MGT ch5

A ketchup manufacturer convinces a supplier who makes vinegar to set up a nearby plant. Which of the following benefits will the ketchup manufacturer be least assured of?

A. Improved value chain system
B. Improved overall quality control
C. Lower incoming shipping costs
D. Just-in-time deliveries
E. Reduced storage needs

B. Improved overall quality control
Which of the following would NOT lead to cost savings?

A. A company that sets up its own direct sales force
B. A company that eliminates low-value-added work steps
C. A company that motivates employees through incentives
D. A company that conducts sales operations at its website
E. A company that sources the best from suppliers across the world

E. A company that sources the best from suppliers across the world
While there are many routes to competitive advantage, the two biggest factors that distinguish one competitive strategy from another are:

A. whether a company can build a brand name and an image that buyers trust.
B. whether a company’s target market is broad or narrow and whether the company is pursuing a low cost or differentiation strategy.
C. whether a company can achieve lower costs than rivals and whether the company is pursuing the industry’s sales and market share leader’s role.
D. whether a company can offer the lowest possible prices and whether the company can get the best suppliers in the market.
E. whether a company’s overall costs are lower than competitors’ and whether the company can achieve strong product differentiation.

B. whether a company’s target market is broad or narrow and whether the company is pursuing a low cost or differentiation strategy.
Whatever strategic approach is adopted by a company to deliver value, it nearly always requires:

A. that management undertake formal planning sessions with functional departments to ensure productivity improvement.
B. the identification of strengths and weaknesses within the company.
C. matching corporate identity with the corporate culture in order to integrate effort and build sales momentum.
D. performing value chain activities differently than rivals and building competitively valuable resources and capabilities that rivals cannot readily match.
E. constant efforts to thwart entry of new rivals and their attempts to create differentiated products with unit costs above price premium.

D. performing value chain activities differently than rivals and building competitively valuable resources and capabilities that rivals cannot readily match.
The biggest and most important differences among the competitive strategies of different companies boil down to:

A. how they go about building a brand name image that buyers trust and whether they are a risk-taker or risk-avoider.
B. the different ways the companies try to cope with the five competitive forces.
C. whether a company’s market target is broad or narrow and whether the company is pursuing a competitive advantage linked to low cost or differentiation.
D. the kinds of actions companies take to improve their competitive assets and reduce their competitive liabilities.
E. the relative emphasis they place on offensive versus defensive strategies.

C. whether a company’s market target is broad or narrow and whether the company is pursuing a competitive advantage linked to low cost or differentiation.
An automotive manufacturer sells a limited number of high-end, custom-built cars, using technologically advanced power systems. What strategy is the manufacturer using to gain competitive advantage?

A. A low-cost provider strategy
B. A broad differentiation strategy
C. A focused low-cost strategy
D. A focused differentiation strategy
E. A best-cost provider strategy

D. A focused differentiation strategy
The generic types of competitive strategies include:

A. market share growth provider, sales revenue leader strategy, and market share retention strategy.
B. offensive strategies, defensive strategies, and counter maneuvers strategies.
C. low-cost provider, broad differentiation, best-cost provider, focused low-cost, and focused differentiation strategies.
D. low-cost/low-price strategies, high-quality/high-price strategies, and medium quality/medium price strategies.
E. price leader strategies, price follower strategies, technology leader strategies, and first-mover strategies.

C. low-cost provider, broad differentiation, best-cost provider, focused low-cost, and focused differentiation strategies.
Which of the following generic types of competitive strategies is typically the “best” strategy for a company to employ?

A. A strategy that seeks to underprice rivals on comparable products that attract a broad spectrum of buyers
B. A strategy that seeks to differentiate product offerings from rivals by offering superior attributes that attract a broad spectrum of buyers
C. A strategy that concentrates on a narrow buyer segment and outcompetes rivals by offering niche members customized attributes
D. A strategy that concentrates on value-conscious buyers and outcompetes rivals by offering products at attractive prices
E. A strategy that is customized to fit the macro-environment and industry and employs resources and capabilities that rivals have trouble duplicating

E. A strategy that is customized to fit the macro-environment and industry and employs resources and capabilities that rivals have trouble duplicating
A low-cost leader’s basis for competitive advantage is:

A. lowest possible prices for comparable products.
B. a low-cost/moderate price approach to gain the biggest market share.
C. high buyer switching costs.
D. meaningful lower overall costs than rivals on comparable products.
E. higher unit sales than rivals.

D. meaningful lower overall costs than rivals on comparable products.
Low-cost leaders who have the lowest industry costs are likely to:

A. have out managed rivals in finding ways to perform value chain activities more cost-effectively.
B. be considering exiting the current product market and use their competitive low-cost strength to gain a competitive advantage in other product arenas.
C. be favorites to win the game of strategy in the long run.
D. understand that driving costs to the lowest possible level is the only way to sell cheap products to consumers.
E. understand that they have lower bargaining power with suppliers than rivals who employ a different strategy.

A. have out managed rivals in finding ways to perform value chain activities more cost-effectively.
How valuable a low-cost leader’s cost advantage is depends on:

A. whether it is easy or inexpensive for rivals to copy the low-cost leader’s methods or otherwise match its low costs.
B. how easy it is for the low-cost leader to gain the biggest market share.
C. the aggressiveness with which the low-cost leader pursues converting the cost advantage into the absolute lowest possible costs.
D. the leader’s ability to combine the cost advantage with a reputation for good quality.
E. the low-cost leader’s ability to be the industry leader in manufacturing innovation so as to keep lowering its manufacturing costs.

