Question 1

An important idea behind the profit pool concept is that there is always a strong relationship between the generation of revenues and the capturing of profits.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following is not a reason for the possible erosion of company competitive advantage?

Accepted Answer

A)  rapid change in technology 
B)  globalization 
C)  actions by rivals from within and outside of the industry 
D)  company commitment to innovation

Question 3

Due to the Internet,firms that use a focus strategy have new opportunities to _________.

Accepted Answer

A)  respond quickly to customer requests 
B)  provide more services and features 
C)  access niche markets in a highly specialized fashion 
D)  access markets less expensively

Question 4

Which of the following is a risk (or potential pitfall)of cost leadership?

Accepted Answer

A)  Cost cutting may lead to the loss of desirable features. 
B)  Attempts to stay ahead of the competition may lead to gold plating. 
C)  Cost differences increase as the market matures. 
D)  Producers are more able to withstand increases in supplier costs.

Question 5

As markets mature the magnitude of differentiation and cost leadership advantages among competitors decrease.

Accepted Answer

A) True 
 B)False

Question 6

A successful differentiation strategy increases rivalry since buyers become more price-sensitive.

Accepted Answer

A) True 
 B)False

Question 7

During the decline stage of the industry life cycle,__________ refers to obtaining as much profit as possible and requires that costs be decreased quickly.

Accepted Answer

A)  maintaining 
B)  exiting 
C)  harvesting 
D)  consolidating

Question 8

Which of the following is NOT one of the ways the Internet is lowering transaction costs?

Accepted Answer

A)  eliminating supply chain intermediaries 
B)  minimizing office expenses 
C)  evaluating employee performance 
D)  reducing business travel

Question 9

One way the Internet and digital technologies are creating opportunities for firms with differentiation strategies is by enabling mass customization.

Accepted Answer

A) True 
 B)False

Question 10

A cost leadership strategy is not susceptible to the risk of reduced flexibility.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is FALSE regarding how a differentiation strategy can help a firm to improve its competitive position relative to the Porter five forces model?

Accepted Answer

A)  By increasing firm margins, it avoids the need for a low cost position. 
B)  It reduces buyer power because buyers lack comparable alternatives. 
C)  Supplier power is increased, because suppliers will be able to charge higher prices for their inputs. 
D)  Firms will enjoy high customer loyalty.

Question 12

Which of the following statements about the introduction stage of the market life cycle is TRUE?

Accepted Answer

A)  It produces relatively large, positive cash flows. 
B)  Strong brand recognition seldom serves as an important switching cost. 
C)  Market share gains by pioneers are usually easily sustained for many years. 
D)  Products or services offered by pioneers may be perceived as differentiated because they are new.

Question 13

Firms that compete on overall cost leadership are vulnerable if there is an increase in the cost of the inputs on which the advantage is based.

Accepted Answer

A) True 
 B)False

Question 14

A firm striving for cost leadership will typically spend relatively more on product related R&D than on process related R&D.

Accepted Answer

A) True 
 B)False

Question 15

The primary aim of strategic management at the business level is __________________.

Accepted Answer

A)  maximizing risk-return tradeoffs through diversification 
B)  achieving a low cost position 
C)  maximizing differentiation of products and/or services 
D)  achieving competitive advantage

Question 16

A manufacturing business pursuing cost leadership is likely to _______.

Accepted Answer

A)  focus on a narrow market segment 
B)  use advertising to build brand image 
C)  rely on experience effects to raise efficiency 
D)  put heavy emphasis on product engineering

Question 17

With experience,unit costs of production decline as _________ increases in most industries.

Accepted Answer

A)  costs 
B)  output 
C)  price 
D)  volume

Question 18

Which of the following is not a potential pitfall of a focus strategy?

Accepted Answer

A)  Erosion of cost advantages can arise within the narrow segment. 
B)  Product/service offerings that are highly focused are subject to competition from new entrants. 
C)  All rivals share a common input or raw material. 
D)  Focusers can become too focused to satisfy buyer needs.

Question 19

Discuss the risks associated with each of these forms of competitive advantage: overall cost leadership,differentiation,and focus.

Accepted Answer

The answer of Discuss the risks associated with each of...

Question 20

One of the main reasons the Internet is eroding sustainable competitive advantages is that _______.

Accepted Answer

A)  incumbent firms are entering market segments that they previously considered to be too small 
B)  nearly all competitors will have greater access to tools for managing costs 
C)  differentiators have been able to preserve their unique advantages 
D)  firms are ignoring opportunities to offer high-end services in niche markets

Exam 5: Business-Level Strategy: Creating Andsustaining Competitive Advantages

An important idea behind the profit pool concept is that there is always a strong relationship between the generation of revenues and the capturing of profits.

Which of the following is not a reason for the possible erosion of company competitive advantage?

Due to the Internet,firms that use a focus strategy have new opportunities to _________.

Which of the following is a risk (or potential pitfall) of cost leadership?

As markets mature the magnitude of differentiation and cost leadership advantages among competitors decrease.

A successful differentiation strategy increases rivalry since buyers become more price-sensitive.

During the decline stage of the industry life cycle,__________ refers to obtaining as much profit as possible and requires that costs be decreased quickly.

Which of the following is NOT one of the ways the Internet is lowering transaction costs?

One way the Internet and digital technologies are creating opportunities for firms with differentiation strategies is by enabling mass customization.

A cost leadership strategy is not susceptible to the risk of reduced flexibility.

Which of the following is FALSE regarding how a differentiation strategy can help a firm to improve its competitive position relative to the Porter five forces model?

Which of the following statements about the introduction stage of the market life cycle is TRUE?

Firms that compete on overall cost leadership are vulnerable if there is an increase in the cost of the inputs on which the advantage is based.

A firm striving for cost leadership will typically spend relatively more on product related R&D than on process related R&D.

The primary aim of strategic management at the business level is __________________.

A manufacturing business pursuing cost leadership is likely to _______.

With experience,unit costs of production decline as _________ increases in most industries.

Which of the following is not a potential pitfall of a focus strategy?

Discuss the risks associated with each of these forms of competitive advantage: overall cost leadership,differentiation,and focus.

One of the main reasons the Internet is eroding sustainable competitive advantages is that _______.