Deck 4: Business-Level Strategy

Question 1

A low-cost leader may create entry barriers to potential entrants by continually decreasing its levels of efficiency.

Answer 1

False

Question 2

Flexible manufacturing systems, information networks and total quality management systems are three sources of strategic flexibility that facilitate the use of integrated strategies.

Answer 2

True

Question 3

Dividing customers into groups based on their needs is called market segmentation, which is a process that clusters people with similar needs into individual and identifiable groups.

Answer 3

True

Question 4

Competitive scope and competitive positioning are the two dimensions that help define the five business-level strategies.

Question 5

A business-level strategy reflects a firm's beliefs about what products and services it should offer to customers.

Question 6

Companies without the core competencies to link primary and support activities are still able to successfully implement a differentiation strategy.

Question 7

A firm competing in a single-product market area in a single geographic location needs a corporate-level strategy to deal with product diversity and an international strategy to deal with geographic diversity.

Question 8

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 as a whole.

Question 9

The reach dimension of relationships with customers is concerned with their buying power.

Question 10

The most successful companies tend to find new ways to meet the needs of new customers in addition to finding ways to satisfy current customers.

Question 11

Compared to firms implementing an integrated cost leadership/differentiation strategy, a company that successfully uses one dominant business-level strategy should be in a better position to learn new skills and technologies more quickly and to effectively leverage its core competencies while competing against its rivals.

Question 12

The affiliation dimension of relationships with customers is concerned with developing relationships with third-party affiliates who can best serve customers.

Question 13

The richness dimension of relationships with customers is concerned with the depth and detail of the one-way flow of information between the firm and the customer.

Question 14

The probability of successful competition increases when a firm carefully integrates internet technology with its strategy, rather than using internet technology on a 'stand-alone basis'.

Question 15

A cost leadership strategy is a valuable defence against rivals when competing on the basis of price.

Question 16

A business-level strategy is an integrated and coordinated set of capabilities and resources designed to exploit core competencies and gain a competitive advantage.

Question 17

A firm is 'stuck in the middle' when its industry is in the middle of a rapid technological change.

Question 18

A cost leader does not need to be concerned about competitors imitating its strategy.

Question 19

Research suggests that having a competitive advantage in terms of logistics creates more value when using the cost leadership strategy than when using the differentiation strategy.

Question 20

While there are constraints that limit the number of firms that adopt the focused cost leadership strategy, this strategy inherently performs better than the cost leadership strategy.

Question 21

The differentiation strategy calls for a firm to provide products that:

A)have acceptable features
B)incorporate features for which the customer will pay a premium
C)are the lowest cost possible
D)solve the problem of being 'stuck in the middle'

Question 22

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

A)unique to the customer
B)not valued by the customer
C)acceptable to customers
D)able to meet unique needs of the customer

Question 23

The integration of a cost leadership strategy and a differentiation strategy will:

A)slow the ability of a firm to respond
B)lower a firm's risks
C)not be used extensively in the future
D)allow a firm to adapt more quickly

Question 24

The differentiation strategy can be effective in controlling the power of rivalry in an industry because:

A)customers will seek out the lowest-cost product
B)customers have no loyalty
C)customers are loyal to brands that satisfy their differentiated needs
D)the differentiation strategy benefits from rivalry

Question 25

Which one of the following is not a risk associated with the cost leadership strategy?

A)Customer perceptions of the value of the product
B)Efficient processes becoming obsolete
C)Ignorance of the competitive levels of differentiation
D)Imitation by competitors

Question 26

Which one of the following is not a risk associated with the differentiation strategy?

A)Price differential for the value becoming too large
B)Narrowing of customer perceptions of the value of product differentiation
C)Counterfeits
D)Processes becoming obsolete

Question 27

A firm that successfully implements the cost leadership strategy would expect:

A)to compete based primarily on price
B)to constantly face challenges from a steady stream of new entrants to the industry
C)to be able to fend off the challenge of product substitutes
D)to focus on its own cost structure, but not its competitors' cost structures

Question 28

A cost leadership strategy can be summarised as:

A)providing products with features acceptable to customers at the lowest competitive price
B)offering products with very inexpensive features so that the price of the product is very low
C)providing unique products so that customers are willing to pay a premium
D)focusing on a few unique features for which customers are willing to pay a premium

Question 29

Which of the following questions is not a customer consideration when a firm is selecting a business-level strategy?

A)How can customer needs be satisfied?
B)Who will be served?
C)What needs do target customers have?
D)When do customers make purchases or switch suppliers?

