Deck 4: Business-Level Strategy

Question 1

When selecting a business level strategy, the firm determines who will be served, what customer needs will be satisfied, and how those needs will be satisfied.

Answer 1

True

Question 2

According to the Chapter 4 Opening Case, part of Starbucks' success in 2011 was the decision to cease introducing new products and to discontinue international expansion in order to focus on reinvigorating its primary brand - the Starbuck's coffee house.

Answer 2

False

Question 3

The generalized forms of value that goods and services provide are either lower cost with acceptable features or highly differentiated features with acceptable cost.

Answer 3

False

Question 4

The difference between the cost leadership and differentiation business-level strategies, and the focused cost leadership and focused differentiation strategies, is their basis for customer value.

Question 5

An English professor spends her summers writing low-brow romance novels that sell directly to paperback. She writes under a fictional name because she is embarrassed to admit to her colleagues and students how she earns the extra money for foreign vacations. The professor is correct in her concern that she is serving customer needs that are objectively inferior and bad.

Question 6

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

Question 7

Strategic fit among the many activities in the value chain is critical for competitive advantage because it is more difficult for a competitor to match a configuration of integrated activities than to imitate a particular activity such as sales promotion or a process technology.

Question 8

Changing consumer needs is illustrated by Starbucks' allowing consumers to have an experience rather than just a cup of coffee and to design their own drinks.

Question 9

As shown in the Chapter 4 Opening Case, Starbucks was unable to control the quality of its experience across the thousands of its stores and hence lost its differentation.

Question 10

Companies without the core competencies in their value chain activities and and support functions are still able to implement successfully a either a cost leadership or a differentiation strategy, although they cannot implement an integrated cost leadership/differentiation strategy.

Question 11

Effective use of the generic business strategies allows the firm to favorably position itself relative to the five forces.

Question 12

To position itself differently from competitors, a firm must decide to either perform activities differently or to perform different activities.

Question 13

Business-level strategy can be thought of as the firm's core strategy.

Question 14

Every firm uses all levels of strategy: corporate, acquisition and restructuring, international and cooperative.

Question 15

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.

Question 16

Almost any identifiable human or organizational characteristic can be used to subdivide a market into segments that differ from one another on a given characteristic.

Question 17

A business-level strategy is an integrated and coordinated set of commitments and actions designed to exploit core competencies and gain a competitive advantage in specific product markets.

Question 18

An examination of a company's activity map will reveal its strategic themes.

Question 19

Southwest Airlines' tightly integrated activities make its cost leadership strategy more vulnerable to imitation than if its activities were loosely integrated.

Question 20

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.

Question 21

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

Question 22

The activities in the value chains of companies using focus strategies are quite different than the activities in the value chains of companies using industry-wide business strategies.

Question 23

The best of the generic business strategies is the integrated cost leadership/differentiation strategy.

Question 24

The value-creating activities associated with the cost leadership strategy and differentation strategy are the same.

Question 25

According to the Chapter 4 Strategic Focus, Walmart's change in strategy to attract more upscale customers was particularly successful especially against Family Dollar and Amazon.

Question 26

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

Question 27

In general, firms can be most effective if they develop business-level strategies that will serve the needs of the "typical customer" in the industry.

Question 28

A low-cost position in the industry is not a valuable defense against rivals when competing on the basis of price.

Question 29

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.

Question 30

A new generation of lunch trucks in cities such as New York, San francisco, and Los Angeles serving high-end fare such as hamburgers made from grass-fed cattle, escargot and crème brulee illustrate the focus cost leadership strategy.

Question 31

Walmart's actions (Chapter 4 Strategic Focus) of becoming more upscale with the intent of taking sales away from Target provided an opening for competitors such as Amazon and Family Dollar to better compete on the basis of price and attract several of Walmart's customer.

Question 32

Essentially, there are only two basic competitive advantages: lower cost than rivals and the ability to differentiate.

Question 33

The differentiation strategy is effective for products that are expensive, luxury consumer goods. It is not effective for common, inexpensive products such as doughnuts.