A. whether it is easy or inexpensive for rivals to copy the low-cost leader’s methods or otherwise match its low costs.
A low-cost leader can translate its low-cost advantage over rivals into superior profit performance by:

A. underpricing rivals and attracting quality-sensitive buyers in great enough numbers.
B. maintaining the present price, and using the lower-cost edge to earn a higher profit margin on each unit sold.
C. going all out to use its cost advantage to capture a dominant share of the market.
D. spending heavily on advertising to promote its cost advantage to build strong customer loyalty.
E. out-producing rivals and thus having more available units for sale.

B. maintaining the present price, and using the lower-cost edge to earn a higher profit margin on each unit sold.
Domino’s Pizza has a well-known slogan: “We’ll deliver in 30 minutes or less, or it’s free!” With it what has the pizza maker achieved?

A. Built a unique customer value proposition
B. Created a new delivery system
C. Given a sense of exclusivity to its customers
D. Coordinated with suppliers to better address customer needs
E. Emphasized human resource management activities

A. Built a unique customer value proposition
The major avenues for achieving a cost advantage over rivals include:

A. performing value chain activities more cost-effectively than rivals or revamping the firm’s overall value chain to eliminate or bypass some cost-producing activities.
B. having a management team that is highly skilled in cutting costs.
C. being a first-mover in adopting the latest state-of-the-art technologies, especially those relating to low-cost manufacture.
D. outsourcing high-cost activities to cost-efficient vendors.
E. paying lower wages and salaries than rivals

A. performing value chain activities more cost-effectively than rivals or revamping the firm’s overall value chain to eliminate or bypass some cost-producing activities.
Achieving a sure cost advantage over rivals entails:

A. concentrating on the primary activities portion of the value chain and outsourcing all support activities.
B. being a first-mover in pursuing backward and forward integration and controlling as much of the industry value chain as possible.
C. selling a mostly standard product and increasing the scale of operation.
D. minimizing R&D expenses and paying below-average wages and salaries to conserve on labor costs.
E. producing a standard product, redesigning the product infrequently, and having minimal advertising.

C. selling a mostly standard product and increasing the scale of operation.
A fast-food restaurant stocks bread, meat, sauces, and other main ingredients, but does not assemble and cook its burgers and sandwiches until a customer places an order. Which cost driver is the restaurant efficiently using to cut costs?

A. Supply chain efficiencies
B. Economies of scale
C. Incentive systems and culture
D. Bargaining power
E. Capacity utilization

A. Supply chain efficiencies
Which of the following is NOT an action that a company should take to perform value chain activities more cost-effectively?

A. Striving to capture all available economies of scale and taking advantage of experience and learning-curve effects
B. Trying to operate facilities at full capacity
C. Adopting labor-saving operating methods
D. Improving supply chain efficiency
E. Over-differentiating so that product features exceed the needs of most buyers

E. Over-differentiating so that product features exceed the needs of most buyers
Cost-efficient management of a company’s overall value chain activities requires that management:

A. ferret out cost-saving opportunities in every part of the value chain.
B. undertake an operations functionality redesign.
C. establish sales productivity and operating practices guidelines.
D. re-create rivals’ assembly plant structuration savings.
E. pursue a differentiation strategy that can be easily copied.

A. ferret out cost-saving opportunities in every part of the value chain.
Which of the following is NOT one of the ways that a company can achieve cost-efficient management of its value chain activities?

A. Striving to ensure a corporate diversity policy is introduced with effective controls
B. Using the company’s strong bargaining power vis-à-vis suppliers or others in the value chain
C. Being alert to the cost advantages of outsourcing or vertical integration
D. Striving to capture all available economies of scale
E. Motivating employees through incentives and company culture

A. Striving to ensure a corporate diversity policy is introduced with effective controls
The culture of a company can be a cost-efficient value chain activity because it can:

A. allow for safeguarding internalized operating benefits.
B. distinguish a company’s capacity integration efforts.
C. spur worker pride in productivity and continuous improvement.
D. foster quality technological enhancements.
E. increase a company’s bargaining power with suppliers.

C. spur worker pride in productivity and continuous improvement.
Which of the following is NOT one of the ways that a company that a non-capital-intensive can achieve a cost advantage by revamping its value chain?

A. Creating a direct sales force and bypassing activities and costs of distributors and dealers
B. Conducting sales operations at the company’s website
C. Increasing production capacity and then striving hard to operate at full capacity
D. Relocating facilities so as to curb the cost for shipping and handling activities
E. Streamlining operations by eliminating low value-added or unnecessary work steps and activities

C. Increasing production capacity and then striving hard to operate at full capacity
An example of how companies can revamp their value chain to reduce costs is to:

A. have suppliers locate their plants close to companies’ own facilities.
B. continue to utilize traditional methods of distribution and sales.
C. not make any changes in product manufacturing but change end distribution methods.
D. increase extra services to increase staffing requirements.
E. facilitate the learning curve by providing superior training to new employees.

A. have suppliers locate their plants close to companies’ own facilities.
Which of the following companies is using cost drivers effectively to manage value chain activities cost efficiently?

