Chap 005- test bank

8/9/2019 Chap 005- test bank

http://slidepdf.com/reader/full/chap-005-test-bank 1/42

Chapter 05 - Business-Level Strategy: Creating and Sustaining Competitive Advantages

Chapter 05Business-Level Strategy: Creating and Sustaining Competitive Advantages

True / False Questions

1. Michael orter!s three generic strategies can "e depicted on t#o dimensions: competitiveadvantage and product li$e cycle.%rue &alse

'. Concentrating solely on one $orm o$ competitive advantage generally leads to the highest possi"le level o$ pro$ita"ility.%rue &alse

(. A $irm striving $or cost leadership #ill typically spend relatively more on product related)*+ than on process related )*+.%rue &alse

,. %o generate a"ove average returns a $irm $ollo#ing an overall cost leadership positionshould not "e concerned #ith attaining parity or pro imity on the "asis o$ di$$erentiationrelative to its peers.%rue &alse

5. %he e perience curve concept suggests that production costs tend to decrease as productionincreases regardless o$ #here an industry is at in its li$e cycle.%rue &alse

/. &irms that compete on overall cost leadership are vulnera"le i$ all rivals share a commoninput or ra# material that contri"utes a signi$icant amount to total costs.%rue &alse

5-1




. %he e ample o$ Le us automo"iles in the te t points out that a $irm can strengthen itsdi$$erentiation strategy "y achieving integration at multiple points along the value chain.%rue &alse

. A success$ul di$$erentiation strategy lo#ers entry "arriers "ecause o$ customer loyalty andthe $irm!s a"ility to provide uni2ueness in its products and services.%rue &alse

3. A success$ul di$$erentiation strategy increases rivalry since "uyers "ecome more price-sensitive.%rue &alse

10. 4$ a $irm has a success$ul di$$erentiation strategy it is not necessary to attain parity oncost.%rue &alse

11. ne potential pit$all o$ a di$$erentiation strategy is that a "rand!s identi$ication in themar6etplace may "ecome diluted through e cessive product line e tensions.

%rue &alse

1'. 7ith a $ocus strategy creating a niche "y di$$erentiating one!s product or service o$tenallo#s small $irms to compete success$ully #ith mar6et leaders.%rue &alse

1(. &ocus "y itsel$ o$ten constitutes a competitive advantage.

%rue &alse

5-'




1,. A potential pit$all o$ a $ocus strategy is that $ocusers can "ecome too $ocused to satis$y "uyer needs.%rue &alse

15. A disadvantage o$ $irms that success$ully integrate overall cost leadership anddi$$erentiation strategies is that they are relatively easy $or competitors to imitate.%rue &alse

1/. Mass customi8ation ena"les manu$acturers to "e more responsive to customer demands$or high 2uality products.%rue &alse

1 . An important idea "ehind the 9pro$it pool9 concept is that there is al#ays a strongrelationship "et#een the generation o$ revenues and the capturing o$ pro$its.%rue &alse

1 . An important potential pit$all o$ an integrated overall cost leadership and di$$erentiationstrategy is that $irms may $ail to implement either one and "ecome 9stuc6-in-the-middle.9

%rue &alse

13. Most analysts agree that use o$ the 4nternet #ill lo#er transaction costs.%rue &alse

'0. ne #ay the 4nternet and digital technologies are creating opportunities $or $irms #ithdi$$erentiation strategies is "y ena"ling mass customi8ation.

%rue &alse

5-(




'1. %he 4nternet o$$ers $e# advantages $or $ocusers "ecause niche players and smallcompanies cannot implement capa"ilities as e$$ectively as their larger competitors.%rue &alse

''. %he 4nternet has provided a small su"set o$ companies #ith greater tools $or managingcosts.%rue &alse

'(. 4ncum"ent $irms that thought a niche mar6et #as too small to enter in the past may use4nternet technologies to enter that segment #ith $ocusers.%rue &alse

',. %he mar6et li$e cycle should "e used as a short-run $orecasting device "ecause it providesa conceptual $rame#or6 $or understanding #hat changes typically occur.%rue &alse

'5. An important advantage o$ $irst movers or 9pioneers9 in a mar6et is that they mayesta"lish "rand recognition that may later serve as an important s#itching cost.

