Question 1

The goal of business-level strategy is to earn above-average returns.

Accepted Answer

A) True 
 B)False

Question 2

Case Scenario : Walt Disney Company.
Walt Disney Company is famed for its creativity, strong global brand, and uncanny ability to take service and experience businesses to higher levels. In the early 1990s, then-CEO Michael Eisner looked to the fast-food industry as a way to draw additional attention to the Disney presence outside of its theme parks - its retail chain was highly successful and growing rapidly. A fast-food restaurant made sense from Eisner's perspective since Disney's theme parks had already mastered rapid, high-volume food preparation, and, despite somewhat undistinguished food and high prices (or perhaps because of), all its in-park restaurants were extremely profitable. From this inspiration, Mickey's Kitchen was launched. The first two locations were opened in California and in a suburb of Chicago, adjacent to existing Disney stores. Menu items included healthy, child-oriented fare like Jumbo Dumbo burgers and even a meatless Mickey Burger. Eisner thought that locating each restaurant next to existing Disney stores was sure to increase foot traffic through both venues. Less than two years later Disney closed down the California and Chicago stores and shuttered further expansion plans. Eisner cited overwhelming competition from McDonalds and general oversaturation in the fast-food industry as the primary reasons for closing down the failing Mickey's Kitchen.
-(Refer to the above Case Scenario) Based on your own knowledge of Disney and the information provided in the scenario, does Disney appear to create value in its businesses primarily through a cost-leadership or through a differentiation strategy?

Accepted Answer

The best answers will begin by noting th

Question 3

Zara has pioneered "cheap chic" in clothing apparel. Zara offers current and desirable fashion goods at relatively low prices. To implement the strategy, Zara uses sophisticated designers and effective means of managing costs. These are all characteristics of which business level strategy?

Accepted Answer

A)  Cost leadership 
B)  Differentiation 
C)  Integrated Cost Leadership/Differentiation 
D)  Stuck-in-the-middle 
A)  Cost leadership 
B)  Differentiation 
C)  Integrated Cost Leadership/Differentiation 
D)  Stuck-in-the-middle

Question 4

Wholesome Pet Food has successfully specialized for 20 years in high-quality pet food made from all-natural ingredients and organically-raised lamb. This brand has a strong following and is recommended by veterinarians who practice in affluent neighborhoods. Wholesome's main supplier of lamb has announced that the price for lamb will be 15 percent higher next year.

Accepted Answer

A)  Wholesome will probably be able to pass the cost on to its customers because they are less sensitive to price increases than the average buyer. 
B)  Companies pursuing Wholesome's business strategy are especially vulnerable to this risk. 
C)  If Wholesome raises its pet food prices, customers will turn to less expensive brands such as Purina. 
D)  Wholesome probably operates on very thin margins, and a cost increase will threaten its ability to earn average returns. 
A)  Wholesome will probably be able to pass the cost on to its customers because they are less sensitive to price increases than the average buyer. 
B)  Companies pursuing Wholesome's business strategy are especially vulnerable to this risk. 
C)  If Wholesome raises its pet food prices, customers will turn to less expensive brands such as Purina. 
D)  Wholesome probably operates on very thin margins, and a cost increase will threaten its ability to earn average returns.

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

A flexible manufacturing system is a computer-controlled process used to produce a variety of products in moderate, flexible quantities with minimal manual intervention.

Accepted Answer

A) True 
 B)False

Question 7

The typical risks of a cost leadership strategy include

Accepted Answer

A)  the inability to balance high differentiation and low price. 
B)  production and distribution processes becoming obsolete. 
C)  excessive differentiation to the point where the customer base is too small. 
D)  loss of customer loyalty. 
A)  the inability to balance high differentiation and low price. 
B)  production and distribution processes becoming obsolete. 
C)  excessive differentiation to the point where the customer base is too small. 
D)  loss of customer loyalty.

Question 8

A company using a narrow target market in its business strategy is

Accepted Answer

A)  following a cost leadership business strategy. 
B)  focusing on a broad array of geographic markets. 
C)  limiting the group of customer segments served. 
D)  decreasing the number of activities on its value chain. 
A)  following a cost leadership business strategy. 
B)  focusing on a broad array of geographic markets. 
C)  limiting the group of customer segments served. 
D)  decreasing the number of activities on its value chain.

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

Describe the risks of a differentiation strategy.

Accepted Answer

The risks of a differentiation strategy

Question 11

When the costs of supplies increase in an industry, the low-cost leader

Accepted Answer

A)  may continue competing with rivals on the basis of product features. 
B)  will lose customers as a result of price increases. 
C)  will be unable to absorb higher costs because cost-leaders operate on very narrow profit margins. 
D)  may be the only firm able to pay the higher prices and continue to earn average or above- average returns. 
A)  may continue competing with rivals on the basis of product features. 
B)  will lose customers as a result of price increases. 
C)  will be unable to absorb higher costs because cost-leaders operate on very narrow profit margins. 
D)  may be the only firm able to pay the higher prices and continue to earn average or above- average returns.

