Question 1

Michael Porter\'s three generic strategies can be depicted on two dimensions: competitive advantage and product life cycle.

Accepted Answer

FALSE

Question 2

Concentrating solely on one form of competitive advantage generally leads to the highest possible level of profitability.

Accepted Answer

FALSE

Question 3

A firm striving for cost leadership will typically spend relatively more on product related R than on process related R.

Accepted Answer

FALSE

Question 4

To generate above-average returns, a firm following an overall cost leadership position should NOT be concerned with attaining parity or proximity on the basis of differentiation relative to its peers.

Accepted Answer

FALSE

Question 5

The experience curve concept suggests that production costs tend to decrease as production increases regardless of where an industry is at in its life cycle.

Accepted Answer

FALSE

Question 6

Firms that compete on overall cost leadership are vulnerable if all rivals share a common input or raw material that contributes a significant amount to total costs.

Accepted Answer

TRUE

Question 7

The example of Lexus automobiles in the text points out that a firm can strengthen its differentiation strategy by achieving integration at multiple points along the value chain.

Accepted Answer

TRUE

Question 8

A successful differentiation strategy lowers entry barriers because of customer loyalty and the firm\'s ability to provide uniqueness in its products and services.

Accepted Answer

FALSE

Question 9

A successful differentiation strategy increases rivalry since buyers become more price-sensitive.

Accepted Answer

FALSE

Question 10

If a firm has a successful differentiation strategy, it is NOT necessary to attain parity on cost.

Accepted Answer

FALSE

Question 11

One potential pitfall of a differentiation strategy is that a brand\'s identification in the marketplace may become diluted through excessive product line extensions.

Accepted Answer

TRUE

Question 12

With a focus strategy, creating a niche by differentiating one\'s product or service often allows small firms to compete successfully with market leaders.

Accepted Answer

TRUE

Question 13

Focus, by itself, often constitutes a competitive advantage.

Accepted Answer

FALSE

Question 14

A potential pitfall of a focus strategy is that focusers can become too focused to satisfy buyer needs.

Accepted Answer

TRUE

Question 15

A disadvantage of firms that successfully integrate overall cost leadership and differentiation strategies is that they are relatively easy for competitors to imitate.

Accepted Answer

FALSE

Question 16

Mass customization enables manufacturers to be more responsive to customer demands for high quality products.

Accepted Answer

TRUE

Question 17

An important idea behind the \"profit pool\" concept is that there is always a strong relationship between the generation of revenues and the capturing of profits.

Accepted Answer

FALSE

Question 18

An important potential pitfall of an integrated overall cost leadership and differentiation strategy is that firms may fail to implement either one and become \"stuck-in-the-middle.\"

Accepted Answer

TRUE

Question 19

Most analysts agree that use of the Internet will lower transaction costs.

Accepted Answer

TRUE

Question 20

One way the Internet and digital technologies are creating opportunities for firms with differentiation strategies is by enabling mass customization.

Accepted Answer

TRUE

Question 21

The Internet offers few advantages for focusers because niche players and small companies cannot implement capabilities as effectively as their larger competitors.

Accepted Answer

FALSE

Question 22

The Internet has provided a small subset of companies with greater tools for managing costs.

Accepted Answer

FALSE

Question 23

Incumbent firms that thought a niche market was too small to enter in the past may use Internet technologies to enter that segment with focusers.

Accepted Answer

TRUE

Question 24

The market life cycle should be used as a short-run forecasting device because it provides a conceptual framework for understanding what changes typically occur.

Accepted Answer

FALSE

Question 25

An important advantage of first movers or \"pioneers\" in a market is that they may establish brand recognition that may later serve as an important switching cost.

Accepted Answer

TRUE

Question 26

During the growth stage of the market life cycle, customers are very likely to establish brand loyalty.