A. Company A orders large amounts of supplies and keeps them stocked till customer demand rises to prevent falling behind schedule in meeting customer needs.
B. Company B uses just-in-time inventories and produces made-to-order products as and when customer demand rises.
C. Company C collects customer requests first and starts processing them only after reaching a certain number.
D. Company D routes all its supplies to a warehouse for storage and then transports them to individual factories for processing.
E. Company E substitutes lower-cost inputs with high-quality, high-cost inputs to gain customer attention and loyalty.

B. Company B uses just-in-time inventories and produces made-to-order products as and when customer demand rises.
A potato chip manufacturer purchases a potato farm. Which of the following regarding its strategy is true?

A. The manufacturer has effectively used vertical integration to increase its bargaining position and reduce transaction costs.
B. The manufacturer has efficiently capitalized on the experience and learning-curve effects within the company.
C. The manufacturer has enhanced utilization by allowing depreciation and other fixed costs to be spread over a larger unit volume.
D. The manufacturer has sacrificed quality by using a lower-cost input.
E. The manufacturer has effectively reduced its operating costs by outsourcing its activities.

A. The manufacturer has effectively used vertical integration to increase its bargaining position and reduce transaction costs.
A competitive strategy of striving to be the low-cost provider is particularly attractive when:

A. buyers are not very price-conscious.
B. most rivals are trying to be best-cost providers.
C. there are many ways to achieve product differentiation that have value to buyers.
D. most buyers use the product in much the same ways, with user requirements calling for a standardized product.
E. most rivals are pursuing focused low-cost or focused differentiation strategies.

D. most buyers use the product in much the same ways, with user requirements calling for a standardized product.
Being the overall low-cost provider in an industry has the attractive advantage of:

A. building strong customer loyalty and locking customers into its product because customers have high switching costs.
B. giving the firm a very appealing brand image.
C. putting a firm in the best position to win the business of price-sensitive customers and earn profits by setting the floor on market price.
D. putting the company in a strong position to be more profitable than companies pursuing a differentiation strategy.
E. greatly reducing the strong bargaining power of rivals with the key distributors.

C. putting a firm in the best position to win the business of price-sensitive customers and earn profits by setting the floor on market price.
A competitive strategy to be the low-cost provider in an industry works well when:

A. price competition among rival sellers is especially sluggish.
B. there are numerous ways to achieve product differentiation that have no value to buyers.
C. buyers incur high costs in switching their purchases from one seller/brand to another.
D. industry newcomers use introductory low prices to attract buyers and build a customer base.
E. industry newcomers use high introductory prices to let buyers know they have a superior product to build a customer base.

D. industry newcomers use introductory low prices to attract buyers and build a customer base.
A competitive strategy predicated on low-cost leadership tends to work best when:

A. there are widely varying needs and preferences among the various buyers of the product or service.
B. there are many market segments and market niches, such that it is feasible for a low-cost leader to dominate the niche where buyers want a budget-priced product.
C. price competition among rivals is especially vigorous and the offerings of rival firms are essentially identical, standardized, commodity-like products.
D. buyers prefer that the products/services of competing sellers have widely varying attributes and prices.
E. buyers have high switching costs and there is considerable diversity in how buyers use the product.

C. price competition among rivals is especially vigorous and the offerings of rival firms are essentially identical, standardized, commodity-like products.
In which of the following circumstances is a strategy to be the industry’s overall low-cost provider NOT particularly well-matched to the market situation?

A. When the offerings of rival firms are essentially identical and readily available from many eager sellers
B. When there are few ways to achieve differentiation that have value to buyers
C. When price competition among rival sellers is especially vigorous
D. When buyers have widely varying needs and special requirements, and the prices of substitute products are relatively high
E. When the majority of industry sales are made to a few, large-volume buyers

D. When buyers have widely varying needs and special requirements, and the prices of substitute products are relatively high
A strategy to be the industry’s overall low-cost provider tends to be more appealing than a differentiation or best-cost or focus/market niche strategy when:

A. there are many ways to achieve product differentiation that buyers find appealing.
B. buyers use the product in a variety of different ways and have high switching costs in changing from one seller’s product to another.
C. the offerings of rival firms are essentially identical, standardized, commodity-like products.
D. entry barriers are high and competition from substitutes is relatively weak.
E. the market is composed of many distinct segments with varying buyer needs and expectations.

C. the offerings of rival firms are essentially identical, standardized, commodity-like products.
Which of the following is NOT one of the pitfalls of a low-cost provider strategy?

A. Overly aggressive price-cutting
B. Setting the industry’s price ceiling to capture volume gains and achieve economies of scale
C. Relying on an approach to reduce costs that can be easily copied
D. Becoming too fixated on cost reduction
E. Having the basis for the firm’s cost advantage undermined by cost-saving technological breakthroughs that can be readily adopted by rival firms

B. Setting the industry’s price ceiling to capture volume gains and achieve economies of scale
A low-cost provider’s product does NOT have to always:

A. contain enough attributes to be attractive to prospective buyers.
B. suggest strong rather than weak product differentiation.
C. signal value to buyers.
D. provide high margins per unit sold to bring in enough unit sales.
E. be valuable and appealing to a wide range of buyers.

B. suggest strong rather than weak product differentiation.
The essence of a broad differentiation strategy is to:

A. appeal to the high-end part of the market and concentrate on providing a top-of-the-line product to consumers.
B. incorporate a greater number of differentiating features into its product/service than rivals.
C. lower buyer switching costs.
D. outspend rivals on advertising and promotion in order to inform and convince buyers of the value of its differentiating attributes.
E. offer unique product attributes in ways that are valuable and appealing and that buyers consider worth paying for.

