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Capstone Chapter 4

Business-level strategies detail commitments and actions taken to provide value to customers and gain competitive advantage by exploiting core competencies in
a. the selection of industries in which the firm will compete.
b. specific product markets.
c. primary value chain activities.
d. particular geographic locations.
b. specific product markets.
A firm’s core strategy is its ____ strategy.
a. corporate
b. business
c. pricing
d. international
b. business
When selecting a business level strategy, the firm must determine all of the following EXCEPT
a. How will the customer’s needs be satisfied?
b. Who is the customer?
c. What are the customers’ needs?
d. Why should these customers’ needs be satisfied?
d. Why should these customers’ needs be satisfied?
The three dimensions of a firm’s relationships with customers include all the following EXCEPT
a. exclusiveness.
b. affiliation.
c. richness.
d. reach.
a. exclusiveness.
Which of the following is TRUE?
a. As customer loyalty increases, customers are more sensitive to price increases.
b. Customer loyalty has a positive relationship with firm profitability.
c. Customer loyalty is fragile and cannot reliably be considered a factor in firm success.
d. Customer loyalty is of importance only to firms using the differentiation strategy.
b. Customer loyalty has a positive relationship with firm profitability.
The ________dimension of relationships with customers is particularly important for social networking sites such as Facebook and MySpace.
a. reach
b. richness
c. affiliation
d. social
a. reach
Amazon has built capabilities around Internet technology and e-commerce to facilitate information exchanges with its customers in a cost effective manner. This represents which of the three service dimension?
a. Reach
b. Richness
c. Affiliation
d. None of the these
b. Richness
Viewing the world through the customer’s eyes and constantly seeking ways to create more value for the company enhances
a. the reach of the company toward the customer.
b. the ability to identify the customer.
c. the richness of the relationship with the customer.
d. affiliation with the customer.
d. affiliation with the customer.
Before the firm decides what products to offer and what benefits and features they will have, the firm must decide all the following questions EXCEPT
a. who the firm should serve.
b. when the customer’s needs should be satisfied.
c. what needs the firm should satisfy.
d. what core competencies are needed to satisfy customer needs.
b. when the customer’s needs should be satisfied.
In the animal food products business, food-product needs of owners of companion animals pets (e.g., dogs and cats) differ from the needs for food and health-related products of those owning production animals (e.g., livestock). Which of the following aspects of managing customer relationships does this choice refer to?
a. Who: Determining the Customers to Serve
b. What: Determining Which Customer Needs to Satisfy
c. How: Determining Core Competencies Necessary to satisfy Customer Needs
d. When: Determining When to Satisfy Customer Needs
a. Who: Determining the Customers to Serve
Starbuck’s determined that all of the following customer needs were important EXCEPT
a. fast service.
b. the experience associated with drinking coffee, not just the coffee.
c. the actual product of service (e.g., a cup of coffee), not the experience.
d. allowing customer to design their own drinks.
c. the actual product of service (e.g., a cup of coffee), not the experience.
Hyundai allows customers to return their cars if they lose their job within 12 months of purchase. Which of the following aspects of managing customer relationships is Hyundai engaged in?
a. Who: Determining the Customers to Serve
b. What: Determining Which Customer Needs to Satisfy
c. How: Determining Core Competencies Necessary to satisfy Customer Needs
d. When: Determining When to Satisfy Customer Needs
b. What: Determining Which Customer Needs to Satisfy
An interior decorator has moved his business from Los Angeles to St. Paul, Minnesota, because his spouse’s company transferred her to St. Paul. The decorator is distressed because the customers in his target market have, in his words, “banal and bourgeois taste.” What is the decorator’s problem?
a. The decorator does not understand that customer needs are neither right nor wrong, good nor bad.
b. The decorator has no core competencies that will transfer to his new geographic market.
c. The decorator should choose a strategy of cost-leadership in this environment.
d. The decorator is highly affiliated with the new target market and understands how he can create value for it.
a. The decorator does not understand that customer needs are neither right nor wrong, good nor bad.
