Deck 7: Business-Level Strategy

Question 1

Airbus may have one of the most complex business models in the world, simultaneously pursuing innovation and cost containment and with four government entities having a significant interest in the company's operations.

Answer 1

True

Question 2

Research has shown that selecting and following a distinct, overarching business-level strategic approach improves company performance.

Answer 2

True

Question 3

The decision that a company makes about its basic competitive approach involves a choice between either a low-cost approach or a differentiation approach.

Answer 3

True

Question 4

A company is said to be "stuck in the middle" when it mixes elements of both the low-cost and differentiation competitive approaches with the possible result that costs are too high and the company cannot charge a premium price.

Question 5

An integrated low-cost/differentiation strategy may be the least risky generic strategy since a company can use the best part of each competitive approach.

Question 6

When there is standardization of products or services among rivals the low-cost competitor will be at a disadvantage.

Question 7

The fundamental design of a product or service may be the single most important area in developing cost savings.

Question 8

Low-cost leadership represents the most powerful competitive position among companies pursuing a low-cost approach.

Question 9

A low-cost strategic approach is always associated with lower prices offered to customers, as can be seen with Wal-Mart.

Question 10

Differentiation is perhaps the most widely used generic strategic approach.

Question 11

Dimensions of performance that companies can use to differentiate their products and services include among other things quality, physical characteristics, safety, and complementarity with other products.

Question 12

There is a risk that a company will differentiate its products or services in ways that the customer does not value.

Question 13

Toyota is an example of a company that has successfully pursued an integrated low- cost/differentiation strategy.

Question 14

A company should outsource those activities where expensive research and development is needed, even though they may be central to the company's mission.

Question 15

One of the risks of outsourcing is that the firm may lose control over costs or activities that are a source of differentiation.

Question 16

Airbus, as seen in the opening vignette for the chapter, is trying to balance the competing goals of ________ and ________.

A) high employment; efficiency
B) innovation; cost containment
C) low prices; low costs
D) safety; desirable features

Question 17

A term for strategic approaches at their highest, most straightforward level is

A) prescriptive strategies.
B) cost leadership.
C) business-level strategies.
D) normative strategies.

Question 18

The choice that a business must make regarding its fundamental competitive approach is between ________ and ________.

A) low cost; differentiation
B) global markets; national markets
C) commodity products; differentiated products
D) innovation; stability

Question 19

The business-level strategy that implies a broad market approach where the company rigorously reduces costs and expenses is called a(n) ________ strategy.

A) inexpensive
B) hybrid
C) best cost
D) low cost

Question 20

The business-level strategy that implies a broad market approach where the activities performed set the company apart from its rivals in a meaningful way such that customers may be willing to pay higher prices is called a ________ strategy.

A) dynamic
B) high price
C) differentiation
D) value creation

Question 21

A company that chooses to pursue a business-level strategy in which it targets a narrow geographic area or a limited group of customers who have particular needs is following a ________ strategy.

A) specialized
B) best cost
C) focus
D) bullseye

Question 22

Which of the following is not one of the generic, business-level strategies?

A) overall low cost
B) broad differentiation
C) integrated low cost and differentiation
D) premium price

Question 23

The idea that companies must maintain relative equality with other companies in the industry on the dimensions of their strategies not important to their basic competitive approaches is expressed by the notion of ________.

A) parity
B) equifinality
C) dominant logic
D) core competencies

Question 24

Which of the following is not a factor which can lead to a low-cost position in the industry?

A) economies of scale
B) an experience curve
C) market research
D) process innovations

Question 25

Which of the following is one of the risks of a low-cost strategy?

A) The firm's low cost position can be duplicated by others in the industry.
B) Customers do not value the benefits derived from low costs.
C) The firm risks being out-competed in the market if it is not the low-cost leader.
D) All of the above are risks associated with a low-cost strategy.

Question 26

In which of the following cases would you recommend that the business use a low-cost strategy?

A) A restaurant that proposes to offer a fine dining experience.
B) A farmer who produces soybeans to be sold at the market price.
C) A maker of high performance computers designed to appeal to gamers.
D) A plastic surgeon who opens a solo practice for celebrities.

Question 27

Which of the following is not an important performance dimension of products and services?

A) effectiveness in intended use
B) physical characteristics
C) similarity to the offerings of rivals
D) complementarity with other products

Question 28

Which of the following is a risk of a differentiation strategy?

A) Rivals will match the price of the firm's product or service.
B) Customers do not value the benefits derived from differentiation.
C) The firm's costs will become too low to signal that it has a quality product.
D) Customers will band together to increase their bargaining power.

Question 29

The two strategies which target narrow customer segments or geographic areas are

A) differentiation focus and low cost focus.
B) high end and middle brow.
C) specialist and generalist.
D) geographic niche and premium niche.

Question 30

What is a likely way for a company to successfully adopt an integrated low cost/differentiation strategy?

A) It can shed those customers who value low prices only.
B) It can migrate from a pure low cost or differentiated position.
C) It can boost its prices for products that appear to be "run-of-the-mill."
D) It can create a merchandise mix with both very high- and low-end products.

Question 31

Perhaps the greatest risk for a company that chooses to pursue an integrated low cost/differentiation strategy is that it will

A) make products that appeal only to those who are interested in novelty.
B) place too strong of an emphasis on market research.
C) have to carry both "hard lines" and "soft lines" for the broadest market appeal.
D) become "stuck in the middle."

Question 32

Outsourcing can be recommended when

A) it improves the company's strategic position in the marketplace.
B) the company needs greater control over the activities to be outsourced.
C) it makes it possible to offload activities in which the company has no special competence.
D) Outsourcing can be recommended when either A or C above is true.

Question 33

When is it inappropriate to outsource an activity?

A) When the company might lose control over its costs or differentiation values.
B) When the company can do something itself at only a slightly greater cost.
C) When the company must write a contract that is too complex to manage the relationship with a supplier.
D) When the company reaches the recommended strategic limit of 125 different activities that have already been outsourced.

Question 34

Describe the two fundamental decisions that companies make that result in their pursuing one of the five generic (business-level) strategies.

Question 35

Under what circumstances does outsourcing contribute to better performance? When might it be inappropriate?