E. offer unique product attributes in ways that are valuable and appealing and that buyers consider worth paying for.
A company attempting to be successful with a broad differentiation strategy has to:

A. study buyer needs and behavior carefully to learn what buyers consider important, what they think has value, and what they are willing to pay for.
B. incorporate more differentiating features into its product/service than rivals.
C. concentrate its differentiating efforts on marketing and advertising (where almost all differentiating features are created).
D. over-differentiate so that product quality, features, or service levels exceed the needs of most buyers
E. concentrate on offering advanced features, whether or not they have value to the customers, to create unique products

A. study buyer needs and behavior carefully to learn what buyers consider important, what they think has value, and what they are willing to pay for.
Successful broad differentiation allows a firm to:

A. be the industry’s best-cost provider.
B. set the industry ceiling on price.
C. avoid being dragged into a price war with industry rivals and not be overly concerned about whether entry barriers into the industry are high or low.
D. command a premium price for its product, and/or increase unit sales, and/or gain buyer loyalty to its brand.
E. take sales and market share away from rivals by undercutting them on price.

D. command a premium price for its product, and/or increase unit sales, and/or gain buyer loyalty to its brand.
Which of the following is NOT true of a company that succeeds in differentiating its product offering from those of its rivals?

A. It can avoid having to compete on the basis of simply a low price.
B. It commands a premium price for its product.
C. It usually increases unit sales.
D. It gains buyer loyalty to its brand.
E. It attracts mainly price-conscious buyers.

E. It attracts mainly price-conscious buyers.
A broad differentiation strategy improves profitability when:

A. it is focused on product innovation.
B. differentiating enhances product performance and quality.
C. the differentiating features appeal to sophisticated and prestigious buyers.
D. the higher price the product commands exceeds the added costs of achieving the differentiation.
E. the differentiator charges a price that is only fractionally higher than the industry’s low-cost provider.

D. the higher price the product commands exceeds the added costs of achieving the differentiation.
Whether a broad differentiation strategy ends up enhancing a company’s profitability depends mainly on whether:

A. many buyers view the product’s differentiating features as having value.
B. most buyers have similar needs and use the product in the same ways.
C. most buyers accept the customer value proposition as unique and the product can produce sufficient unit sales to cover the costs of achieving the differentiation.
D. buyer switching costs are low and customer loyalty to any one brand is low.
E. buyers are prone to shop the market for sellers offering the best price.

C. most buyers accept the customer value proposition as unique and the product can produce sufficient unit sales to cover the costs of achieving the differentiation.
Opportunities to differentiate a company’s product offering:

A. are most reliably found in the R&D portion of the value chain.
B. are typically located in the sales and marketing portion of the value chain.
C. can exist in activities all along an industry’s value chain.
D. usually are tied to product quality and customer service.
E. are most frequently attached to a company’s manufacturing expertise and to its ability to achieve economies of scale in production.

C. can exist in activities all along an industry’s value chain.
What are value drivers?

A. A set of factors (analogous to cost drivers) that are particularly effective in having a strong differentiation effect
B. A firm’s hidden success factor for creating over-the-top product features that will command the highest price in the industry
C. A technique for easily identifying factors that validate a firm’s performance
D. A set of factors that verify the unique nature of a firm
E. A set of guidelines for identifying the most promising upscale attributes to incorporate into a product

A. A set of factors (analogous to cost drivers) that are particularly effective in having a strong differentiation effect
Which of the following is NOT one of the ways managers can enhance differentiation based on value drivers?

A. Striving to create superior product features, design, and performance
B. Striving for innovation and technological advances
C. Pursuing continuous quality improvement
D. Increasing the intensity of marketing, brand building, and sales activities
E. Seeking out low-quality inputs

E. Seeking out low-quality inputs
Brands create customer loyalty, which in turn:

A. increases the perceived cost of switching to another product.
B. strengthens the product’s quality.
C. validates the motivation for alternate products.
D. provides monetary incentive for using the product.
E. allows a company to operate facilities at full capacity.

A. increases the perceived cost of switching to another product.
Pursuing continuous quality improvement as a uniqueness factor is sound because it:

A. can create differentiation even if little tangible differentiation exists otherwise.
B. bestows the first-mover-in-the-market advantage on companies practicing it.
C. can often reduce product defects and improve economy of use.
D. always provides a competitive advantage.
E. provides wider product variety and selection through product versioning.

C. can often reduce product defects and improve economy of use.
Approaches to enhancing differentiation through changes in the value chain do NOT include:

A. coordinating with retailers to enhance the buying experience and building a company’s image.
B. coordinating with suppliers to speed up new product development cycles.
C. coordinating with distributors or shippers to lower shipping costs.
D. collaborating with suppliers to improve many dimensions affecting product features and quality.
E. coordinating with employees to create a greater incentive systems to encourage worker productivity

E. coordinating with employees to create a greater incentive systems to encourage worker productivity
The objective of differentiation is to:

A. offer customers something rivals can’t, at least in terms of the level of satisfaction.
B. develop strategies that are different from those of rivals.
C. establish objectives that are measurable and meaningful when it comes to sales growth.
D. offer customers a sustainable competitive advantage.
E. offer a diverse range of comparable products with low switching costs.

