External Environment – FAQ – 02

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List of FAQs

Q1

Business level strategies are concerned specifically with…

  1. creating differences between the firm’s position and its competitors
  2. selecting the industries in which the firm will compete
  3. how functional areas will be organized within the firm
  4. how a business with multiple physical locations will operate one of those locations

Q2

In order to meet and exceed customer’s expectations, firms must…

  1. constantly manipulate customers’ perceptions of their needs
  2. answer the questions: who, what, when, where, how, and why as they apply to customers
  3. continuously improve, innovate, and upgrade their core competencies

Q3

The focused differentiation strategy differs from the differentiation strategy in that:

  1. the focused differentiators have a broader competitive scope.
  2. the value creating activities of focused differentiators are more constrained.
  3. focused differentiators target a narrower customer market.
  4. there are fewer risks with the focused differentiation strategy.

Q4

When implementing a focus strategy, the firm seeks to…

  1. offer products that are both differentiated and low cost
  2. move into the global market
  3. target the typical customer in an industry
  4. serve the specialized needs of a market segment

Q5

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.

  1. True
  2. False

Q6

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

  1. the selection of industries in which the firm will compete
  2. specific product markets
  3. primary value chain activities
  4. particular geographic locations

Q7

When selecting a business level strategy, the firm must determine all of the following except…

  1. how will the customer’s needs be satisfied?
  2. who is the customer?
  3. what are the customers’ needs?
  4. why should these customers’ needs be satisfied?

Q8

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

  1. a differentiation strategy
  2. a cost leadership strategy
  3. an integrated cost leadership/differentiation strategy
  4. a single-product strategy

Q9

A product’s value is created by each of the following except:

  1. high cost and highly differentiated features
  2. low cost
  3. highly differentiated features
  4. low cost and highly differentiated features

Q10

From a customer’s point of view, for an organization’s capability to be a core competence it must be…

  1. inimitable and unique
  2. valuable and unique
  3. inimitable and non-substitutable
  4. valuable and non-substitutable

Q11

Which of the following is a process used to cluster people with similar needs into individual and identifiable groups?

  1. Market segmentation
  2. Differentiation strategy
  3. Focus group segmentation
  4. TQM

Q12

The focused differentiation strategy differs from the differentiation strategy in that:

  1. the focused differentiators have a broader competitive scope.
  2. the value-creating activities of focused differentiators are more constrained.
  3. focused differentiators target a narrower customer market.
  4. there are fewer risks with the focused differentiation strategy.

Q13

What does FMS stand for as used in this chapter?

  1. Functional movement system
  2. Financial management system
  3. Flexible manufacturing system
  4. Foreign multinational system

Q14

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

  1. acceptable
  2. unique
  3. substandard
  4. mediocre

Q14

Which of the following involves engaging in primary value chain activities and support functions that allow the firm to simultaneously pursue low-cost and differentiation?

  1. Focused cost leadership strategy
  2. Focused differentiation strategy
  3. Integrated cost leadership/differentiation strategy
  4. There is no strategy that fulfills this definition

Q15

The _____ dimension of relationships with customers is particularly important for social networking sites such as Facebook and MySpace.

  1. reach
  2. richness
  3. affiliation
  4. social

Q16

Social networking sites such as MySpace and Facebook utilize which of the dimensions of relationships?

  1. Richness
  2. Reach
  3. Affiliation
  4. Richness, reach, and affiliation

Q17

Which of the following are examples of approaches to differentiation?

  1. Unusual features, responsive customer service and performance
  2. Rapid product innovation, technological leadership, perceived prestige and status
  3. Different tastes
  4. All of the answers given in this question are examples of approaches to differentiation

Q18

Which of the following must a company remember when pursuing a cost leadership strategy?

  1. Buyers will be reluctant to pay for a product unless the quality is acceptable.
  2. Buyers will be reluctant to pay for a product unless the quality is superior.
  3. Buyers will be reluctant to pay for the product unless it is customized.
  4. Product quality is more important in a broad market than in a narrow one.

Q19

One of the following dimensions of a firm’s relationships is concerned with the depth and detail of a two-way flow of information between the customer and the firm, which is it?

