A __________ can be defined as the total profits in an industry at all points along the industry value chain.

61.

Which statement regarding competitive advantages is true?    A.  With an overall cost leadership strategy, firms need not be concerned with parity on differentiation. B.  If several competitors pursue similar differentiation tactics, they may all be perceived as equals in the mind of the consumer. 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. Potential pitfalls of a differentiation strategy include the idea that perceptions of differentiation may vary between buyers and sellers. The issue here is that beauty is in the eye of the beholder. Companies must realize that although they may perceive their products and services as differentiated, their customers may view them as commodities.

AACSB: Analytic Blooms: Understand Learning Objective: 05-03 The pitfalls managers must avoid in striving to attain generic strategies. Level of Difficulty: 2 Medium Topic: Types of Competitive Advantage and Sustainability

62.

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

AACSB: Analytic Blooms: Apply Learning Objective: 05-03 The pitfalls managers must avoid in striving to attain generic strategies. Level of Difficulty: 3 Hard Topic: Types of Competitive Advantage and Sustainability

63.

A firm following a focus strategy must focus on _____________.    A.  governmental regulations B.  the rising cost of inputs C.  a market segment or group of segments D.  avoiding entering international markets A focus strategy is based on the choice of a narrow competitive scope within an industry. A firm following this strategy selects a segment or a group of segments and tailors its strategy to serve them. The essence of focus is the exploitation of a particular market niche.

AACSB: Analytic Blooms: Remember Learning Objective: 05-03 The pitfalls managers must avoid in striving to attain generic strategies. Level of Difficulty: 1 Easy Topic: Types of Competitive Advantage and Sustainability

64.

Which of the following is not a potential pitfall of a focus strategy?    A.  Erosion of cost advantages can arise within the narrow segment. B.  Product/service offerings that are highly focused are subject to competition from new entrants. C.  All rivals share a common input or raw material. D.  Focusers can become too focused to satisfy buyer needs. Potential pitfalls of focus strategies include: erosion of cost advantages within the narrow segment; the idea that even product and service offerings that are highly focused are subject to competition from new entrants; and focusers that become too focused to satisfy buyer needs.

AACSB: Analytic Blooms: Understand Learning Objective: 05-03 The pitfalls managers must avoid in striving to attain generic strategies. Level of Difficulty: 2 Medium Topic: Types of Competitive Advantage and Sustainability

65.

The text discusses three approaches to combining overall cost leadership and differentiation competitive advantages. Which of the following is not one of these three approaches?    A.  automated and flexible manufacturing systems B.  exploiting the profit pool concept for competitive advantage C.  deriving benefits from highly focused and high technology markets D.  coordinating the extended value chain by way of information technology Three approaches to combining overall low cost and differentiation include: automated and flexible manufacturing systems, exploiting the profit pool concept for competitive advantage, and coordinating the extended value chain by way of information technology.

AACSB: Analytic Blooms: Understand Learning Objective: 05-04 How firms can effectively combine the generic strategies of overall cost leadership and differentiation. Level of Difficulty: 2 Medium Topic: Types of Competitive Advantage and Sustainability

66.

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

AACSB: Analytic Blooms: Remember Learning Objective: 05-04 How firms can effectively combine the generic strategies of overall cost leadership and differentiation. Level of Difficulty: 1 Easy Topic: Types of Competitive Advantage and Sustainability

67.

Which of the following is not a potential pitfall of an integrated overall low cost and differentiation strategy?    A.  Firms that fail to attain both strategies may end up with neither and become stuck-in-the-middle. B.  Firms that underestimate the challenges and expenses associated with coordinating value-creating activities in the extended value chain. C.  Firms that target too large a market that causes unit costs to increase. D.  Firms that miscalculate sources of revenue and profit pools in the company industry. The pitfalls of integrated overall cost leadership and differentiation include: firms that fail to attain both strategies may end up with neither and become stuck-in-the-middle; underestimating the challenges and expenses associated with coordinating value-creating activities in the extended value chain; and miscalculating sources of revenue and profit pools in the company industry.

AACSB: Analytic Blooms: Understand Learning Objective: 05-04 How firms can effectively combine the generic strategies of overall cost leadership and differentiation. Level of Difficulty: 2 Medium Topic: Types of Competitive Advantage and Sustainability

68.

Which of the following is not a reason for the possible erosion of company competitive advantage?    A.  rapid change in technology B.  globalization C.  actions by rivals from within and outside of the industry D.  company commitment to innovation Nothing is forever, when it comes to competitive advantages. Rapid changes in technology, globalization, and actions by rivals from within and outside of the industry can quickly erode company advantages. It is becoming increasingly important to recognize that the duration of competitive advantages is declining, especially in technology intensive industries.

AACSB: Analytic Blooms: Understand Learning Objective: 05-05 What factors determine the sustainability of a firm's competitive advantage. Level of Difficulty: 2 Medium Topic: Can Competitive Strategies Be Sustained? Integrating and Applying Strategic Management Concepts

69.

