CHAPTER 4 (strat test) – Flashcards
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Actions that firms take to gain competitive advantage in a single market or industry are known as A) business-level strategies. B) corporate-level strategies. C) functional-level strategies. D) macro-level strategies.
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business-level strategies.
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Actions firms take to gain competitive advantages by operating in multiple markets or industries simultaneously are known as A) business-level strategies. B) corporate-level strategies. C) functional-level strategies. D) macro-level strategies.
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corporate-level strategies.
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Cost-leadership and product-differentiation strategies are so widely recognized that they are often called A) common business strategies. B) generic corporate strategies. C) generic business strategies. D) common corporate strategies.
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generic business strategies.
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A firm that chooses a ________ focuses on gaining advantages by reducing its cost below all of its competitors. A) diversification strategy B) product-differentiation business strategy C) corporate strategy D) cost-leadership business strategy
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cost-leadership business strategy
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The best example of a firm following a cost-leadership business strategy is A) Mercedes Benz. B) Macy's. C) Wal-Mart. D) Rolls Royce.
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Wal-Mart.
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________ are said to exist when the increase in firm size (measured in terms of volume of production) are associated with lower costs (measured in terms of average costs per unit of production). A) Sustainable competitive advantages B) Economies of scale C) Temporary competitive advantages D) Economies of scope
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Economies of scale
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As the volume of production in a firm increases, the average cost per unit decreases until some optimal volume of production is reached, after which the average costs of production begin to rise because of A) diseconomies of scale. B) economies of scope. C) diseconomies of scope. D) economies of scale.
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diseconomies of scale.
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The link between volume of production and the cost of building manufacturing operations is particularly important in industries characterized by A) process innovations. B) product manufacturing. C) product innovation. D) process manufacturing
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process manufacturing
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According to the "two-thirds rule," it would cost a firm ________ to build a plant with a capacity of 100,000 units. A) 2/3*100,000 B) 100,000 / 2/3 C) 100,000 raised to the 2/3 power D) 2 * 100,000 / 3
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100,000 raised to the 2/3 power
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________ levels of production are associated with ________ levels of employee specialization. A) High, high B) High, low C) Low, high D) Low, moderated
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High, high
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Which of the following is not a potential source of diseconomies of scale? A) Physical limits to efficient size B) Worker de-motivation C) Distance to markets and suppliers D) Learning-curve economies
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Learning-curve economies
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If Temper Company, a manufacturer of mattresses, was considering moving its production facilities to China but decided against it because the additional costs of shipping the mattresses back to the U.S. would offset the cost savings associated with moving the production facilities, the increased costs associated with shipping would be an example of A) learning-curve economies. B) diseconomies of scale. C) economies of scale. D) competitive advantages.
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diseconomies of scale.
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________ focus(es) on the relationship between the volume of production and a given point in time and average unit costs, the ________ focus(es) on the relationship between cumulative production and average costs. A) Economies of scale; learning curve B) Competitive advantage; economies of scale C) Learning curve; economies of scale D) Economies of scale; competitive advantage
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Economies of scale; learning curve
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Which of the following statements regarding the learning curve and economies of scale is accurate? A) Just as diseconomies of scale are presumed to exist if a firm gets too large, there is a corresponding increase in costs in the learning-curve model as the cumulative volume of production grows. B) Where diseconomies of scale are presumed to exist if a firm gets too large, there is no corresponding increase in costs in the learning-curve model as the cumulative volume of production grows. C) Where diseconomies of scale are presumed to exist if a firm gets too small, there is no corresponding increase in costs in the learning-curve model as the cumulative volume of production grows. D) Just as diseconomies of scale are presumed to exist if a firm gets too small, there is a corresponding increase in costs in the learning-curve model as the cumulative volume of production grows.
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Where diseconomies of scale are presumed to exist if a firm gets too large, there is no corresponding increase in costs in the learning-curve model as the cumulative volume of production grows.