  1. Richness
  2. Reach
  3. Affiliation
  4. Both reach and affiliation

Q20

The three dimensions of a firm’s relationships with customers include all the following except:

  1. exclusiveness
  2. affiliation
  3. richness
  4. reach

Q21

All of the following are considered generic business-level strategies except:

  1. product diversification
  2. cost leadership
  3. focused differentiation
  4. integrated cost leadership/differentiation

Q22

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

  1. perceived by the customer to add value that they will pay a premium to purchase
  2. valued by the typical industry customer
  3. perceived as standardized by the customer
  4. seen as classic attributes rather than passing fads

Q23

When faced possible substitutes the cost leader has which of the following?

  1. More flexibility than its competitors
  2. Less flexibility than its competitors
  3. Because they are using a cost leadership strategy there are few substitute products
  4. A challenge to increase, only slightly, prices the substitute product has affected

Q24

Which of the following is not a competitive risk of a cost leadership strategy?

  1. Competitors sometimes learn how to successfully imitate a cost leaders strategy.
  2. Competition becomes more advanced as additional firms adopt a cost leadership strategy.
  3. Too much focus on cost reductions may occur.
  4. The process used by a cost leader to produce its goods can become obsolete.

Q25

When selecting a business level strategy, firms evaluate two types of potential competitive advantage which of the following do they utilize?

  1. Production cost and a cost leadership strategy
  2. Bargaining power of buyers and competitive risks of cost leadership strategy
  3. Lower cost than rivals or the ability to differentiate and command a premium price that exceeds the extra cost of doing so
  4. Competitive risk of the differentiation strategy and the rivalry that exists among their existing competitors

Q26

From a strategic perspective, a basic need of all customers is to buy products that do what?

  1. Fulfill a need that is often times indescribable
  2. Create a euphoric condition
  3. Fulfill their own strategic desires
  4. Create value for them

Q27

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 following service dimension?

  1. Reach
  2. Richness
  3. Affiliation
  4. None of the these is correct

Q28

Which of the following is an integrated set of actions taken to produce goods or services that serve the needs of a particular competitive segment?

  1. Focus
  2. Differentiation
  3. Cost leadership
  4. Both differentiation and focus

Q29

Which of the following is not a business level strategy?

  1. Cost leadership
  2. Differentiation
  3. Competitive dynamics
  4. Focused differentiation
  5. Integrated cost leadership/differentiation

Q30

A firm’s core strategy is its ____ strategy.

  1. corporate-level
  2. business-level
  3. pricing
  4. international

Q31

Which of the following business level strategies consider rivalry with existing competitors, the bargaining power of buyers, the bargaining power of suppliers, and potential entrants before creating the final strategy?

  1. Cost leadership strategy and differentiation strategy
  2. Differentiation strategy
  3. Focus strategy
  4. Cost leadership strategy

Q32

Cost leadership strategy has numerous activities associated with it. Which of the following are the support functions that go along with the cost leadership strategy?

  1. Supply chain management, bargaining power of buyers, and potential entrants
  2. Finance, human resources, and management information systems
  3. Operations, supply chain management, and distribution
  4. Marketing (including sales), follow-up service, and product evaluation

Q33

Research suggest that having a competitive advantage in logistics creates which of the following when used with a cost leadership strategy rather than a differentiation strategy?

  1. Logistics is not a consideration when examining cost leadership versus differentiation
  2. Having a competitive advantage does not affect one strategy more than the other
  3. Less value
  4. More value

Q34

The focused differentiation strategy differs from the differentiation strategy in that:

  1. the focused differentiators have a broader competitive scope.
  2. the value-creating activities of focused differentiators are more constrained.
  3. focused differentiators target a narrower customer market.
  4. there are fewer risks with the focused differentiation strategy.

Q35

Corporate parenting generates corporate strategy by focusing on…

  1. the core competencies of the parent corporation and on the value created from the relationship between the parent and its units.
  2. the cash flow among its business units.
  3. whether a business unit should be growing, stabilizing, or retrenching.
  4. acquiring distinctive competencies in the marketplace.
  5. differentiating its activities into separate units and integrating these activities through complex integrating mechanisms.

Q35

The competitive pressures from substitute products tend to be weaker when…

  1. substitutes have been on the market and available for purchase for fewer than three years.
  2. existing industry members currently have sufficient capacity to supply the expected future growth in buyer demand.
  3. there are fewer than 10 sellers of substitute products.
  4. buyers have high costs in switching to substitutes.
  5. the substitute products that are currently available are weakly differentiated from one another.

Q36

Which of the following are most unlikely to qualify as driving forces?