%rue &alse

'/. +uring the gro#th stage o$ the mar6et li$e cycle customers are very li6ely to esta"lish "rand loyalty.%rue &alse

' . iven the attractiveness o$ premium pricing during the gro#th stage o$ the mar6et li$e

cycle managers should emphasi8e short-term results to increase pro$its.%rue &alse

5-,




' . As mar6ets mature competition on the "asis o$ di$$erentiation is pre$era"le to pricecompetition.%rue &alse

'3. As mar6ets mature the magnitude o$ di$$erentiation and cost leadership advantagesamong competitors decrease.%rue &alse

(0. 7ith reverse positioning a strategy to "e used during the mature stage o$ the industry li$ecycle a product escapes its category "y deli"erately associating #ith a di$$erent one.%rue &alse

(1. Businesses that compete in mar6ets that are in decline should simply "e harvested ordivested since they are no longer pro$ita"le.%rue &alse

('. +uring the decline stage o$ the product li$e cycle a harvesting strategy means that a $irm6eeps a product going #ithout signi$icantly reducing mar6eting support technological

development or other investments #hile hoping that competitors #ill e it the mar6et.%rue &alse

((. %he decline stage o$ the industry li$e cycle stage is inevita"ly $ollo#ed "y death.%rue &alse

(,. Many $irms $acing a turnaround situation try to reduce their costs "y outsourcing the

production o$ many inputs.%rue &alse

5-5




ultiple Choi!e Questions

(5. %he primary aim o$ strategic management at the "usiness level isA. ma imi8ing ris6-return tradeo$$s through diversi$ication.B. achieving a lo# cost position.C. ma imi8ing di$$erentiation o$ products and;or services.+. achieving competitive advantage<s=.

(/. rimary value chain activities that involve the e$$ective layout o$ receiving doc6operations <in"ound logistics= and support value chain activities that include e pertise in

process engineering <technology development= characteri8e #hat generic strategy>A. di$$erentiationB. overall cost leadershipC. di$$erentiation $ocus+. stuc6-in-the-middle

( . A manu$acturing "usiness pursuing cost leadership #ill li6elyA. $ocus on a narro# mar6et segment.B. rely on e perience e$$ects to raise e$$iciency.C. use advertising to "uild "rand image.+. put heavy emphasis on product engineering.

( . ne aspect o$ using a cost leadership strategy is that e perience e$$ects may lead to lo#ercosts. ? perience e$$ects are achieved "yA. hiring more e perienced personnel.B. repeating a process until a tas6 "ecomes easier.C. spreading out a given e pense or investment over a greater volume.+. competing in an industry a long time.

(3. %he e perience curve suggests that cutting prices is a good strategyA. i$ it can induce greater demand and there"y help a $irm travel do#n the e perience curve$aster.B. in industries characteri8ed "y high economies o$ scale.C. in the maturity stage o$ the industry li$e cycle.+. in the decline stage o$ the industry li$e cycle.

5-/




,0. Convincing rivals not to enter a price #ar protection $rom customer pressure to lo#er prices and the a"ility to "etter #ithstand cost increases $rom suppliers characteri8e #hichtype o$ competitive strategy>A. verall cost leadership.

B. +i$$erentiation.C. +i$$erentiation $ocus.+. Cost leadership $ocus.

,1. 7hich o$ the $ollo#ing is a ris6 <or potential pit$all= o$ cost leadership>A. Cost cutting may lead to the loss o$ desira"le $eatures.B. Attempts to stay ahead o$ the competition may lead to gold plating.C. Cost di$$erences increase as the mar6et matures.+. roducers are more a"le to #ithstand increases in suppliers! cost.

,'. A $irm can achieve di$$erentiation through all o$ the $ollo#ing means except A. improving "rand image.B. "etter customer service.C. o$$ering lo#er prices to $re2uent customers.+. adding additional product $eatures.

,(. Support value chain activities that involve e cellent applications engineering support<technology development= and $acilities that promote a positive $irm image <$irmin$rastructure= characteri8e #hat generic strategy>A. +i$$erentiation.B. verall cost leadership.C. +i$$erentiation $ocus.+. Stuc6-in-the middle.

,,. @igh product di$$erentiation is generally accompanied "y

A. higher mar6et share.B. decreased emphasis on competition "ased on price.C. higher pro$it margins and lo#er costs.+. signi$icant economies o$ scale.

5-




,5. 7hich o$ the $ollo#ing is false regarding ho# a di$$erentiation strategy can help a $irm toimprove its competitive position vis- -vis orter!s $ive $orces>A. By increasing a $irm!s margins it avoids the need $or a lo# cost position.B. 4t helps a $irm to deal #ith supplier po#er and reduces "uyer po#er since "uyers lac6

compara"le alternatives.C. Supplier po#er is increased "ecause suppliers #ill "e a"le to charge higher prices $or theirinputs.+. &irms #ill en oy high customer loyalty thus e periencing less threat $rom su"stitutes thanits competitors.

,/. A di$$erentiation strategy ena"les a "usiness to address the $ive competitive $orces "yA. lessening competitive rivalry "y distinguishing itsel$.B. having "rand-loyal customers "ecome more sensitive to prices.

C. increasing economies o$ scale.+. serving a "roader mar6et segment.

, . All o$ the $ollo#ing are potential pit$alls o$ a di$$erentiation strategy except :A. uni2ueness that is not valua"le.B. too high a price premium.C. all rivals share a common input or ra# material.+. perceptions o$ di$$erentiation may vary "et#een "uyers and sellers.