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Learning-curve-cost advantages are A) restricted only to manufacturing firms. B) restricted only to firms in services industries. C) restricted only to firms in extraction industries. D) not restricted to manufacturing
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not restricted to manufacturing
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________ are any supplies used by a firm in conducting its business activities. A) Productive assets B) Productive inputs C) Productive outputs D) Productive inventory
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Productive inputs
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In order to create a cost advantage, the cost of acquiring low-cost productive inputs must be ________ the cost savings generated by these factors. A) greater than B) equal to C) less than D) greater than or equal to
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less than
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Machines and robots are examples of A) technological software. B) economies of scale. C) learning-curve effects. D) technological hardware
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technological hardware
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The quality of relations among labor and management, an organization's culture, and the quality of management controls are all examples of A) technological hardware. B) technological software. C) productive inputs. D) economies of scale.
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technological software.
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Choices that firms make about the kinds of products and services they will sell that impact their relative cost position are known as A) technological hardware. B) policy choices. C) technological software. D) corporate level strategies.
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policy choices
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Firms for whom the price of the products or services they sell is determined by market conditions and not by the individual decision of the firms are known as A) profit takers. B) price makers. C) price takers. D) profit makers.
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price takers
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Which of the following statements is accurate? A) A cost-leadership competitive strategy increases the threat of new entrants by lowering cost-based barriers to entry. B) Firms with a low-cost position can reduce the threat of rivalry in an industry. C) Cost leaders are especially vulnerable to substitute products. D) Cost leaders are especially vulnerable to the threat of suppliers.
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Firms with a low-cost position can reduce the threat of rivalry in an industry.
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If the potential responses of competing firms are likely to be very detrimental to the costs advantages of cost leaders, firms pursuing a cost-leadership competitive strategy should A) drop their prices below competitors' prices to increase overall economic performance through increased volumes of profitable sales. B) raise their prices above competitors, increasing overall economic performance through higher margins. C) focus on a specific niche market to avoid direct competition with aggressive competitors. D) set their prices equal to competitors' prices, sacrificing some market share for increased profit margins and the release of less information
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set their prices equal to competitors' prices, sacrificing some market share for increased profit margins and the release of less information
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Which of the following statements about cost leadership and the threat of buyers is accurate? A) If buyers demand increased quality or service, cost leaders can absorb these costs and may still have a cost advantage over the competition. B) Being a cost leader encourages buyer backward vertical integration. C) Firms pursuing a cost-leadership strategy are especially vulnerable to powerful buyers who insist on low prices or higher quality and service from their suppliers. D) Cost leaders are not able to absorb costs associated with buyers' demands for increased quality or service.
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If buyers demand increased quality or service, cost leaders can absorb these costs and may still have a cost advantage over the competition.
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Which of the following is likely to be a rare source of cost advantage? A) Technological software B) If the efficient size of a firm or plant is significantly smaller than the total size of an industry C) Cost disadvantages based on diseconomies of scale D) Technological hardware
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Technological software
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Perhaps the only time economies of scale are not subject to low-cost duplication is when the ________ size of operations is a significant percentage of ________ in an industry. A) minimum; marginal demand B) efficient; total demand C) maximum; marginal demand D) efficient; marginal demand
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efficient; total demand
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Which of the following is less likely to be a rare source of cost advantage? A) Technological software B) Learning-curve advantages C) Differential low-cost access to productive inputs D) Policy choices
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Policy choices
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Which of the following statements is accurate? A) In general, economies of scale are relatively easy-to-duplicate bases of cost leadership, but diseconomies of scale are not. B) In general, diseconomies of scale are relatively easy-to-duplicate bases of cost leadership, but economies of scale are not. C) In general, neither economies of scale nor economies are relatively easy-to-duplicate bases of cost leadership. D) In general, both economies of scale and diseconomies of scale are relatively easy-to-duplicate bases of cost leadership.
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In general, both economies of scale and diseconomies of scale are relatively easy-to-duplicate bases of cost leadership
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When managers committed to an incorrect course of action increase their commitment to this action even as its limitations become manifest, this is known as A) de-escalation of commitment. B) diseconomies of scale. C) escalation of commitment. D) economies of scale
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escalation of commitment.
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Cost advantages based on learning-curve economies are A) rare, but they usually are not costly to duplicate. B) costly to duplicate, but they usually are not rare. C) both rare and usually costly to duplicate. D) not rare and usually are not costly to duplicate.
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rare, but they usually are not costly to duplicate.