In order to meet and exceed customer’s expectations, firms must
a. constantly manipulate customers’ perceptions of their needs.
b. answer the questions: who, what, when, where, how, and why as they apply to customers.
c. continuously improve, innovate, and upgrade their core competencies.
d. successfully defend their established core competencies from imitation by competitors.
c. continuously improve, innovate, and upgrade their core competencies.
Business-level strategies are concerned specifically with
a. creating differences between the firm’s position and its competitors.
b. selecting the industries in which the firm will compete.
c. how functional areas will be organized within the firm.
d. how a business with multiple physical locations will operate one of those locations.
a. creating differences between the firm’s position and its competitors.
An entrepreneur is investigating starting a company that provides tax advice to small companies. In order to position his company differently from the existing competitors, the entrepreneur must
a. analyze the reach, richness, and affiliation the company must have with its customers.
b. provide tax advice either in a different manner or provide a different kind of tax service than competitors.
c. offer tax advice at a price lower than the cheapest competitor.
d. offer tax advice at a higher quality than the best competitor.
b. provide tax advice either in a different manner or provide a different kind of tax service than competitors.
Which of the following are central to implementing value-creating strategies and thereby satisfying customers’needs?
a. Firm resources
b. Capabilities
c. Core competencies
d. None of the these.
c. Core competencies
The analysis of the activity map of a successful company such as Southwest Airlines emphasizes how
a. the organizational culture of Southwest Airlines is the key to the success of the organization.
b. understanding of the profit pool in an industry indicates to companies where above-average returns can be earned.
c. it is hard for rivals to match a configuration of integrated activities than to imitate a single activity.
d. the primary and support activities of a successful company capture value all along the value chain.
c. it is hard for rivals to match a configuration of integrated activities than to imitate a single activity.
By examining the ____ of Southwest Airlines, one can identify the strategic themes around which it has developed its business strategy. These themes include limited passenger service, high aircraft utilization, highly productive ground and gate crews, and so forth.
a. activity map
b. profit pool
c. value diagram
d. five forces model
a. activity map
If Southwest Airlines employees lost their high enthusiasm and commitment to the company,
a. the airline could continue without problems because its cost-leadership strategy is dependent on its efficient internal procedures.
b. replacement employees could be hired from rival airlines that are laying off employees easily merged into the Southwest culture.
c. there would be no impact on Southwest’s profitability because Southwest’s customers value the low fares rather than being “entertained” by the employees.
d. Southwest would have lost one of its competitive advantages and its performance would be threatened.
d. Southwest would have lost one of its competitive advantages and its performance would be threatened.
Strategic fit among many activities (in an activity map) is fundamental to
a. the development of core competencies for a firm.
b. the breadth of competitive scope for a firm.
c. sustainability of a firm’s competitive advantage.
d. the integrity of the firm’s value chain.
c. sustainability of a firm’s competitive advantage.
All of the following are considered generic business-level strategies EXCEPT
a. product diversification.
b. cost leadership.
c. focused differentiation.
d. integrated cost leadership/differentiation.
a. product diversification.
A company using a narrow target market in its business strategy is
a. following a cost leadership business strategy.
b. focusing on a broad array of geographic markets.
c. limiting the group of customer segments served.
d. decreasing the number of activities on its value chain.
c. limiting the group of customer segments served.
As the television industry has changed in the last few decades from just three major networks to a multiplicity of networks, one of the major aspects of business strategy for the newer networks is ____ than the traditional networks.
a. broader target market
b. narrower target market
c. increased use of primary activities to capture value
d. increased use of support activities to capture value
b. narrower target market
The effectiveness of any of the generic business-level strategies is contingent upon
a. customer needs and competitors’ strategies.
b. the match between the opportunities and threats in its external market and the strengths of its internal environment.
c. the trends in the general consumer base and the robustness of the global and industry economy.
d. the firm’s competitive scope and its competitive advantage.
b. the match between the opportunities and threats in its external market and the strengths of its internal environment.
A cost leadership strategy provides goods or services with features that are
a. acceptable.
b. unique.
c. substandard.
d. mediocre.
a. acceptable.