, . 7hich statement regarding competitive advantages is true>A. 4$ several competitors pursue similar di$$erentiation tactics they may all "e perceived ase2uals in the mind o$ the consumer.B. 7ith an overall cost leadership strategy $irms need not "e concerned #ith parity ondi$$erentiation.C. 4n the long run a "usiness #ith one or more competitive advantages is pro"a"ly destined toearn normal pro$its.+. Attaining multiple types o$ competitive advantage is a recipe $or $ailure.

5-




,3. A narro# mar6et $ocus is to a di$$erentiation-"ased strategy as aA. "roadly-de$ined target mar6et is to a cost leadership strategy.B. gro#th mar6et is to a di$$erentiation-"ased strategy.C. gro#th mar6et is to a cost-"ased strategy.

+. technological innovation is to a cost-"ased strategy.

50. A $irm $ollo#ing a $ocus strategyA. must $ocus on governmental regulations.B. must $ocus on a mar6et segment or group o$ segments.C. must $ocus on the rising cost o$ inputs.+. must avoid entering international mar6ets.

51. All o$ the $ollo#ing are potential pit$alls o$ a $ocus strategy except A. erosion o$ cost advantages #ithin the narro# segment.B. all rivals share a common input or ra# material.C. even product and service o$$erings that are highly $ocused are su" ect to competition $romne# entrants and $rom imitation.+. $ocusers can "ecome too $ocused to satis$y "uyer needs.

5'. )esearch has consistently sho#n that $irms that achieve "oth cost leadership and

di$$erentiation advantages tend to per$ormA. at a"out the same level as $irms that achieve either cost or di$$erentiation advantages.B. a"out the same as $irms that are 9stuc6-in-the-middle.9C. lo#er than $irms that achieve di$$erentiation advantages "ut higher than $irms that achievecost advantages.+. higher than $irms that achieve either a cost or a di$$erentiation advantage.

5(. %he te t discusses three approaches to com"ining overall cost leadership anddi$$erentiation competitive advantages. %hese are the $ollo#ing except

A. automated and $le i"le manu$acturing systems.B. e ploiting the pro$it pool concept $or competitive advantage.C. coordinating the 9e tended9 value chain "y #ay o$ in$ormation technology.+. deriving "ene$its $rom highly $ocused and high technology mar6ets.

5-3




5,. A can "e de$ined as the total pro$its in an industry at all points along theindustry!s value chain.A. pro$it ma imi8er B. revenue enhancer

C. pro$it pool+. pro$it outsourcing

55. All o$ the $ollo#ing are potential pit$alls o$ an integrated overall lo# cost anddi$$erentiation strategy except :A. $irms that $ail to attain "oth strategies may end up #ith neither and "ecome 9stuc6-in-the-middle.9B. targeting too large a mar6et that causes unit costs to increase.C. underestimating the challenges and e penses associated #ith coordinating value-creating

activities in the e tended value chain.+. miscalculating sources o$ revenue and pro$it pools in the $irm!s industry.

5/. 7hich o$ the $ollo#ing is not one o$ the #ays the 4nternet is lo#ering transaction costs>A. eliminating supply chain intermediariesB. evaluating employee per$ormanceC. minimi8ing o$$ice e penses+. reducing "usiness travel

5 . +ell Computer has an online ordering system that allo#s consumers to con$igure theiro#n computers "e$ore +ell "uilds them. %his capa"ility is an e ample o$A. electronic data interchange.B. 6no#ledge management.C. colla"orative design.+. mass customi8ation.

5-10




5 . 7hich o$ the $ollo#ing methods o$ implementing a di$$erentiation strategy has "eengreatly enhanced "ecause o$ 4nternet technologies>A. cele"rity endorsementsB. prestige pac6aging

C. e ceptional service+. mass customi8ation

53. 7hich o$ the $ollo#ing phrases "est completes this sentence: Because o$ the 4nternet$irms that use a $ocus strategy have ne# opportunities toA. respond 2uic6ly to customer re2uests.B. provide more services and $eatures.C. access mar6ets less e pensively.+. access niche mar6ets in a highly speciali8ed $ashion.

/0. ne o$ the reasons the 4nternet is eroding sustaina"le competitive advantages isA. incum"ent $irms are entering mar6et segments that they previously considered to "e toosmall.B. nearly all competitors #ill have greater access to tools $or managing costs ma6ing it hard$or any one to achieve an advantage.C. di$$erentiators have "een a"le to preserve the uni2ue advantages that have al#ays "een thehallmar6 o$ their success.+. $irms are ignoring opportunities to o$$er high-end services in niche mar6ets.