  1. Mounting competition from substitutes, increasing efforts on the part of the industry members to collaborate with suppliers and the speed with which the number of key success factors is either rising or falling
  2. Product innovation and changes in who buys the industry’s product and how they use it
  3. Changes in an industry’s long term growth rate, the entry or exit of major firms, and changes in cost and efficiency
  4. Increasing globalization of the industry and marketing innovation
  5. Emerging new Internet technology applications, reductions in uncertainty and business risk, regulatory influences, and government policy changes

Q37

Which of the following is not a major question to ask in assessing a company’s industry and competitive environment?

  1. What are the key factors for future competitive success?
  2. How many companies have ensured the industry in the past year and how many gave exited the industry?
  3. Is the industry outlook conducive to good profitability?
  4. What strategic moves are rivals likely to make next?
  5. What forces are driving changes in the industry, and what impact will these changes have on competitive intensity and industry profitability?

Q38

Whether buyer bargaining power poses a strong or weak source of competitive pressure on industry members depends in part on…

  1. The price sensitivity of buyers, whether buyer switching costs are high or low, and how well-informed buyers are about the product offerings of industry members
  2. whether entry barriers are high or low and the pool of likely entry candidates is big or small
  3. whether the profit margins of sellers are relatively high or low
  4. whether the overall quality of the products/services of industry members is rising or falling
  5. whether buyer demand is local, regional, national, or global

Q39

Which one of the following conditions acts to intensify the competitive pressures associated with the threat of entry?

  1. industry conditions that are causing existing competitors to struggle to earn a decent profit
  2. High entry barriers
  3. A small pool of entry candidates
  4. A general belief on the part of entry candidates that industry members are unwilling or unable to strongly contest the efforts of newcomers to gain a market foothold
  5. A risky or uncertain industry outlook

Q40

A competitive environment where there is weak to moderate rivalry among sellers, high entry barriers, weak competition from substitute products, and little bargaining leverage on the part of both suppliers and customers …

  1. typically results in a ‘buyers’ market where industry members are focused to reduce prices
  2. is conducive to industry members earning attractive profits
  3. gives each industry competitor the best potential for growing rapidly and strongly differentiating its product
  4. lacks powerful driving forces and is thus likely to be relatively slow-changing and have low profit margins
  5. requires that industry members have low costs in order to be competitively successful

Q41

The bargaining leverage of suppliers is stronger when…

  1. There are no good substitutes for the items being furnished by the suppliers and there are only a few “preferred” suppliers of a particular level.
  2. Industry members are a threat to integrate backward into the business of suppliers and to self-manufacture their own requirements.
  3. Suppliers provide an item that accounts for a sizable fraction of the costs of the industry’s product.
  4. The products of suppliers are weakly differentiated, industry members have high costs in switching from one supplier to another, and the supplier industry is compose of more than five suppliers.
  5. Industry members purchase in large quantities and thus are important customers of the suppliers.

Q42

Which one of the following conditions weakens the competitive pressures associated with the threat of entry?

  1. buyer demand for the product is growing rapidly.
  2. existing industry members are unable or unwilling to strongly contest the entry of newcomers.
  3. Existing industry members have little interest in expanding their market reach by entering product segments or geographic areas where they currently do not have a presence.
  4. Newcomers can expect to earn attractive profits.
  5. Entry barriers are relatively low or can be readily hurdled by the likely entry candidates.

Q41

The key success factors in an industry…

  1. are determined by the industry’s driving forces, by the number of different strategic groups in the industry, and by the number of different competitive strategies that industry members are employing
  2. concern the specific resource strengths and competitive capabilities that a company must always incorporate in its strategy in order to be profitable
  3. relate to the kinds of business models and strategies that a company must employ in order to be profitable, win a competitive edge, and give the company a chance at being the global market leader
  4. are those competitive factors that most affect industry members’ abilities to prosper in the marketplace – the particular strategy elements, product attributes, resource strengths, competitive capabilities, and market achievement that spell the difference between being a strong competitor and a weak competitor (and sometimes the difference between profit and loss)
  5. concern those industry-related factors that play a major role in whether a company gains a sustainable competitive advantage in trying to overcome competitive pressures and industry driving forces

Q42

The managerial payoff from spending the time and effort to gather and digest competitive intelligence about rivals’ strategies and situations and gain some inkling of what moves they will be making comes from…