Accepted Answer

FALSE

Question 27

Given the attractiveness of premium pricing during the growth stage of the market life cycle, managers should emphasize short-term results to increase profits.

Accepted Answer

FALSE

Question 28

As markets mature, competition on the basis of differentiation is preferable to price competition.

Accepted Answer

TRUE

Question 29

As markets mature, the magnitude of differentiation and cost leadership advantages among competitors decrease.

Accepted Answer

TRUE

Question 30

With reverse positioning, a strategy to be used during the mature stage of the industry life cycle, a product escapes its category by deliberately associating with a different one.

Accepted Answer

FALSE

Question 31

Businesses that compete in markets that are in decline should simply be harvested or divested since they are no longer profitable.

Accepted Answer

FALSE

Question 32

During the decline stage of the product life cycle, a harvesting strategy means that a firm keeps a product going without significantly reducing marketing support, technological development, or other investments, while hoping that competitors will exit the market.

Accepted Answer

FALSE

Question 33

The decline stage of the industry life cycle stage is inevitably followed by death.

Accepted Answer

FALSE

Question 34

Many firms facing a turnaround situation try to reduce their costs by outsourcing the production of many inputs.

Accepted Answer

TRUE

Question 35

The primary aim of strategic management at the business level is   A. maximizing risk-return tradeoffs through diversification.  B. achieving a low cost position.  C. maximizing differentiation of products and/or services.  D. achieving competitive advantage(s).

Accepted Answer

D. achieving competitive advantage(s).

Question 36

Primary value chain activities that involve the effective layout of receiving dock operations (inbound logistics) and support value chain activities that include expertise in process engineering (technology development) characterize what generic strategy?   A. differentiation  B. overall cost leadership  C. differentiation focus  D. stuck-in-the-middle

Accepted Answer

B. overall cost leadership

Question 37

A manufacturing business pursuing cost leadership will likely   A. focus on a narrow market segment.  B. rely on experience effects to raise efficiency.  C. use advertising to build brand image.  D. put heavy emphasis on product engineering.

Accepted Answer

B. rely on experience effects to raise efficiency.

Question 38

One aspect of using a cost leadership strategy is that experience effects may lead to lower costs. Experience effects are achieved by   A. hiring more experienced personnel.  B. repeating a process until a task becomes easier.  C. spreading out a given expense or investment over a greater volume.  D. competing in an industry for a long time.

Accepted Answer

B. repeating a process until a task becomes easier.

Question 39

The experience curve suggests that cutting prices is a good strategy   A. if it can induce greater demand and thereby help a firm travel down the experience curve faster.  B. in industries characterized by high economies of scale.  C. in the maturity stage of the industry life cycle.  D. in the decline stage of the industry life cycle.

Accepted Answer

A. if it can induce greater demand and thereby help a firm travel down the experience curve faster.

Question 40

Convincing rivals not to enter a price war, protection from customer pressure to lower prices, and the ability to better withstand cost increases from suppliers characterize which type of competitive strategy?   A. Overall cost leadership.  B. Differentiation.  C. Differentiation focus.  D. Cost leadership focus.

Accepted Answer

A. Overall cost leadership.

Question 41

Which of the following is a risk (or potential pitfall) of cost leadership?   A. Cost cutting may lead to the loss of desirable features.  B. Attempts to stay ahead of the competition may lead to gold plating.  C. Cost differences increase as the market matures.  D. Producers are more able to withstand increases in suppliers\' cost.

Accepted Answer

A. Cost cutting may lead to the loss of desirable features.

Question 42

A firm can achieve differentiation through all of the following means EXCEPT   A. improving brand image.  B. better customer service.  C. offering lower prices to frequent customers.  D. adding additional product features.

Accepted Answer

C. offering lower prices to frequent customers.

Question 43

Support value chain activities that involve excellent applications engineering support (technology development) and facilities that promote a positive firm image (firm infrastructure) characterize what generic strategy?   A. Differentiation.  B. Overall cost leadership.  C. Differentiation focus.  D. Stuck-in-the middle.