/1. 7hich o$ these statements regarding the industry li$e cycle is correct>A. art o$ the po#er o$ the mar6et li$e cycle is its a"ility to serve as a short-run $orecastingdevice.B. %rends suggested "y the mar6et li$e cycle model are generally not reversi"le or repeata"le.C. 4t has important implications $or a $irm!s generic strategies $unctional areas value-creatingactivities and overall o" ectives.+. 4t points out the need to maintain a di$$erentiation advantage and a lo# cost advantagesimultaneously.

5-11




/'. 7hich o$ the $ollo#ing statements a"out the introduction stage o$ the mar6et li$e cycle istrue >A. 4t produces relatively large positive cash $lo#s.B. Strong "rand recognition seldom serves as an important s#itching cost.

C. Mar6et share gains "y pioneers are usually easily sustained $or many years.+. roducts or services o$$ered "y pioneers may "e perceived as di$$erentiated simply "ecausethey are ne#.

/(. 4n the stage o$ the industry li$e cycle the emphasis on product design is veryhigh the intensity o$ competition is lo# and the mar6et gro#th rate is lo#.A. introductionB. gro#thC. maturity

+. decline

/,. %he gro#th stage o$ the industry li$e cycle is characteri8ed "yA. 9in-6ind9 competition <$rom the same type o$ product=.B. premium pricing.C. a gro#ing trend to compete on the "asis o$ price.+. retaliation "y competitors #hose customers are stolen.

/5. 4n the stage o$ the industry li$e cycle there are many segments competitionis very intense and the emphasis on process design is high.A. introductionB. gro#thC. maturity+. decline

5-1'




//. 4n a given mar6et 6ey technology no longer has patent protection e perience is not anadvantage and there is a gro#ing need to compete on price. 7hat stage o$ its li$e cycle is themar6et in>A. introduction

B. gro#thC. maturity+. decline

/ . A mar6et that mainly competes on the "asis o$ price and has stagnant gro#th ischaracteristic o$ #hat li$e cycle stage>A. introductionB. gro#thC. maturity

+. decline

/ . As mar6ets matureA. costs continue to increase.B. application $or patents increase.C. di$$erentiation opportunities increase.+. there is increasing emphasis on e$$iciency.

/3. %he si8e o$ pricing and di$$erentiation advantages "et#een competitors decreases in #hichstage o$ the mar6et li$e cycle>A. introductionB. gro#thC. maturity+. decline

5-1(




0. 7hich o$ the $ollo#ing is most o$ten true o$ mature mar6ets>A. Some competitors en oy a signi$icant operating advantage due to increasing e periencee$$ects.B. %he mar6et supports premium pricing #hich attracts additional competitors.

C. Advantages that cannot "e duplicated "y other competitors are di$$icult to achieve.+. %he magnitude o$ pricing di$$erences and product di$$erentiation is larger than in thegro#th stage.

1. 4n the stage o$ the industry li$e cycle there are $e# segments the emphasison process design is lo# and the ma or $unctional areas o$ concern are general managementand $inance.A. introductionB. gro#th

C. maturity+. decline

'. %he most li6ely time to pursue a harvest strategy is in a situation o$A. high gro#th.B. strong competitive advantage.C. mergers and ac2uisitions.+. decline in the mar6et li$e cycle.

(. +uring the decline stage o$ the industry li$e cycle re$ers to o"taining asmuch pro$it as possi"le and re2uires that costs "e decreased 2uic6ly.A. maintainingB. harvestingC. e iting+. consolidating

5-1,




,. )esearch sho#s that the $ollo#ing are all strategies used "y $irms engaged in success$ulturnarounds except A. asset and cost surgery.B. selective product and mar6et pruning.

C. glo"al e pansion.+. piecemeal productivity improvements.

5. iecemeal productivity improvements during a turnaround typically does not involveA. "usiness process reengineering.B. increased capacity utili8ation.C. "enchmar6ing.+. e pansion o$ a $irm!s product mar6et scope.

"ssay Questions

/. Dse the value chain as a $rame#or6 to e plain ho# a $irm can achieve a competitiveadvantage o$ overall cost leadership.

. ? plain ho# a cost leadership strategy permits a $irm to address the $ive $orces in theircompetitive environment so it can en oy higher-than-normal pro$its.

5-15




. +iscuss ho# a competitive advantage can "e attained through di$$erentiation using thevalue chain concept.

3. ? plain ho# a di$$erentiation strategy ena"les a "usiness to address the $ive competitive$orces in such a #ay that it can en oy high levels o$ pro$ita"ility.

0. +iscuss the ris6s associated #ith each o$ these $orms o$ competitive advantage: overallcost leadership di$$erentiation and $ocus.

1. 7hat are the "ene$its and ris6s associated #ith com"ining overall cost leadership anddi$$erentiation strategies>

5-1/




'. +iscuss the uses and limitations associated #ith the industry li$e cycle concept as a$rame#or6 $or studying strategy $ormulation at the "usiness level.