A cost leadership strategy targets the industry’s ____ customers.
a. most typical
b. poorest
c. least educated
d. most frugal
a. most typical
Durable Ceramics, Inc., provides inexpensive ceramic tile to builders of institutional buildings such as schools, prisons, and public administration buildings. It has always competed on a cost leadership basis. Most of its products are purchased by a few commercial construction firms, so it is fairly dependent on these construction firms for selling its product. Durable Ceramic’s next most-efficient competitor, Cost-Less Ceramics, Inc., earns average returns, while Durable earns above-average returns. The commercial construction firms are putting pressure on Durable to reduce its prices. If Durable reduces its prices below those of Cost-Less’s prices, it is likely that
a. both Durable and Cost-Less will devise additional ways to become more efficient in their production processes.
b. Durable will be unable to absorb the lower cost, and will go out of business.
c. both Cost-Less and Durable will go out of business, leaving the customers with fewer alternative sources of low-cost tile.
d. Cost-Less will go out of business, and Durable will gain higher power over its customers.
d. Cost-Less will go out of business, and Durable will gain higher power over its customers.
Research suggests that having a competitive advantage in ____ creates more value in the cost leadership strategy than it does in the differentiation strategy.
a. marketing and sales
b. technology development
c. logistics
d. human resource management
c. logistics
A river barge company can offer cheaper, although slower, per pound transportation of products to companies when compared with transportation by air, truck, or rail. The river barge company should first target customers whose companies use
a. the integrated cost leadership/differentiation strategy.
b. either of the focus strategies.
c. the cost-leadership strategy.
d. any of the strategies except the focused differentiation strategy.
c. the cost-leadership strategy.
In the Chapter 4 Strategic Focus, Walmart made changes to attract upscale customers. These changes had which of the following results?
a. It strengthened Walmart’s position against rivals such as Dollar Stores and Amazon.
b. It made Walmart vulnerable to Dollar Store and Amazon.
c. It attracted significant numbers of new customers.
d. Family Dollar, Dollar Tree, and Dollar General all experienced losses in sales as many of their customers went to Walmart.
b. It made Walmart vulnerable to Dollar Store and Amazon.
In the Chapter 4 Strategic Focus, Walmart’s same store sales have been declining and those of rivals Family Dollar and Amazon have been increasing. What explains this recent change?
a. Walmart was too aggressive with its low-cost position and lost customers who wanted more upscale products.
b. Walmart changed its strategy to focused dirrerentation.
c. Amazon and Family Dollar changed their strategies to attract more upscale customers.
d. Walmart changed its strategy to attract more upscale customers.
d. Walmart changed its strategy to attract more upscale customers.
A company pursuing the differentiation or focused differentiation strategy would tend to
a. build economies of scale and efficient operations.
b. develop and maintain cost-effective MIS operations.
c. develop flexible systems that allow rapid response to customers changing needs.
d. have relationships with suppliers to maintain efficient flow of supplies for operations.
c. develop flexible systems that allow rapid response to customers changing needs.
When the costs of supplies increase in an industry, the low-cost leader
a. may continue competing with rivals on the basis of product features.
b. will lose customers as a result of price increases.
c. will be unable to absorb higher costs because cost-leaders operate on very narrow profit margins.
d. may be the only firm able to pay the higher prices and continue to earn average or above- average returns.
d. may be the only firm able to pay the higher prices and continue to earn average or above- average returns.
Ever improving levels of efficiency enhance profit margins for a cost leader. This effects which of the five forces of industry structure most directly?
a. Potential entrants
b. Substitutes
c. Buyer power
d. Supplier power
a. Potential entrants
The typical risks of a cost leadership strategy include
a. the inability to balance high differentiation and low price.
b. production and distribution processes becoming obsolete.
c. excessive differentiation to the point where the customer base is too small.
d. loss of customer loyalty.
b. production and distribution processes becoming obsolete.
When a firm is able to produce nonstandardized (that is, distinctive) products for customers who value differentiated features more than they value low cost, the firm is successfully implementing
a. a differentiation strategy.
b. a cost leadership strategy.
c. an integrated cost leadership/differentiation strategy.
d. a single-product strategy.
a. a differentiation strategy.
