Deck 7: Business Strategy and Competitive Advantage

Question 1

List three characteristics of firms pursuing successful cost leadership strategies.

Answer 1

No Answer

Question 2

Which of the following actions by competitors can thwart the success of differentiation strategies?

A) private labels and store brands
B) discounting
C) commodification
D) All of these
E) None of these

Answer 2

D

Question 3

The efficiency of a firm's chosen strategy can be judged by ____________.

A) its performance relative to average industry performance.
B) its performance relative to its nearest viable competitor
C) the ratio of its outputs to its inputs
D) the ratio of its inputs to its outputs
E) A and C only

Answer 3

E

Question 4

Firms pursuing a focus strategy can segment the market based on which of the following?

A) customers
B) demographics
C) regions
D) products
E) All of these

Question 5

So-called "dollar stores"-Dollar General, Family Dollar, and Dollar Tree-are good examples of competitors pursuing ____________ strategies.

A) cost leadership
B) differentiation
C) focus cost leadership
D) focus differentiation
E) None of these

Question 6

Firms seeking competitive advantage by pursuing a ____________ strategy must develop the capabilities to provide customers with the appropriate justification to make ultra-luxury purchases of these firms' goods and services.

A) cost leadership
B) differentiation
C) focus cost leadership
D) focus differentiation
E) None of these

Question 7

Morton has been most effective in pursuing a__________ strategy for its commodity products.

A) cost leadership
B) differentiation
C) focus cost leadership
D) focus differentiation
E) None of these

Question 8

A firm seeking strategic advantage in a broad target market by controlling its costs is pursuing a ___________ strategy.

A) cost leadership
B) differentiation
C) focus cost leadership
D) focus differentiation
E) None of these

Question 9

List three characteristics of the management culture of firms pursuing successful cost leadership strategies.

Question 10

Discuss two reasons that can cause firms to become strategically "stuck in the middle."

Question 11

List three competitive advantages that firms are likely to enjoy when pursuing a cost leadership strategy in a broad market segment.

Question 12

Why is the pursuit of a reactor strategy not considered a viable strategic option?

Question 13

What two capabilities must a firm have in order to become a successful "dual advantage" competitor?

Question 14

What is negative brand equity?

Question 15

Why is commodification a threat to a firm's strategy of differentiation?

Question 16

Why is discounting a threat to a firm's strategy of differentiation?

Question 17

Why is private-label and store-brand competition a threat to a firm's strategy of differentiation?

Question 18

List three steps that managers can take when confronted by an aggressive competitor eager to initiate a price war.

Question 19

Discuss the reasons for the decline in profitability levels of firms in commodity markets during downturns in business cycles.

Question 20

Which of the following is not one of Porter's generic strategies?

A) cost leadership
B) differentiation
C) diversification
D) focus
E) None of these are generic strategies

Question 21

__________ are firms that pursue strategies characterized by inconsistencies and a reactionary response to environmental change.

A) Analyzers
B) Defenders
C) Prospectors
D) Reactors
E) None of these

Question 22

Commodity products and services, such as colas, hair care, and microprocessors-cannot be effectively differentiated.

Question 23

The value chain concept can be a very useful tool for managers who are pursuing a cost leadership strategy.

Question 24

To achieve an overall low cost position in their industries, firms should avoid seeking large market shares.

Question 25

The success of a cost leadership strategy depends on the perception by customers that the prices of a particular firm's products or services are lower than the prices of other firms in the industry.

Question 26

The business strategy of differentiation is particularly well suited for firms competing in commodity markets or the markets for basic items in which one firm's products are more or less indistinguishable from other companies' products.

Question 27

In a less competitive industry context, a low cost position firm cannot choose to price at competitors' levels.

Question 28

One of the ways to evaluate the effectiveness of the business strategy is to assess how effectively the firm's strategy is succeeding in preventing the reshaping of its demand curve.

Question 29

Effective business strategies should make the lower portion of the demand curve more elastic.

Question 30

Effective business strategies should make the top portion of a product or service's demand curve more inelastic.

Question 31

Product (as opposed to process) innovation is important for firms pursuing differentiation strategies.

Question 32

Firms simultaneously pursuing more than one generic strategy will inevitably wind up strategically "stuck in the middle".

Question 33

____________ are firms that balance the opportunity-seeking nature of prospectors against the risk aversion of defenders.

A) Analyzers
B) Defenders
C) Prospectors
D) Reactors
E) None of these

Question 34

___________ are firms that seek stability by maintaining current market positions and defending against encroachment by other firms.

A) Analyzers
B) Defenders
C) Prospectors
D) Reactors
E) None of these

Question 35

____________ are firms that pursue entrepreneurial exploration of their competitive environments with the aim of developing new product and market opportunities.

A) Analyzers
B) Defenders
C) Prospectors
D) Reactors
E) None of these

Question 36

A "blue ocean" strategy requires an examination of buyer value elements to create a separation between differentiation and low cost strategies.

Question 37

The success of the generic strategy of differentiation depends on customers valuing the product or service characteristics on which managers have based their differentiation strategies.

Question 38

The profitability levels of firms in commodity markets tend to be heavily impacted by business cycles.

Question 39

Effectiveness of a firm's chosen strategy can be judged by its performance relative to average industry performance.

Question 40

Differentiation increases profit margins by lowering costs, while cost leadership increases profit margins by allowing firms to charge higher prices for products that are perceived as unique.

Question 41

Cost leadership, differentiation, and focus strategies can be both efficient and effective.

Question 42

There's no "one single right way" to think about the types of business strategies.