(. +escri"e the t#o positioning strategiesEreverse positioning and "rea6a#ay positioningthat $irms can use #hen $aced #ith the maturity phase o$ the industry li$e cycle.

,. Brie$ly e plain the advantages o$ the $our alternativesEmaintaining harvesting e itingconsolidatingEassociated #ith the decline stage o$ the mar6et li$e cycle.

5. +iscuss some o$ the e$$ective turnaround strategies.

5-1




Chapter 05 Business-Level Strategy: Creating and Sustaining CompetitiveAdvantages Ans#er Fey

True / False Questions

1. (p. 159) Michael orter!s three generic strategies can "e depicted on t#o dimensions:competitive advantage and product li$e cycle.FALS"

AACSB: Analytic Bloom's: Knowle !e "ifficulty: #asy $earnin! %& ecti e: 5*+

'. (p. 159) Concentrating solely on one $orm o$ competitive advantage generally leads to thehighest possi"le level o$ pro$ita"ility.FALS"

AACSB: Analytic Bloom's: Compre,ension "ifficulty: -e ium $earnin! %& ecti e: 5*+

(. (p. 1 ) A $irm striving $or cost leadership #ill typically spend relatively more on productrelated )*+ than on process related )*+.FALS"

AACSB: Analytic Bloom's: Compre,ension

"ifficulty: -e ium $earnin! %& ecti e: 5*+

5-1




,. (p. 1 5) %o generate a"ove average returns a $irm $ollo#ing an overall cost leadership position should not "e concerned #ith attaining parity or pro imity on the "asis o$di$$erentiation relative to its peers.FALS"


5. (p. 1 +) %he e perience curve concept suggests that production costs tend to decrease as production increases regardless o$ #here an industry is at in its li$e cycle.FALS"


/. (p. 1 5) &irms that compete on overall cost leadership are vulnera"le i$ all rivals share acommon input or ra# material that contri"utes a signi$icant amount to total costs.T#$"

AACSB: Analytic Bloom's: Compre,ension "ifficulty: -e ium $earnin! %& ecti e: 5*/

. (p. 1 0) %he e ample o$ Le us automo"iles in the te t points out that a $irm can strengthen itsdi$$erentiation strategy "y achieving integration at multiple points along the value chain.T#$"


5-13




. (p. 1 0 * 1 ) A success$ul di$$erentiation strategy lo#ers entry "arriers "ecause o$ customerloyalty and the $irm!s a"ility to provide uni2ueness in its products and services.FALS"


3. (p. 1 0 * 1 ) A success$ul di$$erentiation strategy increases rivalry since "uyers "ecome more price-sensitive.FALS"


10. (p. 1 9) 4$ a $irm has a success$ul di$$erentiation strategy it is not necessary to attain parityon cost.FALS"


11. (p. 1 9 * 10 ) ne potential pit$all o$ a di$$erentiation strategy is that a "rand!s identi$ication inthe mar6etplace may "ecome diluted through e cessive product line e tensions.T#$"


"ifficulty: -e ium $earnin! %& ecti e: 5*2

5-'0




1'. (p. 10 * 101) 7ith a $ocus strategy creating a niche "y di$$erentiating one!s product or serviceo$ten allo#s small $irms to compete success$ully #ith mar6et leaders.T#$"


1(. (p. 10 ) &ocus "y itsel$ o$ten constitutes a competitive advantage.FALS"


1,. (p. 10+) A potential pit$all o$ a $ocus strategy is that $ocusers can "ecome too $ocused tosatis$y "uyer needs.T#$"



15. (p. 10+) A disadvantage o$ $irms that success$ully integrate overall cost leadership anddi$$erentiation strategies is that they are relatively easy $or competitors to imitate.FALS"

AACSB: Analytic Bloom's: Compre,ension "ifficulty: -e ium $earnin! %& ecti e: 5*5

5-'1






'0. (p. 100) ne #ay the 4nternet and digital technologies are creating opportunities $or $irms#ith di$$erentiation strategies is "y ena"ling mass customi8ation.T#$"

AACSB: Analytic Bloom's: Compre,ension "ifficulty: -e ium $earnin! %& ecti e: 5*

'1. (p. 10 ) %he 4nternet o$$ers $e# advantages $or $ocusers "ecause niche players and smallcompanies cannot implement capa"ilities as e$$ectively as their larger competitors.FALS"


''. (p. 10 ) %he 4nternet has provided a small su"set o$ companies #ith greater tools $ormanaging costs.FALS"


'(. (p. 10 ) 4ncum"ent $irms that thought a niche mar6et #as too small to enter in the past mayuse 4nternet technologies to enter that segment #ith $ocusers.T#$"


"ifficulty: -e ium $earnin! %& ecti e: 5*

5-'(






' . (p. 1 /) As mar6ets mature competition on the "asis o$ di$$erentiation is pre$era"le to pricecompetition.T#$"