A. offer customers something rivals can’t, at least in terms of the level of satisfaction.
A route to take in developing a differentiation advantage includes:

A. incorporating product attributes and user features that raise the buyer’s overall costs, but keep the price minimal.
B. incorporating tangible features that add functionality, increase customer satisfaction with the product specifications, functions, and styling.
C. signaling value by targeting sophisticated buyers.
D. incorporating intangible features that enhance buyer satisfaction in economic ways.
E. emphasizing high quality and performance of products through a standard and simple, no-fuss packaging.

B. incorporating tangible features that add functionality, increase customer satisfaction with the product specifications, functions, and styling.
An organic foods manufacturer insists on portraying the cleanliness of its farms in its advertisements, charges a higher price for its products, and sells its products only through reputable distributors. What strategy is the manufacturer using to deliver superior value to customers?

A. Signaling the value of the company’s product offering to buyers
B. Incorporating intangible features
C. Incorporating tangible features
D. Lowering the buyer’s overall cost
E. Lowering the overall bargaining power from suppliers

A. Signaling the value of the company’s product offering to buyers
A differentiation-based competitive advantage:

A. nearly always is attached to the quality and service aspects of a company’s product offering.
B. usually is the result of highly effective marketing and advertising to enhance the brand, raise awareness, and build consistent customer experience.
C. requires developing at least one distinctive competence that buyers consider valuable.
D. hinges on a company’s success in developing top-of-the-line product features that will command the highest price premium in the industry.
E. often hinges on incorporating features that raise the performance of the product or lower the buyer’s overall costs of using the company’s product, or enhances buyer satisfaction in intangible or noneconomic ways, or delivers value to customers by differentiating on the basis of competencies and capabilities that rivals can’t match.

E. often hinges on incorporating features that raise the performance of the product or lower the buyer’s overall costs of using the company’s product, or enhances buyer satisfaction in intangible or noneconomic ways, or delivers value to customers by differentiating on the basis of competencies and capabilities that rivals can’t match.
Which of the following is NOT one of the four basic routes to achieving a differentiation-based competitive advantage?

A. Delivering value to customers via the company’s resources, competencies, and value chain activities that rivals don’t have or can’t afford to match and are well-matched to the requirements of the strategy
B. Incorporating tangible features that raise product performance and increase customer satisfaction with the product
C. Incorporating product attributes and user features that lower the buyer’s overall costs of using the company’s product
D. Appealing to buyers who are sophisticated and shop hard for the best, stand-out differentiating attributes
E. Incorporating features that enhance buyer satisfaction in intangible or noneconomic ways

D. Appealing to buyers who are sophisticated and shop hard for the best, stand-out differentiating attributes
Achieving a differentiation-based competitive advantage does NOT involve:

A. incorporating product attributes and user features that lower a buyer’s overall cost of using the product.
B. incorporating features that raise the performance a buyer gets from using the product.
C. incorporating features that enhance buyer satisfaction in noneconomic or intangible ways.
D. delivering value to customers via competencies and competitive capabilities that rivals don’t have or can’t afford to match.
E. appealing to buyers on the basis of attributes that rivals are emphasizing

E. appealing to buyers on the basis of attributes that rivals are emphasizing
Perceived value and signaling value are often an important part of a successful differentiation strategy because:

A. of the standardization of buyer needs and preferences.
B. buyers seldom will pay for value they don’t perceive, no matter how real the value of the differentiating extras may be.
C. buyer satisfaction cannot be achieved until a product’s value is promoted through clever ads.
D. differentiation is all about selling products to sophisticated buyers.
E. there are no other ways to differentiate a product.

B. buyers seldom will pay for value they don’t perceive, no matter how real the value of the differentiating extras may be.
Broad differentiation strategies are well-suited for market circumstances where:

A. there are many ways to differentiate the product or service that have value to buyers.
B. most buyers have the same needs and use the product in the same ways.
C. technological changes are slow-paced.
D. barriers to entry are high and suppliers have a low degree of bargaining power.
E. price competition is especially vigorous.

A. there are many ways to differentiate the product or service that have value to buyers.
Broad differentiation strategies generally work best in market circumstances where:

A. buyer needs and uses of a product are diverse and not fully satisfied by a standardized product.
B. most buyers have similar needs and use the product in the same ways.
C. the products of rivals are weakly differentiated and most competitors are resorting to clever advertising to try to set their product offerings apart.
D. buyers are price sensitive and product switching costs are quite low.
E. market competition revolves around slowly evolving product features.

A. buyer needs and uses of a product are diverse and not fully satisfied by a standardized product.
A broad differentiation strategy works best in situations where:

A. technological change is slow-paced and new or improved products are infrequent.
B. buyer needs and uses of the product are very similar.
C. buyers incur low costs in switching their purchases to rival brands.
D. buyers have a low degree of bargaining power and purchase the product frequently.
E. technological change is fast-paced and competition revolves around rapidly evolving product features.

E. technological change is fast-paced and competition revolves around rapidly evolving product features.
A broad differentiation strategy generally produces the best results in situations where:

A. buyer brand loyalty is low.
B. few rival firms are following a similar differentiation approach.
C. new and improved products are introduced only infrequently.
D. most rivals are pursuing a differentiation strategy and are seeking to differentiate their products on most of the same features and attributes.
E. perceived value of a product is not of great importance.

B. few rival firms are following a similar differentiation approach.
In which of the following market circumstances is a broad differentiation strategy generally NOT well-suited?

