Exam 4: Business-Level Strategy

Ever improving levels of efficiency enhance profit margins for a cost leader. This effects which of the five forces of industry structure most directly?

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

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) With its sole location in an affluent suburb of San Francisco and a narrow product offering of only high-end watches, custom jewelry, and estate sales, Abrahamson's Jewelers is most likely following a differentation strategy.

Durable Ceramics, Inc., provides inexpensive ceramic tile to builders of institutional buildings such as schools, prisons, and public administration buildings. It has always competed on a cost leadership basis. Most of its products are purchased by a few commercial construction firms, so it is fairly dependent on these construction firms for selling its product. Durable Ceramic's next most-efficient competitor, Cost-Less Ceramics, Inc., earns average returns, while Durable earns above-average returns. The commercial construction firms are putting pressure on Durable to reduce its prices. If Durable reduces its prices below those of Cost-Less's prices, it is likely that

How do focused differentiation and focused cost-leadership strategies differ from their non-focused counterparts?

When implementing a focus strategy, the firm seeks to

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.

The Monteleone Company pays large fees to a highly-recognizable, prestigious individual to be the spokesperson for the company's products, luxury private jets. Monteleone is probably following the

Which of the following is TRUE?

Zara offers current and desirable fashion goods at relatively low prices. To implement this strategy, Zara has sophisticated designers and effective means of managing costs. Zara is an example of the integrated cost leadership/differentiation strategy.

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.

Research suggests that having a competitive advantage in ____ creates more value in the cost leadership strategy than it does in the differentiation strategy.

Global competition has increased the options for consumers and has made it more imperative for firms to identify the needs of customers in order to earn above-average returns.

When a firm is able to produce nonstandardized (that is, distinctive) products for customers who value differentiated features more than they value low cost, the firm is successfully implementing

Flexible manufacturing systems, information networks, and total quality management are three techniques that make it possible for firms to implement the focused differentiation strategy.

A risk of The Li Ning Company's integrated cost leadership/differentation strategy is that it may end up "stuck-n-the-middle," i.e., not having either a low cost or a uniqueness advantage (Chapter 4 Strategic Focus).

A firm's core strategy is its ____ strategy.

A risk of a focus strategy is that the needs of the customer within a narrow competitive segment may become more similar to those needs of customers in the whole market.

New Balance Athletic Shoes target Baby Boomers' needs for well-fitting shoes. The company is unique in that it offers a very broad range of shoe widths. A realistic potential risk New Balance runs in this focused differentiation strategy includes the possibility that:

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