'3. (p. 1 /) As mar6ets mature the magnitude o$ di$$erentiation and cost leadership advantagesamong competitors decrease.T#$"


(0. (p. 1 / * 1 2) 7ith reverse positioning a strategy to "e used during the mature stage o$ theindustry li$e cycle a product escapes its category "y deli"erately associating #ith a di$$erentone.FALS"

AACSB: Analytic Bloom's: Knowle !e "ifficulty: #asy $earnin! %& ecti e: 5*0

(1. (p. 1 2 * 1 ) Businesses that compete in mar6ets that are in decline should simply "eharvested or divested since they are no longer pro$ita"le.FALS"


5-'5




('. (p. 1 5) +uring the decline stage o$ the product li$e cycle a harvesting strategy means that a$irm 6eeps a product going #ithout signi$icantly reducing mar6eting support technologicaldevelopment or other investments #hile hoping that competitors #ill e it the mar6et.FALS"


((. (p. 1 ) %he decline stage o$ the industry li$e cycle stage is inevita"ly $ollo#ed "y death.FALS"


(,. (p. 1 0) Many $irms $acing a turnaround situation try to reduce their costs "y outsourcing the production o$ many inputs.T#$"


ultiple Choi!e Questions

(5. (p. 150) %he primary aim o$ strategic management at the "usiness level isA. ma imi8ing ris6-return tradeo$$s through diversi$ication.B. achieving a lo# cost position.C. ma imi8ing di$$erentiation o$ products and;or services.%& achieving competitive advantage<s=.


5-'/




(/. (p. 1 1) rimary value chain activities that involve the e$$ective layout o$ receiving doc6operations <in"ound logistics= and support value chain activities that include e pertise in

process engineering <technology development= characteri8e #hat generic strategy>A. di$$erentiation

B& overall cost leadershipC. di$$erentiation $ocus+. stuc6-in-the-middle


( . (p. 1 +) A manu$acturing "usiness pursuing cost leadership #ill li6ely

A. $ocus on a narro# mar6et segment.B& rely on e perience e$$ects to raise e$$iciency.C. use advertising to "uild "rand image.+. put heavy emphasis on product engineering.


( . (p. 1 +) ne aspect o$ using a cost leadership strategy is that e perience e$$ects may lead tolo#er costs. ? perience e$$ects are achieved "yA. hiring more e perienced personnel.B& repeating a process until a tas6 "ecomes easier.C. spreading out a given e pense or investment over a greater volume.+. competing in an industry a long time.


5-'




(3. (p. 1 +) %he e perience curve suggests that cutting prices is a good strategyA& i$ it can induce greater demand and there"y help a $irm travel do#n the e perience curve$aster.B. in industries characteri8ed "y high economies o$ scale.

C. in the maturity stage o$ the industry li$e cycle.+. in the decline stage o$ the industry li$e cycle.


,0. (p. 1 / * 1 2) Convincing rivals not to enter a price #ar protection $rom customer pressure tolo#er prices and the a"ility to "etter #ithstand cost increases $rom suppliers characteri8e

#hich type o$ competitive strategy>A& verall cost leadership.B. +i$$erentiation.C. +i$$erentiation $ocus.+. Cost leadership $ocus.

AACSB: Analytic Bloom's: Knowle !e "ifficulty: #asy $earnin! %& ecti e: 5*/

,1. (p. 1 2 * 1 5) 7hich o$ the $ollo#ing is a ris6 <or potential pit$all= o$ cost leadership>A& Cost cutting may lead to the loss o$ desira"le $eatures.B. Attempts to stay ahead o$ the competition may lead to gold plating.C. Cost di$$erences increase as the mar6et matures.+. roducers are more a"le to #ithstand increases in suppliers! cost.


5-'






,5. (p. 1 0 * 1 ) 7hich o$ the $ollo#ing is false regarding ho# a di$$erentiation strategy can helpa $irm to improve its competitive position vis- -vis orter!s $ive $orces>A. By increasing a $irm!s margins it avoids the need $or a lo# cost position.B. 4t helps a $irm to deal #ith supplier po#er and reduces "uyer po#er since "uyers lac6

compara"le alternatives.C& Supplier po#er is increased "ecause suppliers #ill "e a"le to charge higher prices $or theirinputs.+. &irms #ill en oy high customer loyalty thus e periencing less threat $rom su"stitutes thanits competitors.


,/. (p. 1 0 * 1 ) A di$$erentiation strategy ena"les a "usiness to address the $ive competitive$orces "yA& lessening competitive rivalry "y distinguishing itsel$.B. having "rand-loyal customers "ecome more sensitive to prices.C. increasing economies o$ scale.+. serving a "roader mar6et segment.


