Deck 4: Business-Level Strategy

Question 1

Walmart's change in strategy to attract more upscale customers will likely succeed because cost leaders are good at differentiating.

Answer 1

False

Question 2

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

Answer 2

True

Question 3

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

Answer 3

False

Question 4

Global competition has increased the options for consumers and has made it more imperative for firms to identify the needs of customers to earn above-average returns.

Question 5

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

Question 6

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

Question 7

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

Question 8

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

Question 9

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

Question 10

The key to Southwest Airlines' success has been its ability to continuously reduce costs while providing customers with superior levels of differentiation, such as an engaging culture.

Question 11

Firms implementing cost leadership strategies often sell no-frills standardized goods or services (but with competitive levels of differentiation) to the industry's most typical customers.

Question 12

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

Question 13

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

Question 14

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

Question 15

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

Question 16

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 17

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 18

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 19

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 20

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

Question 21

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 22

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 23

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, and extended hours.

Question 24

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 25

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

Question 26

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

Question 27

Walmart's actions to become more upscale with the aim 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 some of Walmart's customers.

Question 28

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 29

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

Question 30

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 31

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

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 firm's core strategy is its ____ strategy.

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

Question 34

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 35

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

Question 36

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

Question 37

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

Question 38

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 39

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, at less expensive prices than sit-down restaurants.  This illustrates a focus cost leadership strategy.

Question 40

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 41

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 42

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 43

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 44

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 the above

Question 45

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

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

Question 46

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 47

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 48

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 49

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 50

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 51

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 options are correct.

Question 52

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 53

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 54

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 55

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 the profit ability 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 56

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, and highly productive ground and gate crews.

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

Question 57

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

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

Question 58

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 and easily be 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 59

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

A) low price.
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 60

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 61

All of the following are examples of differentiated products EXCEPT:

A) Mont Blanc pens.
B) Caterpillar's heavy-duty earth-moving equipment.
C) Great Value brand at Walmart.
D) Prada fashion.

Question 62

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

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

Question 63

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, whereas 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 64

When a firm is able to produce nonstandardized (that is, distinctive) products for customers who value differentiated features more than they value low cost, the firm is successfully implementing:

A) a differentiation strategy.
B) a cost leadership strategy.
C) an integrated cost leadership/differentiation strategy.
D) a single-product strategy.

Question 65

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) logistics
D) human resource management

Question 66

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 67

Walmart went against business-level strategy and made changes to attract upscale customers. These changes had which of the following results?

A) It strengthened Walmart's position against rivals such as Dollar Stores and Amazon.
B) It made Walmart vulnerable to Dollar Store and Amazon.
C) It attracted significant numbers of new customers.
D) Family Dollar, Dollar Tree, and Dollar General all experienced losses in sales as many of their customers went to Walmart.

Question 68

All of the following are ways that a good or service can be differentiated EXCEPT:

A) responsive customer service.
B) perceived prestige and status.
C) economies of scale and efficient operations.
D) engineering design and performance.

Question 69

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

A) build economies of scale and efficient operations.
B) develop and maintain cost-effective MIS operations.
C) develop flexible systems that allow rapid response to customers' changing needs.
D) have relationships with suppliers to maintain efficient flow of supplies for operations.

Question 70

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

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

Question 71

Blind taste-tests have shown that the taste of premium-priced vodkas and inexpensive vodkas are indistinguishable even to regular drinkers of vodka. But the sales of premium vodkas are thriving. This is an example of:

A) the perception of perceived prestige and status as a means of differentiating a product.
B) the importance of high-quality raw materials when using the differentiation strategy.
C) the risk of product imitation by competitors.
D) the danger counterfeiting holds for firms pursuing the differentiation strategy.

Question 72

The products or services that are differentiated from others, have qualities that are:

A) perceived by the customer to add value that they will pay a premium to purchase.
B) valued by the typical industry customer.
C) perceived as standardized by the customer.
D) seen as classic attributes rather than passing fads.

Question 73

Walmart's same store sales have been declining and those of rivals Family Dollar and Amazon have been increasing. What could explain this recent change?

A) Walmart was too aggressive with its low-cost position and lost customers who wanted more upscale products.
B) Walmart changed its strategy to focused differentiation.
C) Amazon and Family Dollar changed their strategies to attract more upscale customers.
D) Walmart changed its strategy to attract more upscale customers.

Question 74

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 75

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 76

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 77

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 78

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

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

Question 79

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 80

The use of a differentiation strategy would be expected to be LEAST effective in which of the following markets?

A) Commodity goods
B) Mmotion pictures
C) Popular music
D) Writing instruments