Deck 4: Business Level Strategy

Question 1

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

Answer 1

False

Question 2

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

Answer 2

True

Question 3

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

Answer 3

False

Question 4

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.

Question 5

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

Question 6

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 7

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

Question 8

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 9

As shown in the Chapter 4 Opening Case, because of its lower overhead cost structure, Acer is able to price its products below those of its competitors.

Question 10

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

Question 11

Companies without the core competencies to link primary and support activities 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 12

Essentially, there are only two basic competitive advantages: cost and uniqueness.

Question 13

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 14

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

Question 15

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 16

Firms implementing cost leadership strategies often sell no-frills standardized goods or services to the industry's most typical customers.

Question 17

According to the Chapter 4 Opening Case, Acer's strategy of running a business with lower costs is good when markets are not growing (as occurred during the global recession) but even better when markets are growing.

Question 18

The difference between the cost leadership and differentiation business-level strategies, and the focused cost leadership and focused differentiation strategies, is their competitive reach.

Question 19

According to the Chapter 4 Opening Case, the decision to sell through wholesalers and to manufacture all product in-house are examples of actions taken by Acer to reduce its costs.

Question 20

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

Question 21

According to the Chapter 4 Strategic Focus, while counterfeiting creates jobs, these jobs pay less and the companies and employees pay few if any taxes.

Question 22

Support activities in the value chain are generic across business strategies.

Question 23

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

Question 24

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

Question 25

McDonald's brand recognition is a fundamental source of differentiation, while the rigorous standardization of processes allows it to lower costs. Thus, McDonalds is a classic example of the focused differentiation strategy.

Question 26

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

Question 27

According to the Chapter 4 Strategic Focus, Kazoo Toys focuses on the market of children from birth to age 12 and differentiates by providing unique toys and services.

Question 28

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 29

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

Question 30

The Chapter 4 Strategic Focus notes that counterfeiting actually makes a positive contribution to society through job creation and tax payments.

Question 31

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

Question 32

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 33

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

Question 34

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 35

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 36

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

Question 37

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 38

According to the Chapter 4 Strategic Focus, 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 39

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

Question 40

The Chapter 4 Strategic Focus, counterfeiting contributed to Hewlett-Packard not only losing revenue, but also risk to the company's brand reputation.

Question 41

The Opening Case of Chapter 4 highlights Acer and its business level strategy. All of the following are components of Acer's strategy EXCEPT

A) Pricing its products below its competitors.
B) Outsourcing assembly and manufacture.
C) Manufacturing and assembling all products in-house
D) Selling through retailers

Question 42

Subway is targeting a more narrow market segment among college students than the segment on which McDonald's focuses. Subway is focusing on students interested in healthy fast food. To select this business strategy, Subway would have used information from all the following categories EXCEPT

A) demographic factors.
B) psychological factors.
C) consumption-pattern factors.
D) end-use segments.

Question 43

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 44

Ford's decision to build the Fiesta as a world car was because

A) oil prices had increased and small cars were now more popular.
B) it had not offered any small cars to the automobile market up to that time.
C) customers' needs across the global automobile market were becoming more similar.
D) car tastes were different in Europe and the Fiesta was tailored to those tastes.

Question 45

Gap used shopping experience to subdivide its customers into different segments. Specifically, Gap learned from market research that its female and male customers want different shopping experiences (e.g., men come and go easily, women want exploration). Which of the following aspects of managing customer relationships was Gap 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 46

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

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

Question 47

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

Question 48

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 49

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.

Question 50

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 51

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 52

Acer sells only through retailers and other outlets and outsources all manufacturing and assembly operations. Acer's business level strategy is best described as

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

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

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 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

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 57

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 58

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 59

A firm's core strategy is its ____ strategy.

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

Question 60

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

Question 61

A company using a narrow scope 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 62

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 63

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 64

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 65

Big Lots is able to compete against Wal-Mart with a cost leadership strategy because of its strengths in highly disciplined merchandise cost and inventory management system. This illustrates the

A) ability of Big Lots to imitate Wal-Mart's tightly integrated activity map.
B) ability to survive against a dominant competitor by changing from a broad competitive scope to a narrow competitive scope.
C) fact that support activities in the firm can provide sources of cost reduction.
D) importance of effective use of primary activities in the value chain.

Question 66

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

A) both Durable and Cost-Less will devise additional ways to become more efficient in their production processes.
B) Durable will be unable to absorb the lower cost, and will go out of business.
C) both Cost-Less and Durable will go out of business, leaving the customers with fewer alternative sources of low-cost tile.
D) Cost-Less will go out of business, and Durable will gain higher power over its customers.

Question 67

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 68

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 69

A river barge company can offer cheaper, although slower, per pound transportation of products to companies when compared with transportation by air, truck, or rail. The river barge company should first target customers whose companies use

A) the integrated cost leadership/differentiation strategy.
B) either of the focus strategies.
C) the cost-leadership strategy.
D) any of the strategies except the focused differentiation strategy.

Question 70

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 71

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 72

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

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

Question 73

Michael Porter points out that strategic fit among many activities 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 74

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

A) marketing and sales
B) technology development
C) inbound and outbound logistics
D) human resource management

Question 75

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 76

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 an array of interlocked activities.
D) the primary and support activities of a successful company capture value all along the value chain.

Question 77

A company pursuing the differentiation or focused differentiation strategy would tend to

A) have highly efficient systems linking suppliers' products with the firm's production processes.
B) use economies of scale.
C) have strong capabilities in basic research.
D) make investments in easy-to-use manufacturing technologies.

Question 78

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

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

Question 79

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 competitive scope
B) narrower competitive scope
C) increased use of primary activities to capture value
D) increased use of support activities to capture value

Question 80

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.