A firm successfully implementing a differentiation strategy would expect
a. customers to be sensitive to price increases.
b. to charge premium prices.
c. customers to perceive the product as standard.
d. to have high levels of power over suppliers.
b. to charge premium prices.
The products or services that are differentiated from others have qualities that are
a. perceived by the customer to add value for which they will pay a premium.
b. valued by the typical industry customer.
c. perceived as standardized by the customer.
d. seen as classic attributes rather than passing fads.
a. perceived by the customer to add value for which they will pay a premium.
Blind taste-tests have shown that the taste of premium-priced vodkas and inexpensive vodkas are indistinguishable even to regular drinkers of vodka. But the sales of premium vodkas are thriving. This is an example of
a. the perception of perceived prestige and status as a means of differentiating a product.
b. the importance of high-quality raw materials when using the differentiation strategy.
c. the risk of product imitation by competitors.
d. the danger counterfeiting holds for firms pursuing the differentiation strategy.
a. the perception of perceived prestige and status as a means of differentiating a product.
All of the following are examples of differentiated products EXCEPT
a. Toyota’s Lexus.
b. Caterpillar’s heavy duty earth moving equipment.
c. store brand beef and pork.
d. McKinsey & Company.
c. store brand beef and pork.
The use of a differentiation strategy would be expected to be LEAST effective in which of the following markets?
a. Commodity goods
b. Motion pictures
c. Popular music
d. Writing instruments
a. Commodity goods
All of the following are ways that a good or service can be differentiated EXCEPT
a. Responsive customer service
b. Perceived prestige and status
c. Economies of scale and efficient operations
d. Engineering design and performance
c. Economies of scale and efficient operations
The differentiation strategy can be effective in controlling the power of rivalry with existing competitors in an industry because
a. customers will seek out the lowest cost product.
b. customers of non-differentiated products are sensitive to price increases.
c. customers are loyal to brands that are differentiated in meaningful ways.
d. the differentiation strategy benefits from rivalry because it forces the firm to innovate.
c. customers are loyal to brands that are differentiated in meaningful ways.
Wholesome Pet Food has successfully specialized for 20 years in high-quality pet food made from all-natural ingredients and organically-raised lamb. This brand has a strong following and is recommended by veterinarians who practice in affluent neighborhoods. Wholesome’s main supplier of lamb has announced that the price for lamb will be 15 percent higher next year.
a. Wholesome will probably be able to pass the cost on to its customers because they are less sensitive to price increases than the average buyer.
b. Companies pursuing Wholesome’s business strategy are especially vulnerable to this risk.
c. If Wholesome raises its pet food prices, customers will turn to less expensive brands such as Purina.
d. Wholesome probably operates on very thin margins, and a cost increase will threaten its ability to earn average returns.
a. Wholesome will probably be able to pass the cost on to its customers because they are less sensitive to price increases than the average buyer.
Which of the following is NOT a value-creating activity associated with the differentiation strategy?
a. develop policies to ensure efficient hiring and retention to keep costs low and implement traing to ensure high employee efficiency.
b. provide accurate and timely delivery of goods to customers.
c. ensure receipt of of high quality supplies (raw materials and other goods).
d. develop flexible systems that allow rapid response to to customers’ changing needs.
a. develop policies to ensure efficient hiring and retention to keep costs low and implement traing to ensure high employee efficiency.
A differentiation strategy can be effective in controlling the power of substitutes in an industry because
a. customers have low switching costs.
b. substitute products are lower quality.
c. a differentiating firm can always lower prices.
d. customers develop brand loyalty.
d. customers develop brand loyalty.
Recently, the only type of car available for Anthony to rent on a business trip was a compact, fuel-efficient Japanese import. Anthony was surprised at the comfort and performance of the car. He is in the market for a new car and had previously considered only buying another luxury SUV. Now, he is thinking about the significant cost savings he would have if he bought the compact vehicle rather than a new SUV. This is an example of the competitive risk that
a. a competitor’s products can convey a product’s differentiated features to a customer at a significantly reduced price.
b. a product imitation can cause customers to perceive that competitors offer essentially the same good.
c. experience can narrow a customer’s perceptions of the value of a product’s differentiated features.
d. brand loyalty insulates a company from rivalry with competitors.
c. experience can narrow a customer’s perceptions of the value of a product’s differentiated features.