Question 34

Kazoo Toys has successfully implemented an integrated cost leadership /differentiation strategy by creating value for parents and children interested in purchasing unique toys while simultaneously having access to unique services.

Question 35

The integrated cost leadership/differentiation strategy is superior to the other business-level strategies.

Question 36

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

Question 37

Unlike a cost leadership and a differentiation strategy, both focus strategies are less dependent on the completion of various value chain and support activities in order to compete in a superior manner.

Question 38

A low-cost leader may create entry barriers to potential entrants by continually improving its levels of efficiency.

Question 39

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.

Question 40

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

Question 41

Which of the following is TRUE?

A) As customer loyalty increases, customers are more sensitive to price increases.
B) Customer loyalty has a positive relationship with firm profitability.
C) Customer loyalty is fragile and cannot reliably be considered a factor in firm success.
D) Customer loyalty is of importance only to firms using the differentiation strategy.

Question 42

The three dimensions of a firm's relationships with customers include all the following EXCEPT

A) exclusiveness.
B) affiliation.
C) richness.
D) reach.

Question 43

A firm's core strategy is its ____ strategy.

A) corporate
B) business
C) pricing
D) international

Question 44

The hazard of getting "stuck in the middle" applies to firms using any business strategy.

Question 45

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.

Question 46

The Li Ning Company's move from a cost leadership strategy to an integrated cost leadership/differentation strategy in the sportswear industry was so successful in China that both Nike and Adidas exited the Chinese market (Chapter 4 Strategic Focus).

Question 47

Business-level strategies detail commitments and actions taken to provide value to customers and gain competitive advantage by exploiting core competencies in

A) the selection of industries in which the firm will compete.
B) specific product markets.
C) primary value chain activities.
D) particular geographic locations.

Question 48

Amazon has built capabilities around Internet technology and e-commerce to facilitate information exchanges with its customers in a cost effective manner. This represents which of the three service dimension?

A) Reach
B) Richness
C) Affiliation
D) None of the these

Question 49

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

Question 50

Starbuck's (Chapter 4 Opening Case) was able to revolutionize the coffee drining experience throug its business level strategy of

A) focused cost.
B) cost leadership.
C) differentiation.
D) stuck-in-the-middle.

Question 51

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

Question 52

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).

Question 53

The ________dimension of relationships with customers is particularly important for social networking sites such as Facebook and MySpace.

A) reach
B) richness
C) affiliation
D) social

Question 54

Research shows that firms using a hybrid strategy (i.e., integrated cost leadership/differentation) often outperform firms using pure strategies ( i.e., cost leadership or differentation).

Question 55

One of the benefits of the integrated cost leadership/differentiation strategy is that it is less risky than either the cost leadership or differentiation strategies.

Question 56

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.

Question 57

Although it is a cost leader, IKEA also offers differentiated features that appeal to its target customers, including its unique furniture designs, in-store playrooms for children, wheelchairs for customer use, and extended hours.

Question 58

According to the Chapter 4 Opening Case, part of Starbuck's success in 2011 was the decision to

A) cease introducing new products.
B) emphasize innovation by introducing new products.
C) cut back on the number of stores it operates.
D) discontinue unternational expansion.

Question 59

When selecting a business level strategy, the firm must determine all of the following EXCEPT

A) How will the customer's needs be satisfied?
B) Who is the customer?
C) What are the customers' needs?
D) Why should these customers' needs be satisfied?

Question 60

Because of its focus on innovation and quality manufacturing, Total Quality Management is not useful for firms which follow a cost leadership strategy.

Question 61

As the television industry has changed in the last few decades from just three major networks to a multiplicity of networks, one of the major aspects of business strategy for the newer networks is ____ than the traditional networks.

A) broader target market
B) narrower target market
C) increased use of primary activities to capture value
D) increased use of support activities to capture value

Question 62

A cost leadership strategy targets the industry's ____ customers.