  1. learning which rival companies have winning strategies and which ones have weak or flawed strategies
  2. separating rival companies into two groups – those who have been gaining market share and those who have been losing during the past 2-3 years
  3. avoiding the mistake of flying blind into competitive battle and being surprised by the fresh actions of rivals and helping a company to make maneuvers to expect from its rivals
  4. enabling company managers to determine which rival has the worst strategic and what to do to avoid making the same strategy mistakes
  5. being in better position to know whether the company’s strategy should be mostly defensive in nature (to help protect against the strategic offensives of rivals) or mostly offensive (to try to capitalize on the strategic flaws and mistakes of competitors)

Q43

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

  1. the selection of industries in which the firm will compete
  2. specific product markets
  3. primary value chain activities
  4. particular geographic locations

Q44

The three dimensions of a firm’s relationships with customers include all the following except:

  1. exclusiveness
  2. affiliation
  3. richness
  4. reach

Q45

Which of the following is true?

  1. As customer loyalty increases, customers are more sensitive to price increases.
  2. Customer loyalty has a positive relationship with firm profitability.
  3. Customer loyalty is fragile and cannot reliably be considered a factor in firm success.
  4. Customer loyalty is of importance only to firms using the differentiation strategy.

Q46

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

  1. reach
  2. richness
  3. affiliation
  4. social

Q47

Viewing the world through the customer’s eyes and constantly seeking ways to create more value for the company enhances:

  1. the reach of the company toward the customer
  2. the ability to identify the customer
  3. the richness of the relationship with the customer
  4. affiliation with the customer

Q48

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:

  1. who the firm should serve
  2. when the customer’s needs should be satisfied
  3. what needs the firm should satisfy
  4. what core competencies are needed to satisfy customer needs

Q49

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?

  1. Who: Determining the customers to serve
  2. What: Determining which customer needs to satisfy
  3. How: Determining core competencies necessary to satisfy customer needs
  4. When: Determining when to satisfy customer needs

Q50

Starbuck’s determined that all of the following customer needs were important except:

  1. low price
  2. the experience associated with drinking coffee, not just the coffee
  3. the actual product of service (e.g., a cup of coffee), not the experience
  4. allowing customer to design their own drinks

Q51

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?

  1. Who: Determining the customers to serve
  2. What: Determining which customer needs to satisfy
  3. How: Determining core competencies necessary to satisfy customer needs
  4. When: Determining when to satisfy customer needs

Q52

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?

  1. The decorator does not understand that customer needs are neither right nor wrong, good nor bad.
  2. The decorator has no core competencies that will transfer to his new geographic market.
  3. The decorator should choose a strategy of cost leadership in this environment.
  4. The decorator is highly affiliated with the new target market and understands how he can create value for it.

Q52

In order to meet and exceed customer’s expectations, firms must:

  1. constantly manipulate customers’ perceptions of their needs
  2. answer the questions: who, what, when, where, how, and why as they apply to customers
  3. continuously improve, innovate, and upgrade their core competencies
  4. successfully defend their established core competencies from imitation by competitors

Q53

Business-level strategies are concerned specifically with:

  1. creating differences between the firm’s position and its competitors
  2. selecting the industries in which the firm will compete
  3. how functional areas will be organized within the firm
  4. how a business with multiple physical locations will operate one of those locations

Q54

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:

  1. analyze the reach, richness, and affiliation the company must have with its customers
  2. provide tax advice either in a different manner or provide a different kind of tax service than competitors
  3. offer tax advice at a price lower than the cheapest competitor
  4. offer tax advice at a higher quality than the best competitor

Q55

Which of the following are central to implementing value-creating strategies and thereby satisfying customers’ needs?

  1. Firm resources
  2. Capabilities
  3. Core competencies
  4. None of the above

Q56

The analysis of the activity map of a successful company such as Southwest Airlines emphasizes how:

  1. the organizational culture of Southwest Airlines is the key to the success of the organization.
  2. understanding the profit ability in an industry indicates to companies where above-average returns can be earned.
  3. it is hard for rivals to match a configuration of integrated activities than to imitate a single activity.
  4. the primary and support activities of a successful company capture value all along the value chain.

Q57

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.