A manufacturer of jewelry imitates the style of a popular and expensive brand using manufactured stones rather than real gemstones and lesser grade metals rather than silver and gold. The manufacturer packages the jewelry in boxes of the same color imprinted with an almost identical logo. About 85 percent of the company’s sales are through Internet sales. This example illustrates the competitive risk of ____ that threatens companies that use the differentiation strategy.
a. customer sensitive to price differentials
b. threat by the cost leader
c. customer experience
d. counterfeiting
d. counterfeiting
The typical risks of a differentiation strategy do NOT include which of the following?
a. Customers may find the price differential between the low-cost product and the differentiated product too large.
b. Customers’ experience with other products may narrow customers’ perception of the value of a product’s differentiated features.
c. Counterfeit goods are widely available and acceptable to customers.
d. Suppliers of raw materials erode the firm’s profit margin with price increases.
d. Suppliers of raw materials erode the firm’s profit margin with price increases.
When implementing a focus strategy, the firm seeks to
a. offer products that are both differentiated and low cost.
b. move into the global market.
c. target the typical customer in an industry.
d. serve the specialized needs of a market segment.
d. serve the specialized needs of a market segment.
Ikea offers young customers a selection of home furnishings featuring good design, function, and acceptable quality at low prices. Ikea is using which business level strategy?
a. Cost leadership
b. Focused cost leadership
c. Differentiation
d. Focused differentiation
b. Focused cost leadership
The focused differentiation strategy differs from the differentiation strategy in that
a. the focused differentiators have a broader competitive scope.
b. the value-creating activities of focused differentiators are more constrained.
c. focused differentiators target a narrower customer market.
d. there are fewer risks with the focused differentiation strategy.
c. focused differentiators target a narrower customer market.
Chico’s is a clothing retailer that targets middle-aged women who want stylish and appealing clothes that are suitable for the mature figure. Chico’s has an extensive customer list, a frequent-buyer discount card, and frequent sales promotions to Chico’s customers based on their spending levels. Chico’s uses a ____ strategy.
a. focused differentiation based on a buyer group
b. focused differentiation based on a product line segment
c. generic differentiation
d. integrated cost leadership/differentiation
a. focused differentiation based on a buyer group
The new generation of lunch trucks serving high-end fare in cities such as New York, San Francisco, and Los Angeles share which of the following a business strategies?
a. cost leadership.
b. focused differentiation.
c. integrated cost leadership/differentiation.
d. differentiation.
b. focused differentiation.
Denver-based Kazoo Toys uses the __________ strategy to create value for parents and children interested in purchasing unique toys while simultaneously having access to unique services.
a. cost leadership
b. focused differentation
c. integrated cost leadership differentation
d. differentiation
b. focused differentation
The Monteleone Company pays large fees to a highly-recognizable, prestigious individual to be the spokesperson for the company’s products, luxury private jets. Monteleone is probably following the
a. focused cost-leadership strategy.
b. focused differentiation strategy.
c. integrated cost leadership/differentiation strategy.
d. total quality strategy.
b. focused differentiation strategy.
The risks of a focus strategy include
a. a competitor’s ability to use its core competencies to outfocus the focuser by serving an even more narrowly defined segment.
b. a competitor’s ability to use its core competencies to outfocus the focuser by serving an even more broadly defined segment.
c. decisions by industry-wide competitors to use their resources to serve a wider range of customers’ needs than the focuser has been serving.
d. decisions by focused competitors to use their resources to serve a wider range of customers’ needs.
a. a competitor’s ability to use its core competencies to outfocus the focuser by serving an even more narrowly defined segment.
Focus strategies are
a. sheltered from the risks associated with industry-wide strategies because of their niche focus.
b. able to avoid global risk by focusing on niches in national or regional markets.
c. faced with additional types of risks than are industry-wide strategies.
d. more subject to failure than industry-wide strategies.
c. faced with additional types of risks than are industry-wide strategies.
