Deck 5: Business-Level Strategy Emea Edition

Question 1

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

Answer 1

True

Question 2

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

Answer 2

False

Question 3

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

Answer 3

True

Question 4

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

Question 5

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 6

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

Question 7

As shown in the Chapter 5 Opening Case, because of its lower overhead cost structure, Acer is able to price its products below those of its competitors.

Question 8

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 9

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

Question 10

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 11

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

Question 12

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

Question 13

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

Question 14

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

Question 15

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

Question 16

According to the Chapter 5 Opening Case, the decisions to sell through wholesalers and to manufacture all products in-house are examples of actions taken by Acer to reduce its costs.

Question 17

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 18

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

Question 19

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

Question 20

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 21

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 22

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 23

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 24

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 25

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 26

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 27

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 28

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 29

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

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

Question 30

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 31

According to the Chapter 5 Strategic Focus, while counterfeiting creates jobs, these jobs pay less and the companies and employees pay few if any taxes.

Question 32

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 33

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 34

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 35

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

Question 36

The Chapter 5 Strategic Focus notes that counterfeiting actually makes a positive contribution to society through job creation and tax payments.

Question 37

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 38

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 39

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

Question 40

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 41

Companies successfully implementing an integrated cost leadership/differentiation strategy are better positioned than firms pursuing the other four business strategies to do all of the following EXCEPT

A) learn new skills.
B) adapt quickly to a changing environment.
C) reduce the risks for stakeholders of the firm.
D) have more primary and support activities in which they are competent.

Question 42

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?

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

Question 43

A differentiation strategy can be effective in controlling the power of substitutes in an industry because

A) customers have low switching costs.
B) substitute products are lower quality.
C) a differentiating firm can always lower prices.
D) customers develop brand loyalty.

Question 44

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

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 45

The risks of a focus strategy include

A) a competitor's ability to use its core competencies to outfocus the focuser by serving an even more narrowly defined segment.
B) a competitor's ability to use its core competencies to outfocus the focuser by serving an even more broadly defined segment.
C) decisions by industry-wide competitors to use their resources to serve a wider range of customers' needs than the focuser has been serving.
D) decisions by focused competitors to use their resources to serve a wider range of customers' needs.

Question 46

The benefit of a flexible manufacturing system is that

A) the lot size needed to manufacture a firm's product efficiently is reduced.
B) the necessary skill levels of workers are reduced, allowing the firm to reduce costs.
C) it lends itself to empowerment of employees.
D) it captures the cost savings of economies of scale.

Question 47

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 48

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

A) Potential entrants
B) Substitutes
C) Buyer power
D) Supplier power

Question 49

Three sources of flexibility in completing primary and support activities are particularly useful for firms using the integrated strategy. These are

A) Flexible Manufacturing Systems, Reengineering, and Total Quality Management.
B) Outsourcing, Reengineering, and Flexible Manufacturing Systems.
C) Outsourcing, Total Quality Management, and Information Networks.
D) Flexible Manufacturing Systems, Total Quality Management, and Information Networks.

Question 50

When implementing a focus strategy, the firm seeks to

A) offer products that are both differentiated and low cost.
B) move into the global market.
C) target the typical customer in an industry.
D) serve the specialized needs of a market segment.

Question 51

All of the following are examples of differentiated products EXCEPT

A) Toyota's Lexus.
B) Caterpillar's heavy duty earth moving equipment.
C) store brand beef and pork.
D) McKinsey & Company.

Question 52

The term "stuck in the middle"

A) means adhering to a middle of the road strategy in the face of negative outcomes.
B) indicates that the customers of the firm are willing to pay only a mid-range price for the product.
C) reflects the fact that the customers of the firm have only moderate expectations regarding product quality.
D) means that the firm's cost structure is not low enough to allow it to attractively price its products and that its products are not sufficiently differentiated to create value for its target customer.

Question 53

The typical risks of a cost leadership strategy include

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 54

A firm successfully implementing a differentiation strategy would expect

A) customers to be sensitive to price increases.
B) to charge premium prices.
C) customers to perceive the product as standard.
D) to have high levels of power over suppliers.

Question 55

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?

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

Question 56

TQM is most helpful to firms following the ____ business strategy.

A) cost-leadership
B) integrated cost-leadership/differentiation
C) focused cost-leadership
D) focused differentiation

Question 57

Target's brand promise "Expect More. Pay Less" and appeal to higher-income, fashion conscious discount shoppers illustrates the ________________strategy

A) cost leadership
B) differentiation
C) focused differentiation
D) integrated cost leadership/differentiation

Question 58

The differentiation strategy can be effective in controlling the power of rivalry with existing competitors in an industry because

A) customers will seek out the lowest cost product.
B) customers of non-differentiated products are sensitive to price increases.
C) customers are loyal to brands that are differentiated in meaningful ways.
D) the differentiation strategy benefits from rivalry because it forces the firm to innovate.

Question 59

The Chapter 5 Strategic Focus highlights some concerns and actions about counterfeiting of Hewlett-Packard's products. All of the following are true EXCEPT

A) In 2008, HP's imaging and printing group lost over $1 billion in revenue to counterfeit ink cartridges.
B) HP's big concern is that counterfeit cartridges lack product quality and integrity and may hurt the firm's reputation.
C) HP employs teams of people to roam the globe looking for counterfeit versions of its products.
D) HP relies only on complaints from consumers about defective products.

Question 60

The typical risks of a differentiation strategy do NOT include which of the following?

A) Customers may find the price differential between the low-cost product and the differentiated product too large.
B) Customers' experience with other products may narrow customers' perception of the value of a product's differentiated features.
C) Counterfeit goods are widely available and acceptable to customers.
D) Suppliers of raw materials erode the firm's profit margin with price increases.

Question 61

Define strategy and business-level strategy. What is the difference between these two concepts?

Question 62

Discuss how a cost leadership strategy can allow a firm to earn above-average returns in spite of strong competitive forces. Address each of the five competitive forces.

Question 63

Describe the risks of a differentiation strategy.

Question 64

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

Question 65

What are the risks of an integrated cost leadership/differentiation strategy?