  1. activity map
  2. profit sharing
  3. value diagram
  4. five forces model

Q58

If Southwest Airlines employees lost their high enthusiasm and commitment to the company:

  1. the airline could continue without problems because its cost leadership strategy is dependent on its efficient internal procedures.
  2. replacement employees could be hired from rival airlines that are laying off employees and easily be merged into the Southwest culture.
  3. there would be no impact on Southwest’s profitability because Southwest’s customers value the low fares rather than being “entertained” by the employees.
  4. Southwest would have lost one of its competitive advantages, and its performance would be threatened.

Q58

Strategic fit among many activities (in an activity map) is fundamental to:

  1. the development of core competencies for a firm
  2. the breadth of competitive scope for a firm
  3. sustainability of a firm’s competitive advantage
  4. the integrity of the firm’s value chain

Q59

All of the following are considered generic business-level strategies except:

  1. product diversification
  2. cost leadership
  3. focused differentiation
  4. integrated cost leadership/differentiation

Q60

A company using a narrow target market in its business strategy is:

  1. following a cost leadership business strategy
  2. focusing on a broad array of geographic markets
  3. limiting the group of customer segments served
  4. decreasing the number of activities on its value chain

Q61

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.

  1. broader target market
  2. narrower target market
  3. increased use of primary activities to capture value
  4. increased use of support activities to capture value

Q62

The effectiveness of any of the generic business-level strategies is contingent upon:

  1. customer needs and competitors’ strategies
  2. the match between the opportunities and threats in its external market and the strengths of its internal environment
  3. the trends in the general consumer base and the robustness of the global and industry economy
  4. the firm’s competitive scope and its competitive advantage

Q63

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

  1. acceptable
  2. unique
  3. substandard
  4. mediocre

Q64

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

  1. most typical
  2. poorest
  3. least educated
  4. most frugal

Q65

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:

  1. Both Durable and Cost-Less will devise additional ways to become more efficient in their production processes.
  2. Durable will be unable to absorb the lower cost, and will go out of business.
  3. Both Cost-Less and Durable will go out of business, leaving the customers with fewer alternative sources of low-cost tile.
  4. Cost-Less will go out of business, and Durable will gain higher power over its customers.

Q66

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:

  1. the integrated cost leadership/differentiation strategy
  2. either of the focus strategies
  3. the cost leadership strategy
  4. any of the strategies except the focused differentiation strategy

Q66

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

  1. It strengthened Walmart’s position against rivals such as Dollar Stores and Amazon.
  2. It made Walmart vulnerable to Dollar Store and Amazon.
  3. It attracted significant numbers of new customers.
  4. Family Dollar, Dollar Tree, and Dollar General all experienced losses in sales as many of their customers went to Walmart.

Q67

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?

  1. Walmart was too aggressive with its low-cost position and lost customers who wanted more upscale products.
  2. Walmart changed its strategy to focused differentiation.
  3. Amazon and Family Dollar changed their strategies to attract more upscale customers.
  4. Walmart changed its strategy to attract more upscale customers.

Q68

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

  1. build economies of scale and efficient operations
  2. develop and maintain cost-effective MIS operations
  3. develop flexible systems that allow rapid response to customers’ changing needs
  4. have relationships with suppliers to maintain efficient flow of supplies for operations

Q69

When the costs of supplies increase in an industry, the low-cost leader:

  1. may continue competing with rivals on the basis of product features.
  2. will lose customers as a result of price increases.
  3. will be unable to absorb higher costs because cost-leaders operate on very narrow profit margins.
  4. may be the only firm able to pay the higher prices and continue to earn average or above-average returns.

Q70

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

  1. Potential entrants
  2. Substitutes
  3. Buyer power
  4. Supplier power

Q70

The typical risks of a cost leadership strategy include:

  1. the inability to balance high differentiation and low price
  2. production and distribution processes becoming obsolete
  3. excessive differentiation to the point where the customer base is too small
  4. loss of customer loyalty

Q71

A firm successfully implementing a differentiation strategy would expect:

  1. customers to be sensitive to price increases
  2. to charge premium prices
  3. customers to perceive the product as standard
  4. to have high levels of power over suppliers

Q72

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

  1. perceived by the customer to add value that they will pay a premium to purchase
  2. valued by the typical industry customer
  3. perceived as standardized by the customer
  4. seen as classic attributes rather than passing fads

Q73

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:

  1. the perception of perceived prestige and status as a means of differentiating a product
  2. the importance of high-quality raw materials when using the differentiation strategy
  3. the risk of product imitation by competitors
  4. the danger counterfeiting holds for firms pursuing the differentiation strategy