, . (p. 1 * 1 9) All o$ the $ollo#ing are potential pit$alls o$ a di$$erentiation strategy except :A. uni2ueness that is not valua"le.B. too high a price premium.C& all rivals share a common input or ra# material.+. perceptions o$ di$$erentiation may vary "et#een "uyers and sellers.


5-(0






51. (p. 10+) All o$ the $ollo#ing are potential pit$alls o$ a $ocus strategy except A. erosion o$ cost advantages #ithin the narro# segment.B& all rivals share a common input or ra# material.C. even product and service o$$erings that are highly $ocused are su" ect to competition $rom

ne# entrants and $rom imitation.+. $ocusers can "ecome too $ocused to satis$y "uyer needs.


5'. (p. 10+ * 10/) )esearch has consistently sho#n that $irms that achieve "oth cost leadership anddi$$erentiation advantages tend to per$orm

A. at a"out the same level as $irms that achieve either cost or di$$erentiation advantages.B. a"out the same as $irms that are 9stuc6-in-the-middle.9C. lo#er than $irms that achieve di$$erentiation advantages "ut higher than $irms that achievecost advantages.%& higher than $irms that achieve either a cost or a di$$erentiation advantage.


5(. (p. 10/ * 105) %he te t discusses three approaches to com"ining overall cost leadership anddi$$erentiation competitive advantages. %hese are the $ollo#ing except A. automated and $le i"le manu$acturing systems.B. e ploiting the pro$it pool concept $or competitive advantage.C. coordinating the 9e tended9 value chain "y #ay o$ in$ormation technology.%& deriving "ene$its $rom highly $ocused and high technology mar6ets.



5-('






5 . (p. 100) +ell Computer has an online ordering system that allo#s consumers to con$iguretheir o#n computers "e$ore +ell "uilds them. %his capa"ility is an e ample o$A. electronic data interchange.B. 6no#ledge management.

C. colla"orative design.%& mass customi8ation.


5 . (p. 100) 7hich o$ the $ollo#ing methods o$ implementing a di$$erentiation strategy has "eengreatly enhanced "ecause o$ 4nternet technologies>

A. cele"rity endorsementsB. prestige pac6agingC. e ceptional service%& mass customi8ation


53. (p. 10 ) 7hich o$ the $ollo#ing phrases "est completes this sentence: Because o$ the4nternet $irms that use a $ocus strategy have ne# opportunities toA. respond 2uic6ly to customer re2uests.B. provide more services and $eatures.C. access mar6ets less e pensively.%& access niche mar6ets in a highly speciali8ed $ashion.


5-(,




/0. (p. 109) ne o$ the reasons the 4nternet is eroding sustaina"le competitive advantages isA. incum"ent $irms are entering mar6et segments that they previously considered to "e toosmall.B& nearly all competitors #ill have greater access to tools $or managing costs ma6ing it hard

$or any one to achieve an advantage.C. di$$erentiators have "een a"le to preserve the uni2ue advantages that have al#ays "een thehallmar6 o$ their success.+. $irms are ignoring opportunities to o$$er high-end services in niche mar6ets.


/1. (p. 1 1) 7hich o$ these statements regarding the industry li$e cycle is correct>A. art o$ the po#er o$ the mar6et li$e cycle is its a"ility to serve as a short-run $orecastingdevice.B. %rends suggested "y the mar6et li$e cycle model are generally not reversi"le or repeata"le.C& 4t has important implications $or a $irm!s generic strategies $unctional areas value-creatingactivities and overall o" ectives.+. 4t points out the need to maintain a di$$erentiation advantage and a lo# cost advantagesimultaneously.

AACSB: Analytic

Bloom's: Compre,ension "ifficulty: -e ium $earnin! %& ecti e: 5*0

/'. (p. 1 +) 7hich o$ the $ollo#ing statements a"out the introduction stage o$ the mar6et li$ecycle is true >A. 4t produces relatively large positive cash $lo#s.B. Strong "rand recognition seldom serves as an important s#itching cost.C. Mar6et share gains "y pioneers are usually easily sustained $or many years.%& roducts or services o$$ered "y pioneers may "e perceived as di$$erentiated simply "ecausethey are ne#.


5-(5




/(. (p. 1 +) 4n the stage o$ the industry li$e cycle the emphasis on product design isvery high the intensity o$ competition is lo# and the mar6et gro#th rate is lo#.A& introductionB. gro#th

C. maturity+. decline


/,. (p. 1 + * 1 /) %he gro#th stage o$ the industry li$e cycle is characteri8ed "yA. 9in-6ind9 competition <$rom the same type o$ product=.

B& premium pricing.C. a gro#ing trend to compete on the "asis o$ price.+. retaliation "y competitors #hose customers are stolen.