A. When buyer needs and preferences are too diverse to be fully satisfied by a standardized product
B. When few rivals are pursuing a similar differentiation approach
C. When the products of rivals are weakly differentiated
D. When there are many ways to differentiate a product or a service and many buyers perceive these differences valuable
E. When technological change is fast-paced and competition revolves around rapidly evolving product features

C. When the products of rivals are weakly differentiated
A pitfall to avoid in pursuing a differentiation strategy is:

A. trying to differentiate on the basis of attributes or features that are easily and quickly copied.
B. choosing a product offering that supports buyers’ indifference to rival brands’ offerings.
C. charging a premium price for the differentiating features.
D. meeting and exceeding the meaningful gaps in quality, performance, service, and other attractive differentiating attributes offered by rivals.
E. spending on activities to differentiate the company’s product to enhance profitability.

A. trying to differentiate on the basis of attributes or features that are easily and quickly copied.
Which of the following is NOT one of the pitfalls of pursuing a differentiation strategy?

A. Over-emphasizing efforts to strongly differentiate the company’s product from those of rivals rather than being content with weak product differentiation
B. Offering trivial improvements in quality, service, or performance features
C. Overcharging for the differentiating features
D. Adding so many frills and extra features that the product exceeds the needs of buyers
E. Overspending on efforts to differentiate the company’s product offering

A. Over-emphasizing efforts to strongly differentiate the company’s product from those of rivals rather than being content with weak product differentiation
Focused strategies keyed either to low cost or differentiation are especially appropriate for situations where:

A. the market is composed of distinctly different buyer groups who have different needs or use the product in different ways.
B. most other rival firms are using a best-cost producer strategy.
C. buyers have strong bargaining power and entry barriers are low.
D. most industry rivals have weakly differentiated products.
E. most industry participants are also using a focused differentiation strategy.

A. the market is composed of distinctly different buyer groups who have different needs or use the product in different ways.
What sets focused (or market niche) strategies apart from low-cost leadership and broad differentiation strategies is:

A. the extra attention paid to top-notch product performance and product quality.
B. their concentrated attention on serving the needs of buyers in a narrow piece of the overall market.
C. greater opportunity for competitive advantage.
D. their suitability for market situations where most industry rivals have weakly differentiated products.
E. their objective of delivering more value for the least money.

B. their concentrated attention on serving the needs of buyers in a narrow piece of the overall market.
A focused low-cost strategy seeks to achieve competitive advantage by:

A. outmatching competitors in offering niche members an absolute rock-bottom price.
B. delivering more value for the lesser money than other competitors.
C. performing the primary value chain activities at a lower cost per unit than can the industry’s low-cost leaders.
D. dominating more market niches in the industry via a lower cost and a lower price than any other rival.
E. serving buyers in a narrow piece of the total market (target market niche) at a lower cost and lower price than rivals.

E. serving buyers in a narrow piece of the total market (target market niche) at a lower cost and lower price than rivals.
The chief difference between a low-cost provider strategy and a focused low-cost strategy is:

A. whether the product is strongly differentiated or weakly differentiated from rivals.
B. the degree of bargaining power that buyers have.
C. the size of the buyer group that a company is trying to appeal to.
D. the type of value chain being used to achieve a low-cost competitive advantage.
E. the number of upscale attributes incorporated into the product offering.

C. the size of the buyer group that a company is trying to appeal to.
A focused low-cost strategy can lead to attractive competitive advantage when:

A. buyers are looking for the best value at the best price.
B. buyers are looking for a budget-priced product.
C. buyers are price sensitive and are attracted to brands with low switching costs.
D. a market is emerging and demand in the target market niche is growing rapidly and is served by industry-wide competitors
E. a firm can lower costs significantly by limiting its customer base to a well-defined buyer segment.

E. a firm can lower costs significantly by limiting its customer base to a well-defined buyer segment.
A focused differentiation strategy aims at securing competitive advantage by:

A. providing niche members with a top-of-the-line product at a premium price.
B. catering to buyers looking for an upscale product at an attractively low price.
C. offering a product carefully designed to appeal to the unique preferences and needs of a narrow, well-defined group of buyers.
D. developing product attributes that no other company in the industry has.
E. convincing a narrow, well-defined group of buyers that the company has a truly world-class product.

C. offering a product carefully designed to appeal to the unique preferences and needs of a narrow, well-defined group of buyers.
A drink manufacturer finds setting up a plant to make its own bottle caps expensive and technically difficult. Which of the following will be most helpful in solving the manufacturer’s problem?

A. Outsourcing
B. Achieving economies of scale
C. Lowering input costs
D. Increasing bargaining power
E. Going for a vertical integration with a distributor

A. Outsourcing
A government oil company is having trouble with the private refineries and transporters to whom it delegates important stages of production. It decides to become more active along the entire supply chain from locating deposits to retailing the fuel to consumers. Which of the following does it intend to achieve?

A. Outsourcing
B. Economies of scale
C. Increase inputs
D. Advanced production technology
E. Vertical integration

E. Vertical integration
The risks of a focused strategy based on either low-cost or differentiation include the:

A. chance that niche customers will bargain more aggressively for good deals than customers in the overall marketplace.
B. potential for the preferences and needs of niche members to shift over time toward product attributes desired by buyers in the mainstream portion of the market.
C. potential for the segment to be highly vulnerable to economic cycles.
D. potential for segment growth to race beyond the production or service capabilities of incumbent firms.
E. potential for the segment to become too specialized for other multi-segmented rivals to enter.