Accepted Answer

A. Differentiation.

Question 44

High product differentiation is generally accompanied by   A. higher market share.  B. decreased emphasis on competition based on price.  C. higher profit margins and lower costs.  D. significant economies of scale.

Accepted Answer

B. decreased emphasis on competition based on price.

Question 45

Which of the following is FALSE regarding how a differentiation strategy can help a firm to improve its competitive position vis-Ã -vis Porter\'s five forces?   A. By increasing a firm\'s margins, it avoids the need for a low cost position.  B. It helps a firm to deal with supplier power and reduces buyer power since buyers lack comparable alternatives.  C. Supplier power is increased because suppliers will be able to charge higher prices for their inputs.  D. Firms will enjoy high customer loyalty, thus experiencing less threat from substitutes than its competitors.

Accepted Answer

C. Supplier power is increased because suppliers will be able to charge higher prices for their inputs.

Question 46

A differentiation strategy enables a business to address the five competitive forces by   A. lessening competitive rivalry by distinguishing itself.  B. having brand-loyal customers become more sensitive to prices.  C. increasing economies of scale.  D. serving a broader market segment.

Accepted Answer

A. lessening competitive rivalry by distinguishing itself.

Question 47

All of the following are potential pitfalls of a differentiation strategy EXCEPT:   A. uniqueness that is not valuable.  B. too high a price premium.  C. all rivals share a common input or raw material.  D. perceptions of differentiation may vary between buyers and sellers.

Accepted Answer

C. all rivals share a common input or raw material.

Question 48

Which statement regarding competitive advantages is true?   A. If several competitors pursue similar differentiation tactics, they may all be perceived as equals in the mind of the consumer.  B. With an overall cost leadership strategy, firms need not be concerned with parity on differentiation.  C. In the long run, a business with one or more competitive advantages is probably destined to earn normal profits.  D. Attaining multiple types of competitive advantage is a recipe for failure.

Accepted Answer

A. If several competitors pursue similar differentiation tactics, they may all be perceived as equals in the mind of the consumer.

Question 49

A narrow market focus is to a differentiation-based strategy as a   A. broadly-defined target market is to a cost leadership strategy.  B. growth market is to a differentiation-based strategy.  C. growth market is to a cost-based strategy.  D. technological innovation is to a cost-based strategy.

Accepted Answer

A. broadly-defined target market is to a cost leadership strategy.

Question 50

A firm following a focus strategy   A. must focus on governmental regulations.  B. must focus on a market segment or group of segments.  C. must focus on the rising cost of inputs.  D. must avoid entering international markets.

Accepted Answer

B. must focus on a market segment or group of segments.

Question 51

All of the following are potential pitfalls of a focus strategy EXCEPT   A. erosion of cost advantages within the narrow segment.  B. all rivals share a common input or raw material.  C. even product and service offerings that are highly focused are subject to competition from new entrants and from imitation.  D. focusers can become too focused to satisfy buyer needs.

Accepted Answer

B. all rivals share a common input or raw material.

Question 52

Research has consistently shown that firms that achieve both cost leadership and differentiation advantages tend to perform   A. at about the same level as firms that achieve either cost or differentiation advantages.  B. about the same as firms that are \"stuck-in-the-middle.\"  C. lower than firms that achieve differentiation advantages but higher than firms that achieve cost advantages.  D. higher than firms that achieve either a cost or a differentiation advantage.

Accepted Answer

D. higher than firms that achieve either a cost or a differentiation advantage.

Question 53

The text discusses three approaches to combining overall cost leadership and differentiation competitive advantages. These are the following EXCEPT   A. automated and flexible manufacturing systems.  B. exploiting the profit pool concept for competitive advantage.  C. coordinating the \"extended\" value chain by way of information technology.  D. deriving benefits from highly focused and high technology markets.