New Balance Athletic Shoes target Baby Boomers’ needs for well-fitting shoes. The company is unique in that it offers a very broad range of shoe widths. A realistic potential risk New Balance runs in this focused differentiation strategy includes the possibility that:
a. Baby Boomers may find that they do not need well-fitting shoes, since they will become increasingly sedentary as they age.
b. A competitor may be able to better use flexible manufacturing systems to make shoes with an individualized fit.
c. Athletic shoes may go out of style.
d. New Balance shoes may begin to appeal to a wider market, thus losing New Balance’s focus advantage.
b. A competitor may be able to better use flexible manufacturing systems to make shoes with an individualized fit.
Suppose another firm found a way to offer IKEA’s customers (young buyers interested in stylish furniture at low cost) additional sources of differentiation while charging the same price or to provide the same service with the same sources of differentiation at a lower price. What category of competitive risk to a focus strategy would this be?
a. An industry-wide competitor decides that the market segment served by IKEA is worth entering.
b. Focusing on a more narrowly defined segment and “outfocusing” the focuser.
c. The needs of the customers in this narrow segment have become more similar to those of industry-wide competitors.
d. Experience can narrow customer’s perceptions of value of the firm’s differentiated features.
b. Focusing on a more narrowly defined segment and “outfocusing” the focuser.
Zara has pioneered “cheap chic” in clothing apparel. Zara offers current and desirable fashion goods at relatively low prices. To implement the strategy, Zara uses sophisticated designers and effective means of managing costs. These are all characteristics of which business level strategy?
a. Cost leadership
b. Differentiation
c. Integrated Cost Leadership/Differentiation
d. Stuck-in-the-middle
c. Integrated Cost Leadership/Differentiation
Firms use the integrated cost leadership/differentiation strategy because
a. other firms have established unassailable market dominance with the other four strategies.
b. global markets allow for much broader competitive scope.
c. most consumers want to pay a low price for products with somewhat highly differentiated features.
d. one strategy is not enough for most large firms.
c. most consumers want to pay a low price for products with somewhat highly differentiated features.
The integration of a cost leadership and a differentiation strategy
a. is challenging because it increases the number of value chain activities and support functions in which the firm must become competent.
b. forces a firm to adapt more slowly to changes in its environment.
c. allows the firm to avoid being “stuck in the middle.”
d. requires such a large customer base that it is most practical for firms in the global marketplace.
a. is challenging because it increases the number of value chain activities and support functions in which the firm must become competent.
Target’s brand promise “Expect More. Pay Less” and appeal to higher-income, fashion conscious discount shoppers illustrates the ________________strategy
a. cost leadership
b. differentiation
c. focused differentiation
d. integrated cost leadership/differentiation
d. integrated cost leadership/differentiation
According to the Chapter 4 Strategic Focus, The Li Ning Company entered the Chinese sportswear market using a __________________ strategy. As it seeks to expand into new market segments, however, its strategy has changed to ____________________.
a. differentation; integrated cost leadership/differentation
b. focused differentation; differentation
c. cost leadership; integrated cost leadership/differentation
d. focused cost leadership; cost leadership
c. cost leadership; integrated cost leadership/differentation
Three sources of flexibility in completing primary and support activities are particularly useful for firms using the integrated strategy. These are
a. Flexible Manufacturing Systems, Reengineering, and Total Quality Management.
b. Outsourcing, Reengineering, and Flexible Manufacturing Systems.
c. Outsourcing, Total Quality Management, and Information Networks.
d. Flexible Manufacturing Systems, Total Quality Management, and Information Networks.
d. Flexible Manufacturing Systems, Total Quality Management, and Information Networks.
The benefit of a flexible manufacturing system is that
a. the lot size needed to manufacture a firm’s product efficiently is reduced.
b. the necessary skill levels of workers are reduced, allowing the firm to reduce costs.
c. it lends itself to empowerment of employees.
d. it captures the cost savings of economies of scale.
a. the lot size needed to manufacture a firm’s product efficiently is reduced.