Q73

All of the following are examples of differentiated products except:

  1. Mont Blanc pens
  2. Caterpillar’s heavy-duty earth-moving equipment
  3. Great Value brand at Walmart
  4. Prada fashion

Q74

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

  1. Commodity goods
  2. Motion pictures
  3. Popular music
  4. Writing instruments

Q75

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

  1. responsive customer service
  2. perceived prestige and status
  3. economies of scale and efficient operations
  4. engineering design and performance

Q76

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

  1. customers will seek out the lowest-cost product.
  2. customers of nondifferentiated products are sensitive to price increases.
  3. customers are loyal to brands that are differentiated in meaningful ways.
  4. the differentiation strategy benefits from rivalry because it forces the firm to innovate.

Q77

Wholesome Pet Food has successfully specialized for 20 years in high-quality pet food made from all-natural ingredients and organically raised lamb. This brand has a strong following and is recommended by veterinarians who practice in affluent neighborhoods. Wholesome’s main supplier of lamb has announced that the price for lamb will be 15 percent higher next year. Which one of the following is true?

  1. Wholesome will probably be able to pass the cost on to its customers because they are less sensitive to price increases than the average buyer.
  2. Companies pursuing Wholesome’s business strategy are especially vulnerable to this risk.
  3. If Wholesome raises its pet food prices, customers will turn to less expensive brands such as Purina.
  4. Wholesome probably operates on very thin margins, and a cost increase will threaten its ability to earn average returns.

Q78

Which of the following is not a value-creating activity associated with the differentiation strategy?

  1. Developing policies to ensure efficient hiring and retention to keep costs low and implement training to ensure high employee efficiency
  2. Providing accurate and timely delivery of goods to customers
  3. Ensuring receipt of high-quality supplies (raw materials and other goods)
  4. Developing flexible systems that allow rapid response to customers’ changing needs

Q78

A differentiation strategy can be effective in controlling the power of substitutes in an industry because:

  1. customers have low switching costs.
  2. substitute products are lower quality.
  3. a differentiating firm can always lower prices.
  4. customers develop brand loyalty.

Q79

Recently, the only type of car available for Anthony to rent on a business trip was a compact, fuel-efficient Japanese import. Anthony was surprised at the comfort and performance of the car. He is in the market for a new car and had previously considered only buying another luxury SUV. Now, he is thinking about the significant cost savings he would have if he bought the compact vehicle rather than a new SUV. This is an example of the competitive risk that:

  1. a competitor’s products can convey a product’s differentiated features to a customer at a significantly reduced price.
  2. a product imitation can cause customers to perceive that competitors offer essentially the same goods.
  3. experience can narrow a customer’s perceptions of the value of a product’s differentiated features.
  4. brand loyalty insulates a company from rivalry with competitors.

Q80

A manufacturer of jewelry imitates the style of a popular and expensive brand using manufactured stones rather than real gemstones and lesser grade metals rather than silver and gold. The manufacturer packages the jewelry in boxes of the same color imprinted with an almost identical logo. About 85 percent of the company’s sales are through Internet sales. This example illustrates the competitive risk of ____ that threatens companies that use the differentiation strategy.

  1. customer sensitive to price differentials
  2. threat by the cost leader
  3. customer experience
  4. counterfeiting

Q81

The typical risks of a differentiation strategy do not include which of the following?

  1. Customers may find the price differential between the low-cost product and the differentiated product too large.
  2. Customers’ experience with other products may narrow customers’ perception of the value of a product’s differentiated features.
  3. Counterfeit goods are widely available and acceptable to customers.
  4. Suppliers of raw materials erode the firm’s profit margin with price increases.

Q82

Chico’s is a clothing retailer that targets middle-aged women who want stylish and appealing clothes that are suitable for the mature figure. Chico’s has an extensive customer list, a frequent-buyer discount card, and frequent sales promotions to Chico’s customers based on their spending levels. Chico’s uses a ____ strategy.

  1. focused differentiation based on a buyer group
  2. focused differentiation based on a product line segment
  3. generic differentiation
  4. integrated cost leadership/differentiation

Q83

The new generation of lunch trucks serving high-end fare in cities such as New York, San Francisco, and Los Angeles share which of the following business strategy?