/5. (p. 1 /) 4n the stage o$ the industry li$e cycle there are many segments

competition is very intense and the emphasis on process design is high.A. introductionB. gro#thC& maturity+. decline


5-(/




//. (p. 1 /) 4n a given mar6et 6ey technology no longer has patent protection e perience is notan advantage and there is a gro#ing need to compete on price. 7hat stage o$ its li$e cycle isthe mar6et in>A. introduction

B. gro#thC& maturity+. decline


/ . (p. 1 /) A mar6et that mainly competes on the "asis o$ price and has stagnant gro#th is

characteristic o$ #hat li$e cycle stage>A. introductionB. gro#thC& maturity+. decline


/ . (p. 1 /) As mar6ets matureA. costs continue to increase.B. application $or patents increase.C. di$$erentiation opportunities increase.%& there is increasing emphasis on e$$iciency.


5-(




/3. (p. 1 /) %he si8e o$ pricing and di$$erentiation advantages "et#een competitors decreases in#hich stage o$ the mar6et li$e cycle>A. introductionB. gro#th

C& maturity+. decline


0. (p. 1 /) 7hich o$ the $ollo#ing is most o$ten true o$ mature mar6ets>A. Some competitors en oy a signi$icant operating advantage due to increasing e perience

e$$ects.B. %he mar6et supports premium pricing #hich attracts additional competitors.C& Advantages that cannot "e duplicated "y other competitors are di$$icult to achieve.+. %he magnitude o$ pricing di$$erences and product di$$erentiation is larger than in thegro#th stage.


1. (p. 1 2) 4n the stage o$ the industry li$e cycle there are $e# segments theemphasis on process design is lo# and the ma or $unctional areas o$ concern are generalmanagement and $inance.A. introductionB. gro#thC. maturity%& decline


5-(




'. (p. 1 5) %he most li6ely time to pursue a harvest strategy is in a situation o$A. high gro#th.B. strong competitive advantage.C. mergers and ac2uisitions.

%& decline in the mar6et li$e cycle.


(. (p. 1 5) +uring the decline stage o$ the industry li$e cycle re$ers to o"taining asmuch pro$it as possi"le and re2uires that costs "e decreased 2uic6ly.A. maintaining

B& harvestingC. e iting+. consolidating


,. (p. 1 0) )esearch sho#s that the $ollo#ing are all strategies used "y $irms engaged in

success$ul turnarounds except A. asset and cost surgery.B. selective product and mar6et pruning.C& glo"al e pansion.+. piecemeal productivity improvements.

AACSB: Analytic Bloom's: Knowle !e "ifficulty: #asy $earnin! %& ecti e: 5*

5-(3




5. (p. 1 0) iecemeal productivity improvements during a turnaround typically does not involveA. "usiness process reengineering.B. increased capacity utili8ation.

C. "enchmar6ing.%& e pansion o$ a $irm!s product mar6et scope.


"ssay Questions

/. (p. 1 * 1 1) Dse the value chain as a $rame#or6 to e plain ho# a $irm can achieve acompetitive advantage o$ overall cost leadership.

Ans#ers #ill vary.


. (p. 1 / * 1 2) ? plain ho# a cost leadership strategy permits a $irm to address the $ive $orcesin their competitive environment so it can en oy higher-than-normal pro$its.

Ans#ers #ill vary.


5-,0




. (p. 1 5 * 1 0) +iscuss ho# a competitive advantage can "e attained through di$$erentiationusing the value chain concept.

Ans#ers #ill vary.


3. (p. 1 0 * 1 ) ? plain ho# a di$$erentiation strategy ena"les a "usiness to address the $ivecompetitive $orces in such a #ay that it can en oy high levels o$ pro$ita"ility.

Ans#ers #ill vary.


0. (p. 1 2 * 1 54 1 * 1 94 10+ respecti ely) +iscuss the ris6s associated #ith each o$ these $orms o$competitive advantage: overall cost leadership di$$erentiation and $ocus.

Ans#ers #ill vary.


1. (p. 10+ * 10 ) 7hat are the "ene$its and ris6s associated #ith com"ining overall costleadership and di$$erentiation strategies>

Ans#ers #ill vary.


5-,1




'. (p. 109 * 1 ) +iscuss the uses and limitations associated #ith the industry li$e cycle conceptas a $rame#or6 $or studying strategy $ormulation at the "usiness level.

Ans#ers #ill vary.


(. (p. 1 / * 1 2) +escri"e the t#o positioning strategiesEreverse positioning and "rea6a#ay positioning that $irms can use #hen $aced #ith the maturity phase o$ the industry li$e cycle.

Ans#ers #ill vary.


,. (p. 1 2 * 1 ) Brie$ly e plain the advantages o$ the $our alternativesEmaintaining harvestinge iting consolidatingEassociated #ith the decline stage o$ the mar6et li$e cycle.

Ans#ers #ill vary.


5. (p. 1 0) +iscuss some o$ the e$$ective turnaround strategies.

Ans#ers #ill vary.


Chap 005- test bank

Documents