A flexible manufacturing system is
a. based on the use of temporary and part-time employees as well as outsourcing.
b. a computer-controlled process that is used to produce a variety of products in moderate, flexible quantities with minimal human intervention.
c. based on a 360-degree view of the company’s relationships with customers.
d. a system that identifies “the one best way” to produce each product in the company’s line.
b. a computer-controlled process that is used to produce a variety of products in moderate, flexible quantities with minimal human intervention.
A nationwide chain of pet stores wishes to identify the tradeoffs that its customers are willing to make between low-cost products such as generic pet foods and differentiated features such as pick-up and delivery of pets for grooming. The best technique for this firm to learn this information would be to use
a. information networks.
b. a flexible manufacturing system.
c. differentiation development planning.
d. Enterprise Resource Planning.
a. information networks.
By linking companies with their suppliers, distributors, and customers, ____ provide a company with flexibility.
a. Flexible manufacturing systems
b. Information networks
c. Total quality management systems
d. Capabilities
b. Information networks
TQM is most helpful to firms following the ____ business strategy.
a. cost-leadership
b. integrated cost-leadership/differentiation
c. focused cost-leadership
d. focused differentiation
b. integrated cost-leadership/differentiation
The term “stuck in the middle”
a. means adhering to a middle of the road strategy in the face of negative outcomes.
b. indicates that the customers of the firm are willing to pay only a mid-range price for the product.
c. reflects the fact that the customers of the firm have only moderate expectations regarding product quality.
d. means that the firm’s cost structure is not low enough to allow it to attractively price its products and that its products are not sufficiently differentiated to create value for its target customer.
d. means that the firm’s cost structure is not low enough to allow it to attractively price its products and that its products are not sufficiently differentiated to create value for its target customer.
The goal of business-level strategy is to earn above-average returns.
T
A business-level strategy is an integrated and coordinated set of commitments and actions designed to exploit core competencies and gain a competitive advantage in specific product markets.
T
Every firm uses all levels of strategy: corporate, acquisition and restructuring, international and cooperative.
F
Business-level strategy can be thought of as the firm’s core strategy.
T
When selecting a business level strategy, the firm determines who will be served, what customer needs will be satisfied, and how those needs will be satisfied.
T
Global competition has increased the options for consumers and has made it more imperative for firms to identify the needs of customers in order to earn above-average returns.
T
Effective use of the generic business strategies allows the firm to favorably position itself relative to the five forces.
T
Almost any identifiable human or organizational characteristic can be used to subdivide a market into segments that differ from one another on a given characteristic.
T
The generalized forms of value that goods and services provide are either lower cost with acceptable features or highly differentiated features with acceptable cost.
F
An English professor spends her summers writing low-brow romance novels that sell directly to paperback. She writes under a fictional name because she is embarrassed to admit to her colleagues and students how she earns the extra money for foreign vacations. The professor is correct in her concern that she is serving customer needs that are objectively inferior and bad.
F
Changing consumer needs is illustrated by Starbucks’ allowing consumers to have an experience rather than just a cup of coffee and to design their own drinks.
F
Companies without the core competencies in their value chain activities and and support functions are still able to implement successfully a either a cost leadership or a differentiation strategy, although they cannot implement an integrated cost leadership/differentiation strategy.
F
To position itself differently from competitors, a firm must decide to either perform activities differently or to perform different activities.
T
An examination of a company’s activity map will reveal its strategic themes.
T
Southwest Airlines’ tightly integrated activities make its cost leadership strategy more vulnerable to imitation than if its activities were loosely integrated.
F
The key to Southwest Airlines’ success has been its ability to continuously reduce costs while providing customers with superior levels of differentation such as an engaging culture.
F
Strategic fit among the many activities in the value chain is critical for competitive advantage because it is more difficult for a competitor to match a configuration of integrated activities than to imitate a particular activity such as sales promotion or a process technology.
F
The difference between the cost leadership and differentiation business-level strategies, and the focused cost leadership and focused differentiation strategies, is their basis for customer value.
F
Essentially, there are only two basic competitive advantages: lower cost than rivals and the ability to differentiate.
