Generic Business Strategies - Quiz

CHAPTER 6: GENERIC BUSINESS STRATEGIES Ð QUIZZES 1. While there are many ways 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. 2. Firms pursuing a differentiation strategy primarily seek to A. keep their cost structures lower than that of the cost leader. B. reduce the value gap to gain a competitive advantage C. provide products that are a direct imitation of the competitors' products D. create higher customer perceived value than the value that competitors create C. find suppliers that provide inputs with cheap price and average quality D. create a lower economic value as compared to its competitors 8. Which of the following is more of a value driver than a cost driver? A. superior customer service B. economies of scale C. learning-curve effects D. experience-curve effects 9. Economies of scale do NOT allow firms to A. spread their fixed costs over a larger output B. employ specialized systems and equipment C. spread their variable costs over a larger output D. take advantage of certain physical properties 3. In contrast to a differentiator, a cost-leader will A. charge a premium price for its products and services B. build an organizational culture where creativity and customer responsiveness thrive C. focus its research and development on process technologies to improve efficiency D. follow an organizational structure that requires lots of investments 10. Home Smart Inc. is a chain of supermarkets that sells its products at higher prices than its competitors. Yet, the supermarket chain has a large customer base due to its wide product portfolio and superior customer service. Which of the following generic business strategies has Home Smart adopted in this scenario? A. cost-leadership B. differentiation C. blue ocean strategy D. product diversification 4. _____ is best described as decreases in cost per unit as output increases. A. Economies of scale B. Economies of scope C. Time compression economies D. Economies of replication 11. When a firm operates at the minimum efficient scale, the A. returns to scale are constant B. cost per unit is the highest C. firm experiences diseconomies of scale D. firm attains the highest cost position 5. Organic Eats is a restaurant that serves the needs of a small percentage of highly health-conscious consumers. It has an all-organic, vegan menu. Since there are very few restaurants that offer the same unique services, customers are willing to pay a premium price for its products and services. In this scenario, Organic Eats is following a A. product diversification strategy B. blue ocean strategy C. broad differentiation strategy D. focused differentiation strategy 12. When a firm manufactures 2,000Ð3,000 units of a product, it incurs an average cost of $10 per unit. When it manufactures 3,000Ð4,000 units of the same product, the average cost per unit reduces to $7. However, manufacturing beyond 4,000 units will raise the average cost per unit to $9. Which of the following is the firm's minimum efficient scale? A. 2,000Ð3,000 units B. 3,000Ð4,000 units C. below 2,000 units D. above 4,000 units 6. 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. concentrate on offering advanced features, whether or not they have value to the customers 13. Which of the following statements accurately describes the difference between economies of scale and learning effects? A. Economies of scale occur over time, whereas learning effects are captured at one point in time. B. Firms experience economies of scale when output increases, and learning effects when output decreases. C. While there are no diseconomies to learning, there are diseconomies to scale D. Economies of scale reduce cost per unit, learning effects increase cost per unit. 7. A firm pursuing a differentiation strategy as opposed to a low-cost strategy will A. focus its research and development on product technologies to add uniqueness B. concentrate on leveraging its economies of scale through process technologies 14. A firm's learning curve is steeper than that of its competitor. What does this imply? A. The firm is at an advantage when compared to its competitor. B. The firm and its competitor have achieved cost parity C. The firm experiences negative returns to scale D. The firm experiences diseconomies of scale when compared to the competitor 15. At a certain output level, the per-unit cost incurred by a firm to manufacture a product is $5. Other factors remaining constant, what will be the new per-unit cost if the cumulative output is doubled, and the firm is able to achieve an 80 percent learning curve? A. $3 B. $4 C. $5 D. $6 16. Which of the following situations will have greater effects from economies of scale than from learning effects? A. when conducting surgeries B. when practicing corporate law C. when mass manufacturing pens D. when making business decisions 17. Allure is a cosmetic brand that pursues a cost-leader strategy. Which of the following statements is true of the cosmetic brand? A. It appeals to the price-conscious buyers B. Its primary value driver is product uniqueness C. It charges a premium price for its products D. It directly competes against luxury cosmetic brands that charge premium prices 18. A cost-leader is protected from the threat of new entrants primarily due to its A. superior customer service B. luxury goods C. economies of scale D. premium pricing 19. Which of the following statements is true of a strategic position? A. Choosing a strategic position requires making important trade-offs between value and cost positions B. Strategic positions are fixed; they do not change like the environment C. Differentiation and cost leadership require similar strategic positions 20. Which of the following is a key question managers must answer to formulate an appropriate business-level strategy? A. When will we satisfy our customer needs? B. How will we satisfy our customer needs? C. Where will we satisfy our customer needs? D. Can we satisfy our customer needs? 21. Product features, customer service, and complements are all examples of important A. cost curves B. cost drivers C. value curves D. value drivers 22. Which of the following is an accurate statement about learning effects? A. Learning effects involve the decrease of output over time B. Learning effects involve the accumulation of output over time C. Learning effects involve the increase of output at a point in time D. Learning effects involve the decrease of output at a point in time 23. Which of the following is NOT an action that a company that follows a cost leadership strategy should take? A. trying 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 24. A low-cost leadership strategy is particularly attractive when A. buyers are not very price-conscious B. there are many ways to achieve product differentiation that have value to buyers C. most buyers use the product in much the same ways, with user requirements calling for a standardized product D. most rivals are pursuing focused low-cost or focused differentiation strategies 25. Which of the following is NOT true of a company that succeeds in differentiating its products 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 gains buyer loyalty to its brand D. It attracts mainly price-conscious buyers 26. Whether a broad differentiation strategy is effective depends mainly on whether A. most buyers have similar needs and use the product in the same ways B. 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 C. buyer switching costs are low and customer loyalty to any one brand is low D. buyers are always searching for sellers offering the best price 27. Opportunities to differentiate a company's product 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 28. A differentiation strategy works best when A. technological change is fast-paced and competition revolves around rapidly evolving product features B. buyers' needs are homogeneous C. there are few other ways to make a product unique to buyers D. firms have not much of excess cash to invest in R&D activities 29. What sets focused strategies apart from low-cost leadership and broad differentiation strategies? A. the extra attention paid to premium 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 objective of delivering more value for the least money