  1. Cost leadership
  2. Focused differentiation
  3. Integrated cost leadership/differentiation
  4. Differentiation

Q84

The Monteleone Company pays large fees to a highly recognizable, prestigious individual to be the spokesperson for the company’s products, luxury private jets. Monteleone is probably following the:

  1. focused cost leadership strategy
  2. focused differentiation strategy
  3. integrated cost leadership/differentiation strategy
  4. total quality strategy

Q85

The risks of a focus strategy include:

  1. a competitor’s ability to use its core competencies to outfocus the focuser by serving an even more narrowly defined segment.
  2. a competitor’s ability to use its core competencies to outfocus the focuser by serving an even more broadly defined segment.
  3. decisions by industry-wide competitors to use their resources to serve a wider range of customers’ needs than the focuser has been serving.
  4. decisions by focused competitors to use their resources to serve a wider range of customers’ needs.

Q86

Focus strategies are:

  1. sheltered from the risks associated with industry-wide strategies because of their niche focus.
  2. able to avoid global risk by focusing on niches in national or regional markets.
  3. faced with additional types of risks than are industry-wide strategies.
  4. more subject to failure than industry-wide strategies.

Q87

New Balance Athletic Shoes target Baby Boomers’ needs for well-fitting shoes. The company is unique in that it offers a very broad range of shoe widths. A realistic potential risk New Balance runs in this focused differentiation strategy includes the possibility that:

  1. Baby Boomers may find that they do not need well-fitting shoes, because they will become increasingly sedentary as they age.
  2. a competitor may be able to better use flexible manufacturing systems to make shoes with an individualized fit.
  3. athletic shoes may go out of style.
  4. New Balance shoes may begin to appeal to a wider market, thus losing New Balance’s focus advantage.

Q88

Suppose another firm found a way to offer IKEA’s customers (young buyers interested in stylish furniture at low cost) additional sources of differentiation while charging the same price or to provide the same service with the same sources of differentiation at a lower price. What category of competitive risk to a focus strategy would this be?

  1. An industry-wide competitor decides that the market segment served by IKEA is worth entering.
  2. Focusing on a more narrowly defined segment and “outfocusing” the focuser.
  3. The needs of the customers in this narrow segment have become more similar to those of industry-wide competitors.
  4. Experience can narrow customer’s perceptions of value of the firm’s differentiated features.

Q89

Zara has pioneered “cheap chic” in clothing apparel. Zara offers current and desirable fashion goods at relatively low prices. To implement the strategy, Zara uses sophisticated designers and effective means of managing costs. These are all characteristics of which business level strategy?

  1. Cost leadership
  2. Differentiation
  3. Integrated cost leadership/differentiation
  4. Stuck in the middle

Q90

Firms use the integrated cost leadership/differentiation strategy because:

  1. other firms have established unassailable market dominance with the other four strategies.
  2. global markets allow for much broader competitive scope.
  3. most consumers want to pay a low price for products with somewhat highly differentiated features.
  4. one strategy is not enough for most large firms.

Q91

The integration of a cost leadership and a differentiation strategy:

  1. is challenging because it increases the number of value-chain activities and support functions in which the firm must become competent.
  2. forces a firm to adapt more slowly to changes in its environment.
  3. allows the firm to avoid being “stuck in the middle.”
  4. requires such a large customer base that it is most practical for firms in the global marketplace.

Q92

Target’s brand promise “Expect More. Pay Less” and appeal to higher-income, fashion-conscious discount shoppers illustrates the _____ strategy.

  1. cost leadership
  2. differentiation
  3. focused differentiation
  4. integrated cost leadership/differentiation

Q93

J.C. Penney attempted the strategy ______ . But it couldn’t out ______ Walmart, nor could it ______ Macy’s and Target.

  1. of integrated cost leadership; price; compete with
  2. of focused differentiation; cost; differentiate between
  3. of cost leadership; cost; differentiate between
  4. of focused cost leadership; price; differentiate between

Q94

Three sources of flexibility in completing primary and support activities are particularly useful for firms using the integrated strategy. These are:

  1. flexible manufacturing systems, reengineering, and Total Quality Management.
  2. outsourcing, reengineering, and flexible manufacturing systems.
  3. outsourcing, Total Quality Management, and information networks.
  4. flexible manufacturing systems, Total Quality Management, and information networks.

Q95

The benefit of a flexible manufacturing system is that:

  1. the lot size needed to manufacture a firm’s product efficiently is reduced.
  2. the necessary skill levels of workers are reduced, allowing the firm to reduce costs.
  3. it lends itself to empowerment of employees.
  4. it captures the cost savings of economies of scale.