Question 12

The analysis of the activity map of a successful company such as Southwest Airlines emphasizes how

Accepted Answer

A)  the organizational culture of Southwest Airlines is the key to the success of the organization. 
B)  understanding of the profit pool in an industry indicates to companies where above-average returns can be earned. 
C)  it is hard for rivals to match a configuration of integrated activities than to imitate a single activity. 
D)  the primary and support activities of a successful company capture value all along the value chain. 
A)  the organizational culture of Southwest Airlines is the key to the success of the organization. 
B)  understanding of the profit pool in an industry indicates to companies where above-average returns can be earned. 
C)  it is hard for rivals to match a configuration of integrated activities than to imitate a single activity. 
D)  the primary and support activities of a successful company capture value all along the value chain.

Question 13

By examining the ____ of Southwest Airlines, one can identify the strategic themes around which it has developed its business strategy. These themes include limited passenger service, high aircraft utilization, highly productive ground and gate crews, and so forth.

Accepted Answer

A)  activity map 
B)  profit pool 
C)  value diagram 
D)  five forces model 
A)  activity map 
B)  profit pool 
C)  value diagram 
D)  five forces model

Question 14

An interior decorator has moved his business from Los Angeles to St. Paul, Minnesota, because his spouse's company transferred her to St. Paul. The decorator is distressed because the customers in his target market have, in his words, "banal and bourgeois taste." What is the decorator's problem?

Accepted Answer

A)  The decorator does not understand that customer needs are neither right nor wrong, good nor bad. 
B)  The decorator has no core competencies that will transfer to his new geographic market. 
C)  The decorator should choose a strategy of cost-leadership in this environment. 
D)  The decorator is highly affiliated with the new target market and understands how he can create value for it. 
A)  The decorator does not understand that customer needs are neither right nor wrong, good nor bad. 
B)  The decorator has no core competencies that will transfer to his new geographic market. 
C)  The decorator should choose a strategy of cost-leadership in this environment. 
D)  The decorator is highly affiliated with the new target market and understands how he can create value for it.

Question 15

The integration of a cost leadership and a differentiation strategy

Accepted Answer

A)  is challenging because it increases the number of value chain activities and support functions in which the firm must become competent. 
B)  forces a firm to adapt more slowly to changes in its environment. 
C)  allows the firm to avoid being "stuck in the middle." 
D)  requires such a large customer base that it is most practical for firms in the global marketplace. 
A)  is challenging because it increases the number of value chain activities and support functions in which the firm must become competent. 
B)  forces a firm to adapt more slowly to changes in its environment. 
C)  allows the firm to avoid being "stuck in the middle." 
D)  requires such a large customer base that it is most practical for firms in the global marketplace.

Question 16

Viewing the world through the customer's eyes and constantly seeking ways to create more value for the company enhances

Accepted Answer

A)  the reach of the company toward the customer. 
B)  the ability to identify the customer. 
C)  the richness of the relationship with the customer. 
D)  affiliation with the customer. 
A)  the reach of the company toward the customer. 
B)  the ability to identify the customer. 
C)  the richness of the relationship with the customer. 
D)  affiliation with the customer.

Question 17

The key to Southwest Airlines' success has been its ability to continuously reduce costs while providing customers with superior levels of differentation such as an engaging culture.

Accepted Answer

A) True 
 B)False

Question 18

Case Scenario : Abrahamson's Jewelers.
Through its sole location in an affluent suburb of San Francisco, Abrahamson's Jewelers has established a strong niche market in the upscale jewelry store segment. Abrahamson's was founded in 1871 and is currently owned and operated by John Wickersham, who bought the firm from its namesake founders in 1985. Wickersham joined the firm as a trainee out of high school, completed his gemology training, and several years later took ownership with the financial help of his parents. That debt has long been paid off and business has thrived. When he first acquired the business, Abrahamson's offered a full range of jewelry and gift items from watches to wedding sets to silverware to clocks. This broad range of products was mirrored by a broad price range-$10,000 Rolex watches were sold next to $50 Seiko watches. While some jewelry was custom designed and manufactured, most of the products were "case ready," meaning they were sourced from large jewelry and silver manufacturers from around the world. Over the last 15 years, Wickersham has narrowed the company's product offering considerably to focus only on high-end watches like Rolex and Piaget, custom jewelry, and estate jewelry. Wickersham stresses that this is an appropriate focus for his business since each of the products lends itself to relationship selling, and price rarely comes into the discussion. Despite the narrower offering moreover, Abrahamson's floor space has doubled, and clients are intensely loyal to the good taste, design skills, and personal service level provided by Mr. Wickersham.
-(Refer to the above Case Scenario) Would you recommend that Mr. Wickersham embark on an Internet sales strategy for his company?