A) most typical
B) poorest
C) least educated
D) most frugal

Question 63

In order to meet and exceed customer's expectations, firms must

A) constantly manipulate customers' perceptions of their needs.
B) answer the questions: who, what, when, where, how, and why as they apply to customers.
C) continuously improve, innovate, and upgrade their core competencies.
D) successfully defend their established core competencies from imitation by competitors.

Question 64

Starbuck's determined that all of the following customer needs were important EXCEPT

A) fast service.
B) the experience associated with drinking coffee, not just the coffee.
C) the actual product of service (e.g., a cup of coffee), not the experience.
D) allowing customer to design their own drinks.

Question 65

In the animal food products business, food-product needs of owners of companion animals pets (e.g., dogs and cats) differ from the needs for food and health-related products of those owning production animals (e.g., livestock). Which of the following aspects of managing customer relationships does this choice refer to?

A) Who: Determining the Customers to Serve
B) What: Determining Which Customer Needs to Satisfy
C) How: Determining Core Competencies Necessary to satisfy Customer Needs
D) When: Determining When to Satisfy Customer Needs

Question 66

Business-level strategies are concerned specifically with

A) creating differences between the firm's position and its competitors.
B) selecting the industries in which the firm will compete.
C) how functional areas will be organized within the firm.
D) how a business with multiple physical locations will operate one of those locations.

Question 67

An entrepreneur is investigating starting a company that provides tax advice to small companies. In order to position his company differently from the existing competitors, the entrepreneur must

A) analyze the reach, richness, and affiliation the company must have with its customers.
B) provide tax advice either in a different manner or provide a different kind of tax service than competitors.
C) offer tax advice at a price lower than the cheapest competitor.
D) offer tax advice at a higher quality than the best competitor.

Question 68

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.

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

Question 69

Hyundai allows customers to return their cars if they lose their job within 12 months of purchase. Which of the following aspects of managing customer relationships is Hyundai engaged in?

A) Who: Determining the Customers to Serve
B) What: Determining Which Customer Needs to Satisfy
C) How: Determining Core Competencies Necessary to satisfy Customer Needs
D) When: Determining When to Satisfy Customer Needs

Question 70

If Southwest Airlines employees lost their high enthusiasm and commitment to the company,

A) the airline could continue without problems because its cost-leadership strategy is dependent on its efficient internal procedures.
B) replacement employees could be hired from rival airlines that are laying off employees easily merged into the Southwest culture.
C) there would be no impact on Southwest's profitability because Southwest's customers value the low fares rather than being "entertained" by the employees.
D) Southwest would have lost one of its competitive advantages and its performance would be threatened.

Question 71

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

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 72

Strategic fit among many activities (in an activity map) is fundamental to

A) the development of core competencies for a firm.
B) the breadth of competitive scope for a firm.
C) sustainability of a firm's competitive advantage.
D) the integrity of the firm's value chain.

Question 73

Which of the following are central to implementing value-creating strategies and thereby satisfying customers'needs?

A) Firm resources
B) Capabilities
C) Core competencies
D) None of the these.

Question 74

The effectiveness of any of the generic business-level strategies is contingent upon

A) customer needs and competitors' strategies.
B) the match between the opportunities and threats in its external market and the strengths of its internal environment.
C) the trends in the general consumer base and the robustness of the global and industry economy.
D) the firm's competitive scope and its competitive advantage.

Question 75

A cost leadership strategy provides goods or services with features that are

A) acceptable.
B) unique.
C) substandard.
D) mediocre.

Question 76

All of the following are considered generic business-level strategies EXCEPT

A) product diversification.
B) cost leadership.
C) focused differentiation.
D) integrated cost leadership/differentiation.

Question 77

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

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 78

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?

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 79

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

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 80

Before the firm decides what products to offer and what benefits and features they will have, the firm must decide all the following questions EXCEPT

A) who the firm should serve.
B) when the customer's needs should be satisfied.
C) what needs the firm should satisfy.
D) what core competencies are needed to satisfy customer needs.