T
The integrated cost leadership/differentiation strategy is superior to the other business-level strategies.
F
The best of the generic business strategies is the integrated cost leadership/differentiation strategy.
F
Low-cost leaders usually concentrate on the value chain activities of inbound logistics and outbound logistics as a means to reduce costs.
T
Firms implementing cost leadership strategies often sell no-frills standardized goods or services (but with competitive levels of differentation) to the industry’s most typical customers.
T
A low-cost position in the industry is not a valuable defense against rivals when competing on the basis of price.
F
According to the Chapter 4 Strategic Focus, Walmart’s change in strategy to attract more upscale customers was particularly successful especially against Family Dollar and Amazon.
F
Walmart’s actions (Chapter 4 Strategic Focus) of becoming more upscale with the intent of taking sales away from Target provided an opening for competitors such as Amazon and Family Dollar to better compete on the basis of price and attract several of Walmart’s customer.
T
The value-creating activities associated with the cost leadership strategy and differentation strategy are the same.
F
Human resources and other support functions are not value-creating activities in the value chain; only the value chain activities create value.
F
A low-cost leader may create entry barriers to potential entrants by continually improving its levels of efficiency.
T
In general, firms can be most effective if they develop business-level strategies that will serve the needs of the “typical customer” in the industry.
F
The differentiation strategy is effective for products that are expensive, luxury consumer goods. It is not effective for common, inexpensive products such as doughnuts.
F
Virtually anything can be a basis for a firm to create a differentiated product or service.
T
A risk of the differentiation strategy is that the firm’s means of differentiation may eventually not provide value for which customers are willing to pay.
T
Counterfeit products are a serious problem for firms following the differentiation strategy.
T
Unlike a cost leadership and a differentiation strategy, both focus strategies are less dependent on the completion of various value chain and support activities in order to compete in a superior manner.
F
The activities in the value chains of companies using focus strategies are quite different than the activities in the value chains of companies using industry-wide business strategies.
F
Kazoo Toys has successfully implemented an integrated cost leadership /differentiation strategy by creating value for parents and children interested in purchasing unique toys while simultaneously having access to unique services.
F
A new generation of lunch trucks in cities such as New York, San francisco, and Los Angeles serving high-end fare such as hamburgers made from grass-fed cattle, escargot and crème brulee illustrate the focus cost leadership strategy.
T
A risk of a focus strategy is that the needs of the customer within a narrow competitive segment may become more similar to those needs of customers in the whole market.
T
Although it is a cost leader, IKEA also offers differentiated features that appeal to its target customers, including its unique furniture designs, in-store playrooms for children, wheelchairs for customer use, and extended hours.
T
Zara offers current and desirable fashion goods at relatively low prices. To implement this strategy, Zara has sophisticated designers and effective means of managing costs. Zara is an example of the integrated cost leadership/differentiation strategy.
T
The Li Ning Company’s move from a cost leadership strategy to an integrated cost leadership/differentation strategy in the sportswear industry was so successful in China that both Nike and Adidas exited the Chinese market (Chapter 4 Strategic Focus).
F
Flexible manufacturing systems, information networks, and total quality management are three techniques that make it possible for firms to implement the focused differentiation strategy.
F
A risk of The Li Ning Company’s integrated cost leadership/differentation strategy is that it may end up “stuck-n-the-middle,” i.e., not having either a low cost or a uniqueness advantage (Chapter 4 Strategic Focus).
F
A flexible manufacturing system is a computer-controlled process used to produce a variety of products in moderate, flexible quantities with minimal manual intervention.
T
Because of its focus on innovation and quality manufacturing, Total Quality Management is not useful for firms which follow a cost leadership strategy.
F
One of the benefits of the integrated cost leadership/differentiation strategy is that it is less risky than either the cost leadership or differentiation strategies.
F
The hazard of getting “stuck in the middle” applies to firms using any business strategy.
T
Research shows that firms using a hybrid strategy (i.e., integrated cost leadership/differentation) often outperform firms using pure strategies ( i.e., cost leadership or differentation).
F

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