. 
D)  Cost leaders, in general, make an effort to offer unique features to the customers. 
E)  Cost leaders, in general, emphasize on efficiency.

Question 18

Pete opens a new pizzeria in town. He promises home delivery of pizzas within a period of thirty minutes. He also makes a unique offer that if the pizzas are not delivered within thirty minutes of placing the order, then the customer will not be charged for the pizza. None of the other pizzerias in his town offer such a deal. This is an example of a(n) _____ strategy.

Accepted Answer

A)  cost leadership 
B)  adaptive 
C)  differentiation 
D)  pull 
E)  focused cost leadership 
A)  cost leadership 
B)  adaptive 
C)  differentiation 
D)  pull 
E)  focused cost leadership

Question 19

Markets that involve a lot of brand loyalty offer great opportunities to cost leaders to attract a large segment of customers.

Accepted Answer

A) True 
 B)False

Question 20

In many cases, the target market is defined by the sales channel used to reach customers.

Accepted Answer

A) True 
 B)False

Explain the disadvantages of a cost leadership strategy.

Which of the following holds true for companies following the focused differentiation strategy?

A(n) _____ strategy requires competing based on price to target a narrow market.

One of the ways that cost leaders generally keep their costs low is by not spending much on advertising.

The unique features provided by firms following a focused differentiation strategy are often very specialized.

Cost leaders are companies that sell inferior, poor quality goods and services for rock-bottom prices.

Describe any route toward a best-cost strategy.

A focus strategy typically implies that a firm forgoes any attempt to develop expertise about the goods and services that it offers.

_____ refers to the extent to which an increase in the cost of the product makes a buyer less likely to purchase an item.

Firms that compete based on price and target a narrow market are following a focused cost leadership strategy. All of the below firms are focused cost leaders except:

A company provides baby sitting services to single working mothers. This is the example of a(n):

Which of the following statements holds true for companies following the differentiation strategy?

One route toward a best-cost strategy is for a firm to adopt a business model whose fixed costs and overhead are very low relative to the costs that competitors are absorbing.

Which of the following statements holds true for the cost leadership strategy?

Markets that involve a lot of brand loyalty offer great opportunities to cost leaders to attract a large segment of customers.

In many cases, the target market is defined by the sales channel used to reach customers.

Mastering Strategy: Art and Science

Leading Strategically

Evaluating the External Environment

Managing Company Resources

Supporting the Business-Level Strategy: Competitive and Cooperative Moves

Competing in International Markets

Selecting Corporate-Level Strategies

Executing Strategy Through Organizational Design

Leading an Ethical Organization: Corporate Governance, Corporate Ethics, and Social Responsibility

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Exam 5: Selecting Business-Level Strategies

Explain the disadvantages of a cost leadership strategy.

Which of the following holds true for companies following the focused differentiation strategy?

A(n) _____ strategy requires competing based on price to target a narrow market.

One of the ways that cost leaders generally keep their costs low is by not spending much on advertising.

The unique features provided by firms following a focused differentiation strategy are often very specialized.

Cost leaders are companies that sell inferior, poor quality goods and services for rock-bottom prices.

Describe any route toward a best-cost strategy.

A focus strategy typically implies that a firm forgoes any attempt to develop expertise about the goods and services that it offers.

_____ refers to the extent to which an increase in the cost of the product makes a buyer less likely to purchase an item.

Firms that compete based on price and target a narrow market are following a focused cost leadership strategy. All of the below firms are focused cost leaders except:

A company provides baby sitting services to single working mothers. This is the example of a(n):

Which of the following statements holds true for companies following the differentiation strategy?

One route toward a best-cost strategy is for a firm to adopt a business model whose fixed costs and overhead are very low relative to the costs that competitors are absorbing.

Which of the following statements holds true for the cost leadership strategy?

Markets that involve a lot of brand loyalty offer great opportunities to cost leaders to attract a large segment of customers.

In many cases, the target market is defined by the sales channel used to reach customers.

Mastering Strategy: Art and Science

Leading Strategically

Evaluating the External Environment

Managing Company Resources

Supporting the Business-Level Strategy: Competitive and Cooperative Moves

Competing in International Markets

Selecting Corporate-Level Strategies

Executing Strategy Through Organizational Design

Leading an Ethical Organization: Corporate Governance, Corporate Ethics, and Social Responsibility

Filters