B. potential for the preferences and needs of niche members to shift over time toward product attributes desired by buyers in the mainstream portion of the market.
Focusing carries several risks, one of which is the:

A. chance that niche customers will bargain more aggressively for good deals than customers in the overall marketplace.
B. chance that competitors will find effective ways to match the focused firm’s capabilities in serving the target market.
C. potential for the segment to be highly vulnerable to economic cycles.
D. potential for the segment to become too specialized for other multi-segmented rivals to enter.
E. inability of a company to compete industry-wide.

B. chance that competitors will find effective ways to match the focused firm’s capabilities in serving the target market.
Best-cost provider strategies are those that:

A. are a hybrid of low-cost provider and differentiation strategies that aim at providing desired attributes while beating rivals on price.
B. are rewarded by providing buyers with the best attributes at a premium.
C. have strategy elements related to the lowest-cost provider in the largest and fastest growing (or best) market segment.
D. look for a low-cost advantage rather than a differentiation advantage.
E. look for a differentiation advantage rather than a low-cost advantage.

A. are a hybrid of low-cost provider and differentiation strategies that aim at providing desired attributes while beating rivals on price.
To profitably employ a best-cost provider strategy, a company must have the resources and capabilities to:

A. sell a product with the best cost at the best price.
B. have the best cost (as compared to rivals) for each activity in the industry’s value chain.
C. provide buyers with the best attributes at the best cost.
D. incorporate attractive or upscale attributes into its product offering at a lower cost than rivals.
E. do a better job than rivals of adopting the best operating practices.

D. incorporate attractive or upscale attributes into its product offering at a lower cost than rivals.
A firm pursuing a best-cost provider strategy:

A. seeks to be the low-cost provider in the largest and fastest growing (or best) market segment.
B. tries to have the best cost (as compared to rivals) for each activity in the industry’s value chain.
C. tries to outcompete a low-cost provider by attracting buyers on the basis of charging the best price.
D. seeks to deliver superior value to buyers by satisfying their expectations on key attributes and beating rivals in meeting customer expectations on price.
E. seeks to achieve the best costs by using the best operating practices and incorporating the best features and attributes.

D. seeks to deliver superior value to buyers by satisfying their expectations on key attributes and beating rivals in meeting customer expectations on price.
The objective of a best-cost provider strategy is to:

A. deliver superior value to value-conscious buyers at a comparatively lower price than rivals.
B. offer buyers the industry’s best-performing product at the best cost and best (lowest) price in the industry.
C. attract buyers on the basis of having the industry’s overall best-performing product at a price that is slightly below the industry-average price.
D. out-compete rivals using low-cost provider strategies.
E. translate its best-cost status into achieving the highest profit margins of any firm in the industry.

A. deliver superior value to value-conscious buyers at a comparatively lower price than rivals.
The competitive objective of a best-cost provider strategy is to:

A. outmatch the resource strengths of both low-cost providers and differentiators.
B. position the company outside the competitive arena of low-cost producers and differentiators.
C. meet or exceed buyer expectations on key quality/performance/features/service attributes and beat their expectations on price (given what rivals are charging for much the same attributes).
D. deliver superior value to buyers by doing such a good job of cost control that it ends up with the best cost (as compared to rivals) in performing each activity in its value chain.
E. identify and concentrate on those differentiating features that are inexpensive to incorporate.

C. meet or exceed buyer expectations on key quality/performance/features/service attributes and beat their expectations on price (given what rivals are charging for much the same attributes).
What is the primary target market for a best cost-provider?

A. hunting buyers
B. Price-conscious buyers
C. Best-price driven buyers
D. Value-conscious buyers
E. Brand-conscious buyer

D. Value-conscious buyers
The competitive advantage of a best-cost provider is:

A. having the best value chain in the industry.
B. its brand name reputation.
C. its capability to incorporate upscale or attractive attributes into its product offering at lower costs than rivals.
D. a distinctive competence in delivering top-notch quality and customer service.
E. a distinctive competence in supply chain management.

C. its capability to incorporate upscale or attractive attributes into its product offering at lower costs than rivals.
For a best-cost provider strategy to be successful, a company must have:

A. excellent marketing and sales skills in convincing buyers to pay a premium price for the attributes/features incorporated in its product.
B. resource strengths and competitive capabilities that allow it to incorporate upscale attributes at lower costs than rivals whose products have similar upscale attributes.
C. access to greater learning/experience curve effects and scale economies than rivals.
D. one of the best-known and most respected brand names in the industry.
E. a short, low-cost value chain.

B. resource strengths and competitive capabilities that allow it to incorporate upscale attributes at lower costs than rivals whose products have similar upscale attributes.
The target market of a best-cost provider is:

A. value-conscious buyers.
B. brand-conscious buyers.
C. price-sensitive buyers.
D. middle-income buyers.
E. young adults (in the 18-35 age group).

A. value-conscious buyers.
Best-cost provider strategies are appealing in those market situations where:

A. diverse buyer preferences make product differentiation the norm and where a large number of value-conscious buyers can be induced to purchase mid-range products.
B. a company is positioned between competitors who have ultra-low prices and competitors who have top-notch products in terms of both quality and performance.
C. buyers are more quality-conscious than price-conscious.
D. there are numerous buyer segments, buyer needs are diverse across these segments, only a few of the segments are growing rapidly, and sellers’ products are strongly differentiated.
E. buyers are more performance-conscious than value-conscious.