Accepted Answer

The best answers will note that some asp

Question 19

Ikea offers young customers a selection of home furnishings featuring good design, function, and acceptable quality at low prices. Ikea is using which business level strategy?

Accepted Answer

A)  Cost leadership 
B)  Focused cost leadership 
C)  Differentiation 
D)  Focused differentiation 
A)  Cost leadership 
B)  Focused cost leadership 
C)  Differentiation 
D)  Focused differentiation

Question 20

The use of a differentiation strategy would be expected to be LEAST effective in which of the following markets?

Accepted Answer

A)  Commodity goods 
B)  Motion pictures 
C)  Popular music 
D)  Writing instruments 
A)  Commodity goods 
B)  Motion pictures 
C)  Popular music 
D)  Writing instruments

The goal of business-level strategy is to earn above-average returns.

Zara has pioneered "cheap chic" in clothing apparel. Zara offers current and desirable fashion goods at relatively low prices. To implement the strategy, Zara uses sophisticated designers and effective means of managing costs. These are all characteristics of which business level strategy?

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

A flexible manufacturing system is a computer-controlled process used to produce a variety of products in moderate, flexible quantities with minimal manual intervention.

The typical risks of a cost leadership strategy include

A company using a narrow target market in its business strategy is

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

Describe the risks of a differentiation strategy.

When the costs of supplies increase in an industry, the low-cost leader

The analysis of the activity map of a successful company such as Southwest Airlines emphasizes how

By examining the ____ of Southwest Airlines, one can identify the strategic themes around which it has developed its business strategy. These themes include limited passenger service, high aircraft utilization, highly productive ground and gate crews, and so forth.

An interior decorator has moved his business from Los Angeles to St. Paul, Minnesota, because his spouse's company transferred her to St. Paul. The decorator is distressed because the customers in his target market have, in his words, "banal and bourgeois taste." What is the decorator's problem?

The integration of a cost leadership and a differentiation strategy

Viewing the world through the customer's eyes and constantly seeking ways to create more value for the company enhances

The key to Southwest Airlines' success has been its ability to continuously reduce costs while providing customers with superior levels of differentation such as an engaging culture.

Ikea offers young customers a selection of home furnishings featuring good design, function, and acceptable quality at low prices. Ikea is using which business level strategy?

The use of a differentiation strategy would be expected to be LEAST effective in which of the following markets?

Strategic Management and Strategic Competitiveness

The External Environment: Opportunities, Threats, Industry Competition, and Competitor Analysis

The Internal Organization: Resources, Capabilities, Core Competencies, and Competitive Advantages

Competitive Rivalry and Competitive Dynamics

Corporate-Level Strategy

Merger and Acquisition Strategies

International Strategy

Cooperative Strategy

Corporate Governance

Organizational Structure and Controls

Strategic Leadership

Strategic Entrepreneurship

Filters

Exam 4: Business-Level Strategy

The goal of business-level strategy is to earn above-average returns.

Zara has pioneered "cheap chic" in clothing apparel. Zara offers current and desirable fashion goods at relatively low prices. To implement the strategy, Zara uses sophisticated designers and effective means of managing costs. These are all characteristics of which business level strategy?

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

A flexible manufacturing system is a computer-controlled process used to produce a variety of products in moderate, flexible quantities with minimal manual intervention.

The typical risks of a cost leadership strategy include

A company using a narrow target market in its business strategy is

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

Describe the risks of a differentiation strategy.

When the costs of supplies increase in an industry, the low-cost leader

The analysis of the activity map of a successful company such as Southwest Airlines emphasizes how

By examining the ____ of Southwest Airlines, one can identify the strategic themes around which it has developed its business strategy. These themes include limited passenger service, high aircraft utilization, highly productive ground and gate crews, and so forth.

An interior decorator has moved his business from Los Angeles to St. Paul, Minnesota, because his spouse's company transferred her to St. Paul. The decorator is distressed because the customers in his target market have, in his words, "banal and bourgeois taste." What is the decorator's problem?

The integration of a cost leadership and a differentiation strategy

Viewing the world through the customer's eyes and constantly seeking ways to create more value for the company enhances

The key to Southwest Airlines' success has been its ability to continuously reduce costs while providing customers with superior levels of differentation such as an engaging culture.

Ikea offers young customers a selection of home furnishings featuring good design, function, and acceptable quality at low prices. Ikea is using which business level strategy?

The use of a differentiation strategy would be expected to be LEAST effective in which of the following markets?

Strategic Management and Strategic Competitiveness

The External Environment: Opportunities, Threats, Industry Competition, and Competitor Analysis

The Internal Organization: Resources, Capabilities, Core Competencies, and Competitive Advantages

Competitive Rivalry and Competitive Dynamics

Corporate-Level Strategy

Merger and Acquisition Strategies

International Strategy

Cooperative Strategy

Corporate Governance

Organizational Structure and Controls

Strategic Leadership

Strategic Entrepreneurship

Filters