Accepted Answer

D. deriving benefits from highly focused and high technology markets.

Question 54

A __________ can be defined as the total profits in an industry at all points along the industry\'s value chain.   A. profit maximizer  B. revenue enhancer  C. profit pool  D. profit outsourcing

Accepted Answer

C. profit pool

Question 55

All of the following are potential pitfalls of an integrated overall low cost and differentiation strategy EXCEPT:   A. firms that fail to attain both strategies may end up with neither and become \"stuck-in-the-middle.\"  B. targeting too large a market that causes unit costs to increase.  C. underestimating the challenges and expenses associated with coordinating value-creating activities in the extended value chain.  D. miscalculating sources of revenue and profit pools in the firm\'s industry.

Accepted Answer

B. targeting too large a market that causes unit costs to increase.

Question 56

Which of the following is NOT one of the ways the Internet is lowering transaction costs?   A. eliminating supply chain intermediaries  B. evaluating employee performance  C. minimizing office expenses  D. reducing business travel

Accepted Answer

B. evaluating employee performance

Question 57

Dell Computer has an online ordering system that allows consumers to configure their own computers before Dell builds them. This capability is an example of   A. electronic data interchange.  B. knowledge management.  C. collaborative design.  D. mass customization.

Accepted Answer

D. mass customization.

Question 58

Which of the following methods of implementing a differentiation strategy has been greatly enhanced because of Internet technologies?   A. celebrity endorsements  B. prestige packaging  C. exceptional service  D. mass customization

Accepted Answer

D. mass customization

Question 59

Which of the following phrases best completes this sentence: Because of the Internet, firms that use a focus strategy have new opportunities to   A. respond quickly to customer requests.  B. provide more services and features.  C. access markets less expensively.  D. access niche markets in a highly specialized fashion.

Accepted Answer

D. access niche markets in a highly specialized fashion.

Question 60

One of the reasons the Internet is eroding sustainable competitive advantages is   A. incumbent firms are entering market segments that they previously considered to be too small.  B. nearly all competitors will have greater access to tools for managing costs making it hard for any one to achieve an advantage.  C. differentiators have been able to preserve the unique advantages that have always been the hallmark of their success.  D. firms are ignoring opportunities to offer high-end services in niche markets.

Accepted Answer

B. nearly all competitors will have greater access to tools for managing costs making it hard for any one to achieve an advantage.

Question 61

Which of these statements regarding the industry life cycle is correct?   A. Part of the power of the market life cycle is its ability to serve as a short-run forecasting device.  B. Trends suggested by the market life cycle model are generally not reversible or repeatable.  C. It has important implications for a firm\'s generic strategies, functional areas, value-creating activities, and overall objectives.  D. It points out the need to maintain a differentiation advantage and a low cost advantage simultaneously.

Accepted Answer

C. It has important implications for a firm\'s generic strategies, functional areas, value-creating activities, and overall objectives.

Question 62

Which of the following statements about the introduction stage of the market life cycle is TRUE?   A. It produces relatively large, positive cash flows.  B. Strong brand recognition seldom serves as an important switching cost.  C. Market share gains by pioneers are usually easily sustained for many years.  D. Products or services offered by pioneers may be perceived as differentiated simply because they are new.

Accepted Answer

D. Products or services offered by pioneers may be perceived as differentiated simply because they are new.

Question 63

In the __________ stage of the industry life cycle, the emphasis on product design is very high, the intensity of competition is low, and the market growth rate is low.   A. introduction  B. growth  C. maturity  D. decline

Accepted Answer

A. introduction

Question 64

The growth stage of the industry life cycle is characterized by   A. \"in-kind\" competition (from the same type of product).  B. premium pricing.  C. a growing trend to compete on the basis of price.  D. retaliation by competitors whose customers are stolen.

Accepted Answer

A. \"in-kind\" competition (from the same type of product).

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