Question 30

Business-level strategies detail commitments and actions taken to provide value to customers and to gain competitive advantage by exploiting core competencies in:

A)the selection of industries in which the firm will compete
B)specific and individual product markets
C)specific and individual functional departments
D)specific plant locations

Question 31

One risk of the differentiation strategy is that:

A)a competitor may focus on the same market segment
B)equipment may quickly become obsolete
C)a firm's means of differentiation may no longer provide value to the customer
D)a firm may fail to detect competitors' efforts to differentiate the commodity product

Question 32

A differentiation strategy provides products that customers perceive as having:

A)acceptable features
B)features of little value relative to the value provided by the low-cost leader's product
C)features for which the customer will pay a low price
D)features that are non-standardised and meet unique needs

Question 33

The risks of a focus strategy include:

A)a competitor's ability to use its core competencies to 'out-focus' the focuser by serving a more narrowly defined segment
B)a competitor's ability to use its core competencies to 'out-focus' the focuser by serving a more broadly defined segment
C)decisions by industry-wide competitors to use their resources to serve a wider range of customers' specialised needs than the focuser has been serving
D)decisions by focused competitors to use their resources to serve a wider range of customers' needs

Question 34

The risks of a cost leadership strategy include:

A)becoming 'stuck in the middle'
B)not increasing the value of a good or service in the face of successful imitations
C)the ability of competing firms to provide similar features in a product
D)customers deciding the product is not worth what the firm must charge for it

Question 35

A focus strategy seeks to exploit core competencies:

A)by serving the needs of a certain industry segment
B)on an industry-wide basis
C)by servicing several professions
D)by servicing one particular corporation within a given industry

Question 36

An integrated and coordinated set of commitments and actions designed to exploit core competencies and gain a competitive advantage is a definition of:

A)core competencies
B)sustained competitive advantage
C)strategic mission
D)a business-level strategy

Question 37

The five business-level strategies can be defined along the dimensions of:

A)competitive positioning and competitive advantage
B)competitive scope and competitive landscape
C)competitive landscape and competitive positioning
D)competitive advantage and competitive scope

Question 38

Which one of the following is not a business-level strategy?

A)Diversification
B)Focus
C)Differentiation
D)Cost leadership

Question 39

The richness dimension of relationships with customers refers to:

A)customers' buying power
B)the depth and detail of the two-way flow of information between a firm and the customer
C)useful interactions with customers
D)a firm's access and connection to customers

Question 40

When implementing a focus strategy, a firm seeks:

A)to be the lowest-cost producer in an industry
B)to offer products with unique features for which customers will pay a premium
C)to avoid being stuck in the middle
D)to serve the specialised needs of a market segment

Question 41

Elaborate enterprise resource planning (ERP) software systems improve firm efficiency by:

A)allowing workforce reductions without corresponding losses in productivity
B)making it possible to share information quickly with everyone in the industry
C)reducing the time required to design and test new products
D)facilitating the transfer of financial and operational data between departments and with suppliers and distributors

Question 42

When employing a differentiation strategy, which factors allow a firm to earn above-average returns in spite of strong competitive forces?

Question 43

Which one of the following is not an objective of TQM?

A)Meeting customers' expectations while striving to exceed them, especially in terms of quality
B)Incorporating improvements in all parts of the firm while continuously striving for additional improvement opportunities
C)Reducing the time required to design and test new products
D)Focusing on work activities to drive out inefficiencies and waste in all business processes

Question 44

When employing a cost leadership strategy, which factors allow a firm to earn above-average returns in spite of strong competitive forces?

Question 45

TQM stands for:

A)time quality management
B)total quality management
C)time quantity management
D)total quality managers

Question 46

The term stuck in the middle means:

A)a middle-of-the-road strategy
B)that a firm's customers are willing to pay only a mid-range price for a given product
C)that a firm's customers have only moderate expectations regarding product quality
D)a firm has failed to establish a leadership position as either a low-cost producer or as a product differentiator

Question 47

What are the risks of an integrated cost leadership/differentiation strategy?

Question 48

Describe a focus strategy and its risks.

Question 49

Describe a cost leadership strategy and its risks.

Question 50

The integration of a cost leadership strategy and a differentiation strategy leads to a competitive advantage because:

A)managers have greater flexibility in the actions they can take
B)different firms need different types of strategies to be successful
C)firms can offer some differentiated features at a relatively low cost
D)one strategy is not enough for most large firms

Question 51

A flexible manufacturing system is a:

A)manufacturing system where the output produced varies each month
B)computer-controlled process that is used to produce a variety of products in moderate, flexible quantities
C)system of manufacturing where humans and machines are used interchangeably
D)system where firms may choose to produce a product in any given month

Question 52

________ are three sources of strategic flexibility that facilitate the use of the integrated strategy.

A)Flexible manufacturing systems, information networks and total quality management systems
B)Computer information systems, total quality management systems and value chain analytical systems
C)Flexible manufacturing systems, value chain analytical systems and strategic management process systems
D)Total quality management systems, information networks and enterprise resource planning software systems

Question 53

Firms' relationships with customers are characterised by three dimensions.What are these dimensions? Briefly describe each.

Question 54

Describe the risks of a differentiation strategy.

Question 55

Using Ikea as an example, demonstrate how the focused cost leadership strategy can be well implemented.

Question 56

The benefit of a flexible manufacturing system is that:

A)the lot size needed to manufacture a firm's product efficiently is reduced
B)workers are no longer needed in the numbers required by standard manufacturing systems
C)the technological advantage of the company is expanded
D)a company is further enabled to shut down during periods of economic decline