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Firms implementing cost-leadership strategies will generally adopt a A) multidivisional structure. B) product divisional structure. C) functional organizational structure. D) matrix structure.
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functional organizational structure
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In a functional structure, each of the major business functions is managed by a A) functional manager. B) divisional manager. C) chief executive officer. D) line manager
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functional manager.
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The only person in a functional organization to have a multifunctional perspective is the A) CFO. B) CEO. C) COO. D) marketing manager
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CEO.
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Firms pursuing a cost-leadership strategy are typically characterized by A) loose cost control systems. B) a de-emphasis on quantitative cost goals and costs. C) infrequent cost control reports. D) close supervision of labor, raw materials and inventory
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close supervision of labor, raw materials and inventory
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Which of the following compensation policies is most likely to enhance a firm's ability to pursue a low-cost strategy? A) Awarding employees bonuses based on the total amount of goods produced B) Awarding employees bonuses based on customer comment cards C) Awarding employees bonuses that are equal to 50% of the total cost savings achieved based on employee suggestions and initiatives D) Awarding employees bonuses based solely on how long they have been employed with the company
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Awarding employees bonuses that are equal to 50% of the total cost savings achieved based on employee suggestions and initiatives
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Cost-leadership firms are typically characterized by very ________ cost-control systems. A) tight B) flexible C) loose D) decentralized
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tight
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The U in U-form structure stands for A) "uniform." B) "unitary." C) "unilateral." D) "unambiguous."
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"unitary."
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In ________ structures, employees report to two or more people. A) unilateral B) functional C) divisional D) matrix
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matrix
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A marketing manager is an example of a(n) ________ manager. A) ambidextrous B) divisional C) functional D) unitary
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functional
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Sematech is pursuing which strategy? A) Cost-leadership business strategy B) Product-differentiation business strategy C) Cost-leadership corporate strategy D) Product-differentiation corporate strategy
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Cost-leadership business strategy
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Firms implementing cost-leadership strategies will have ________ layers in their reporting structure. A) many B) relatively simple C) relatively few D) relatively complex
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relatively few
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By increasing production volume in an effort to reduce costs, Sematech is pursuing which sources of cost advantage? A) Size differences and diseconomies of scale B) Differential access to productive inputs C) Size differences and economies of scale D) Technological advantages
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Size differences and economies of scale
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If Sematech's efforts to increase its production capacity resulted in increased complexity and an inability of managers to control and operate the firm efficiently, this would be an example of A) physical limits to efficient size. B) worker de-motivation. C) distance to markets and suppliers. D) managerial diseconomies.
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managerial diseconomies.
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If Sematech's expansion plans did not produce the desired cost savings but the company decided to continue production expansion in an effort to capture cost reductions, this would be an example of A) economies of scale. B) escalation of commitment. C) diseconomies of scale. D) managerial diseconomies
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escalation of commitment.
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If Sematech were to continue seeking methods to maintain the company's cost-leadership position that would be costly to duplicate, which of the following is most likely to be a basis of cost leadership that may be costly to duplicate? A) Establishing economies of scale B) Exploiting learning-curve economies C) Purchasing new technological hardware D) Securing differential access to low-cost productive inputs
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Securing differential access to low-cost productive inputs
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If Lucy Sullivan were a Sematech manager who oversaw the finance operations in the company's functional structure, Lucy would be considered a A) chief executive officer. B) divisional manager. C) chief operating officer. D) functional manager.
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functional manager.
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Given Sematech's business level strategy, which organizational structure is the most appropriate? A) Matrix structure B) U-form structure C) Multidivisional structure D) Product-divisional structure
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U-form structure
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By employing a low-cost competitive strategy, Sematech has made itself A) less able to withstand industry price wars. B) more vulnerable to rivals. C) less vulnerable to the power of suppliers. D) more vulnerable to the power of buyers.
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less vulnerable to the power of suppliers
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If Sematech decided to focus on building its technological hardware, it would focus on elements such as A) robots. B) organizational culture. C) the quality of organizational controls. D) the quality of relations among labor and management
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robots
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If Sematech were to choose to narrow its product line in an effort to reduce costs, this would be an example of A) technological software. B) a policy choice. C) a competitive advantage. D) a learning-curve effect.
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a policy choice.