Q96

A flexible manufacturing system is:

  1. based on the use of temporary and part-time employees as well as outsourcing.
  2. a computer-controlled process that is used to produce a variety of products in moderate, flexible quantities with minimal human intervention.
  3. based on a 360-degree view of the company’s relationships with customers.
  4. a system that identifies “the one best way” to produce each product in the company’s line.

Q97

A nationwide chain of pet stores wishes to identify the tradeoffs that its customers are willing to make between low-cost products such as generic pet foods and differentiated features such as pick-up and delivery of pets for grooming. The best technique for this firm to learn this information would be to use:

  1. information networks
  2. a flexible manufacturing system
  3. differentiation development planning
  4. Enterprise Resource Planning

Q97

By linking companies with their suppliers, distributors, and customers, ____ provide a company with flexibility.

  1. flexible manufacturing systems
  2. information networks
  3. Total Quality Management systems
  4. capabilities

Q98

TQM is most helpful to firms following the ____ business strategy.

  1. cost leadership
  2. integrated cost leadership/differentiation
  3. focused cost leadership
  4. focused differentiation

Q99

The term “stuck in the middle”:

  1. means adhering to a middle of the road strategy in the face of negative outcomes.
  2. indicates that the customers of the firm are willing to pay only a mid-range price for the product.
  3. reflects the fact that the customers of the firm have only moderate expectations regarding product quality.
  4. means that the firm’s cost structure is not low enough to allow it to attractively price its products and that its products are not sufficiently differentiated to create value for its target customer.

Q100

All of the following describe strategies except:

  1. they are purposeful.
  2. they cannibalize the old strategy.
  3. they precede the taking of actions to which they apply.
  4. they demonstrate a shared understanding of the firm’s vision and mission.

Q101

More choices and easily accessible information about the functionality of firms’ products are creating increasingly ______ customers.

  1. sophisticated and knowledgeable
  2. loyal
  3. dissatisfied
  4. content

Q102

The ______ dimension of relationships with customers is concerned with the firm’s access and

connection to customers.

  1. loyalty
  2. reach
  3. richness
  4. affiliation

Q103

Reach is an especially critical dimension for which firm?

  1. Google
  2. J.C. Penney
  3. Blockbuster
  4. Colgate-Palmolive

Q104

Customer ratings of products they bought online is an example of:

  1. loyalty
  2. reach
  3. richness
  4. affiliation

Q105

A company selling diapers knows the market is for people with young children. However, within that segment they can further divide the market by a demographic factor like:

  1. culture
  2. lifestyle
  3. consumption pattern
  4. income

Q106

When firms use core competencies to implement value-creating strategies they are answering the “______” question.

  1. who
  2. what
  3. why
  4. how

Q107

Stage in the family life cycle is a ______ factor.

  1. demographic
  2. socioeconomic
  3. psychological
  4. perceptual

Q108

The book The Dyslexic Advantage appeals to a market of educators, people with dyslexia, their friends, family, and coworkers. This is customer segmentation by ______ factors.

  1. demographic
  2. socioeconomic
  3. psychological
  4. consumption

Q109

Religious beliefs are an example of customer segmentation by ______ factors.

  1. demographic
  2. socioeconomic
  3. geographic
  4. psychological

Q110

Historically, women have paid more for dry cleaning than men. Signature Cleaners advertises “equal price” for all customers. Signature Cleaners appeals to women, which is market segmentation by ______ factors.

  1. demographic
  2. socioeconomic
  3. geographic
  4. consumption pattern

Q111

Chelsea Milling Company makes Jiffy packaged baking mixes. It was established in 1930. It has never spent one cent on advertising, which is one reason it is able to pursue a(n) ______ strategy.

  1. differentiation
  2. focused differentiation
  3. integrated cost leadership/differentiation
  4. cost leadership

Q112

Mercedes mass produces luxury vehicles at a premium price. It uses a(n) ______ strategy.

  1. differentiation
  2. focused differentiation
  3. integrated cost leadership/differentiation
  4. focused cost leadership

Q113

A firm using a(n) ______ strategy generally needs to operate “below the radar” of larger and more resource rich firms that serve the broader market.

  1. cost leadership
  2. differentiation
  3. focused
  4. integrated cost leadership/differentiation