Exam 5: Selecting Business-Level Strategies

What are the advantages of a focus differentiation strategy?

Cost leaders' emphasis on efficiency makes them vulnerable to price competition from rivals.

The presence of a cost leader in an industry encourages new firms to enter the business.

Describe any route toward a best-cost strategy.

A differentiation strategy helps break barriers to entry that protect the firm and its industry from new competition.

A relative lack of market research can lead cost leaders to be not as skilled as other firms at detecting important environmental changes.

Cost leaders are often large companies, and this allows them to demand price concessions from their suppliers.

Firms that charge relatively low prices and offer substantial differentiation are following a _____ strategy.

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.

Economies of scale occur because expenses are distributed across a greater number of items.

A(n) _____ strategy requires offering unique features that fulfill the demands of a narrow market.

Explain the disadvantages of a cost leadership strategy.

A firm following a differentiation strategy attempts to convince customers to pay a premium price for its good or services by providing unique and desirable features.

Jeff wants to open a new coffee shop in his town where there are already two other coffee shops.In order to attract more customers, James decides to charge a lower price for each cup of coffee than what his competitors charge.This is an example of a(n) _____ strategy.

What are the advantages of a differentiation strategy?

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.

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

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

What are the disadvantages of a differentiation strategy?

Mike opens a new gym in his hometown.He charges lower membership and monthly fees than what is offered by the other four gyms in town.This results in the migration of customers from the other gyms to Mike's gym.This enables the company to attract a lot of customers.This is an example of a(n) _____ strategy.