Question 1

The opening case of Chapter 6 highlights the business-level strategy of Whole Foods.All of the following are part of this strategy EXCEPT:

Accepted Answer

A)   Adopting a new strategic intent to become the champion of healthy eating.
B)   Reducing costs through initiatives such as expanding its private-label offerings.
C)   Emphasizing its organic food offerings as the tool to compete on price.
D)   Improving its logistics system in order to improve efficiencies. C

Question 2

When competing on the basis of low-cost leadership,a primary objective is to:

Accepted Answer

A)   Lower manufacturing costs.
B)   Lower production costs.
C)   Lower supplier costs.
D)   Lower overall costs. D

Question 3

Under the five forces model,a risk to a business with a cost-leadership strategy is:

Accepted Answer

A)   Competition switches from customer service to pricing.
B)   When technological innovations open up cost reductions for substitutes or competitors.
C)   New entrants are all start-up firms with low volumes.
D)   Suppliers request a 2% price increase across the industry. B

Question 4

How does an experience curve help a business gain competitive advantage?

Accepted Answer

The answer of How does an experience curve help a...

Question 5

When the focus of competition is on differentiation,a firm tends to use all of these levers EXCEPT:

Accepted Answer

A)   New product launches.
B)   Cost input factors.
C)   Marketing and promotion.
D)   Unique product features.

Question 6

When it comes to strategic positioning and generic business strategies,which of the following is TRUE:

Accepted Answer

A)   All of the business strategies are equally difficult to adopt.
B)   Only a few exceptional firms are able to balance the value-cost strategic trade-offs and adopt an integration strategy successfully.
C)   Once a firm has established itself with a strategy, it should stick with what it knows.
D)   Strategic positioning is not as critical to competitive advantage as is the firm's resources and economic environment.

Question 7

Why are differentiation and cost-leadership described as generic business strategies?

Accepted Answer

The answer of Why are differentiation and cost-leadership described as...

Question 8

Strategy Highlight 6.1 discusses Toyota's recall challenges with its Lexus brand.All of the following are true EXCEPT:

Accepted Answer

A)   Toyota used the value driver of customer service when it called each owner individually for recommended repairs.
B)   By exceeding customer expectations, Toyota turned a serious threat into an opportunity by establishing brand reputation for superior customer service.
C)   Toyota's customer responsiveness enabled the firm to influence early adopters who became opinion leaders for influencing others to purchase a Lexus.
D)   Since the Lexus recall of the 1990s, Toyota leveraged firm experience effects and has successfully maintained quality leadership in the automobile industry with no major challenges.

Question 9

Understanding the productivity frontier is useful because of all of the following EXCEPT:

Accepted Answer

A)   It represents possible strategic positions a firm can take.
B)   It reflects the relationship between strategic positions, value creation, and costs.
C)   It helps a firm determine cost-differentiation trade-offs.
D)   It reflects which global markets will be the most productive to pursue in the future.

Question 10

Between 2007 and 2009,Microsoft spent close to $25 billion on R&D,the majority of which went to its new Windows 7 operating system.These costs were fixed.However,after Windows 7 hit the market,the marginal costs were basically zero.Since Microsoft expects to sell several hundred million copies of Windows 7,it can be said that:

Accepted Answer

A)   Microsoft has a competitive advantage because it has already spent the capital required for its new offering.
B)   Microsoft has a competitive advantage because it will be able to drive down per-unit costs of Windows 7 with each additional copy it sells.
C)   Since Microsoft will sell so many units of Windows 7, it has attained competitive parity within its strategic group.
D)   Microsoft will be at a competitive disadvantage unless it exceeds its sales forecasts because its marginal costs will change.

Question 11

Applying the five forces model to business-level strategy allows managers to assess the benefits and risks of both cost-leadership and differentiation strategies.

Accepted Answer

A) True 
 B)False

Question 12

Succeeding at an integration strategy is typically easy for a firm.

Accepted Answer

A) True 
 B)False

Question 13

The Tata Group of India is a widely diversified multinational company.In 2008,it bought Jaguar and Land Rover from Ford.It is hoping to leverage the prestige of these brands due to their global reputation.Then,in 2009 Tata introduced the Nano car,which is the lowest-priced car in the world.The rear hatch of the Nano can't be opened,and it has no radio or even a glove compartment.It can be said that the Tata Group of India is:

Accepted Answer

A)   Planning to move the Jaguar business unit from differentiated to an integration strategy.
B)   Pursuing the Chinese market with the Land Rover acquisition.
C)   Pursuing both a focused differentiation strategy and a focused cost-leadership strategy.
D)   Planning to move the Nano business unit from low-cost to an integration strategy.

Question 14

Value drivers are tools that help managers:

Accepted Answer

A)   Increase perceived value and decrease costs.
B)   Improve value chain activities and increase costs.
C)   Achieve a low-cost position and maintain perceived value.
D)   Achieve cost parity and maintain perceived value.

Question 15

What is the difference between economies of scale and diseconomies of scale?

Accepted Answer

The answer of What is the difference between economies of...

Question 16

How are the benefits different for cost leadership versus differentiation when analyzing the power of suppliers to the industry?

Accepted Answer

The answer of How are the benefits different for cost...

Question 17

When pursuing a cost-leadership strategy,a business must remember that:

Accepted Answer

A)   Buyers will be reluctant to pay for a product unless the quality is acceptable.
B)   Buyers will be reluctant to pay for a product unless the quality is superior.
C)   Buyers will be reluctant to pay for the product unless it is customized.
D)   Product quality is more important in a broad market than in a narrow one.

Question 18

Achieving differentiation parity along with lower costs is important to a low-cost leader because:

Accepted Answer

A)   The firm is then able to target a less price-sensitive customer market.
B)   Creating the same value as the competition, combined with lower costs, gives the firm a competitive advantage.
C)   The firm is then able to incorporate differentiating features that cause buyers to prefer its products.
D)   All of these.

Question 19

When pursuing an integration strategy,managers use levers to help them simultaneously increase perceived value and lower costs.Which of the following is NOT one of these levers?

Accepted Answer

A)   Quality
B)   Complements
C)   Economies of scope
D)   Structure, culture, and routines

Question 20

_________ is when a firm is searching for new knowledge that could enhance future performance.

Accepted Answer

A)   Boundary spanning
B)   Channel communication
C)   Exploitation
D)   Exploration

Exam 6: Business Strategy: Differentiation, Cost Leadership, and Integration