A. diverse buyer preferences make product differentiation the norm and where a large number of value-conscious buyers can be induced to purchase mid-range products.
The big danger or risk of a best-cost provider strategy is:

A. that buyers will be highly skeptical about paying a relatively low price for upscale attributes/features.
B. not establishing strong alliances and partnerships with key suppliers.
C. that rivals with low-cost provider strategies will be able to steal away some customers on the basis of a lower price, and high-end differentiators will be able to steal away customers with the appeal of better product attributes.
D. that it will be unable to achieve top-notch quality at a rock-bottom cost.
E. becoming too highly integrated and not relying enough on outsourcing.

C. that rivals with low-cost provider strategies will be able to steal away some customers on the basis of a lower price, and high-end differentiators will be able to steal away customers with the appeal of better product attributes.
A company’s biggest vulnerability in employing a best-cost provider strategy is:

A. relying too heavily on outsourcing.
B. getting squeezed between the strategies of firms employing low-cost provider strategies and high-end differentiation strategies.
C. getting trapped in a price war with low-cost leaders.
D. being timid in cutting its prices far enough below high-end differentiators to win away many of their customers.
E. not having a sustainable distinctive competence in cost reduction.

B. getting squeezed between the strategies of firms employing low-cost provider strategies and high-end differentiation strategies.
Success with a best-cost provider strategy designed to outcompete high-end differentiators requires:

A. achieving significantly lower costs in providing the upscale features.
B. providing significantly better product attributes in order to justify a price above what low-cost leaders are charging.
C. matching the company’s resources and capabilities to a low-cost provider status.
D. motivating buyers to purchase upscale features that match rivals.
E. achieving the lowest costs in the industry.

A. achieving significantly lower costs in providing the upscale features.
Each of the five generic strategies positions the company differently, EXCEPT when it concerns:

A. its market and competitive environment.
B. establishing a central theme for how the company will endeavor to outcompete rivals.
C. having resources and capabilities that rivals have trouble duplicating.
D. defining differences in terms of product line and production emphasis.
E. defining differences in terms of marketing emphasis and the means of maintaining strategy.

C. having resources and capabilities that rivals have trouble duplicating.
The production emphasis of a company pursuing a broad differentiation strategy usually involves:

A. eliminating cost reduction and decreasing quality and essential features to boost profitability.
B. strong efforts to be a leader in manufacturing process innovation.
C. emphasis on building differentiating features that buyers are willing to pay for and includes wide selection and many product variations.
D. the aggressive pursuit of economies of scale and experience-curve effects.
E. developing a distinctive competence in zero-defect manufacturing techniques.

C. emphasis on building differentiating features that buyers are willing to pay for and includes wide selection and many product variations.
The marketing emphasis of a company pursuing a broad differentiation strategy usually is to:

A. under-price rival brands with comparable features.
B. tout differentiating features and charge a premium price that more than covers the extra costs of differentiating features.
C. out-advertise rivals and make frequent use of discount coupons.
D. emphasize selling directly to end-users and promoting personalized customer service.
E. communicate the product’s ability to serve the customer’s every need.

B. tout differentiating features and charge a premium price that more than covers the extra costs of differentiating features.
The keys to maintaining a broad differentiation strategy are to:

A. stress constant innovation to stay ahead of imitative rivals and to concentrate on a few differentiating features.
B. charge a premium price that more than covers the extra costs of differentiating features and to convince customers to be brand loyal.
C. out-innovate and out-advertise rivals.
D. emphasize personalized customer service and to add as many differentiating features as possible.
E. keep prices close to the average of all rivals and to spend heavily on new product R&D.

A. stress constant innovation to stay ahead of imitative rivals and to concentrate on a few differentiating features.
The marketing emphasis of a company pursuing a focused low-cost provider strategy usually is to:

A. tout the company’s lower prices.
B. tout the lack of frills and extras.
C. out-advertise rivals and make frequent use of discount coupons.
D. communicate the attractive features of a budget-priced product offering that fits niche members’ expectations.
E. communicate the product’s ability to serve the customer’s every need.

D. communicate the attractive features of a budget-priced product offering that fits niche members’ expectations.
The underlying criteria of a best-cost provider strategy usually is found in the ability of a company to:

A. offer better goods at attractive prices.
B. create attributes that appeal specifically to niche members.
C. lower overall costs more than rivals in serving niche members.
D. offer buyers something attractively different from competitors’ offerings.
E. offer the best product at the industry’s lowest possible price.

A. offer better goods at attractive prices.
A production-based emphasis toward a low-cost provider strategy usually requires a company to strive for:

A. product superiority.
B. continuous cost reductions without sacrificing acceptable quality and essential features.
C. small-scale production or custom-made products that match the tastes and requirements of niche members.
D. appealing features and better quality at lower costs than rivals.
E. whatever differentiating features buyers are willing to pay for.

B. continuous cost reductions without sacrificing acceptable quality and essential features.
Each of the following is likely to help a company’s low-cost provider strategy succeed EXCEPT:

A. resources and capabilities to keep costs below those of its competitors.
B. cost-effective management of value chain activities better than rivals.
C. effective leveraging of cost drivers.
D. having the innovative capability to bypass certain value chain activities being performed by rivals.
E. capabilities to simultaneously deliver lower cost and higher-quality/differentiated features.

E. capabilities to simultaneously deliver lower cost and higher-quality/differentiated features.