Atlas Door created competitive advantage by reducing the time to receive and process and order and through installing a just in time logistics operation. Which of the following is not a reason for their favorable position relative to the five forces of industry competition?    A.  It exerted power over its customers. B.  It created high entry barriers for new entrants. C.  The integration of many value-chain activities in the firm provided causal ambiguity and path dependency. D.  The product was easily imitable. When Atlas began operations, distributors had little interest in its product. The established distributors already carried the door line of a much larger competitor and saw little to no reason to switch suppliers except, perhaps, for a major price concession. But as a startup, Atlas was too small to compete on price alone. Instead, it positioned itself as the door supplier of last resort, that is, the company people came to if the established supplier could not deliver or missed a key date. With an average industry order fulfillment time of almost four months, some calls inevitably came to Atlas. And when it did get the call, Atlas commanded a higher price because of its faster delivery. Atlas not only got a higher price, but its effective integration of value-creating activities saved time and lowered costs. Thus, it enjoyed the best of both worlds.

AACSB: Analytic Blooms: Understand Learning Objective: 05-05 What factors determine the sustainability of a firm's competitive advantage. Level of Difficulty: 2 Medium Topic: Can Competitive Strategies Be Sustained? Integrating and Applying Strategic Management Concepts

70.

Which of the following is NOT one of the ways the Internet is lowering transaction costs?    A.  eliminating supply chain intermediaries B.  minimizing office expenses C.  evaluating employee performance D.  reducing business travel Hiring new employees, meeting with customers, ordering supplies, and addressing government regulations; all have some costs associated with them that can be lowered with the use of the Internet. Removing intermediaries also lowers transaction costs, and Internet search reduces the need for travel.

AACSB: Analytic Blooms: Understand Learning Objective: 05-06 How Internet-enabled business models are being used to improve strategic positioning. Level of Difficulty: 2 Medium Topic: How the Internet and Digital Technologies Affect the Competitive Strategies

71.

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.  mass customization C.  knowledge management D.  collaborative design Among the most striking differentiation trends are new ways to interact with consumers. In particular, the Internet has created new ways of differentiating by enabling mass customization, which improves the response to customer wishes.

AACSB: Analytic Blooms: Understand Learning Objective: 05-06 How Internet-enabled business models are being used to improve strategic positioning. Level of Difficulty: 2 Medium Topic: How the Internet and Digital Technologies Affect the Competitive Strategies

72.

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.  mass customization D.  exceptional service Among the most striking differentiation trends are new ways to interact with consumers. In particular, the Internet has created new ways of differentiating by enabling mass customization, which improves the response to customer wishes.

AACSB: Analytic Blooms: Understand Learning Objective: 05-06 How Internet-enabled business models are being used to improve strategic positioning. Level of Difficulty: 2 Medium Topic: How the Internet and Digital Technologies Affect the Competitive Strategies

73.

Due to 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 niche markets in a highly specialized fashion D.  access markets less expensively With focus strategies, the Internet offers new avenues in which to compete because they can access markets less expensively (low cost) and provide more services and features (differentiation). Some claim that the Internet has opened up a new world of opportunities for niche players who seek to access small markets in a highly specialized fashion.

AACSB: Analytic Blooms: Understand Learning Objective: 05-06 How Internet-enabled business models are being used to improve strategic positioning. Level of Difficulty: 2 Medium Topic: How the Internet and Digital Technologies Affect the Competitive Strategies

74.

One of the main reasons the Internet is eroding sustainable competitive advantages is that _______.    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 C.  differentiators have been able to preserve their unique advantages D.  firms are ignoring opportunities to offer high-end services in niche markets Many experts agree that the net effect of the digital economy is fewer rather than more opportunities for sustainable advantages. This means strategic thinking becomes more important. More specifically, the Internet has provided all companies with greater tools for managing costs.

AACSB: Analytic Blooms: Understand Learning Objective: 05-06 How Internet-enabled business models are being used to improve strategic positioning. Level of Difficulty: 2 Medium Topic: How the Internet and Digital Technologies Affect the Competitive Strategies

75.

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 points out the need to maintain a differentiation advantage and a low cost advantage simultaneously. D.  It has important implications for company generic strategies, functional areas, value-creating activities, and overall objectives. Industry life cycles are important because the emphasis on various generic strategies, functional areas, value-creating activities, and overall objectives varies over the course of an industry life cycle.

AACSB: Analytic Blooms: Understand Learning Objective: 05-07 The importance of considering the industry life cycle to determine a firm's business-level strategy and its relative emphasis on functional area strategies and value-creating activities. Level of Difficulty: 2 Medium Topic: Industry Life Cycle Stages: Strategic Implications

76.

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 because they are new. In the introduction stage, products are unfamiliar to consumers. Market segments are not well defined, and product features are not clearly specified.

AACSB: Analytic Blooms: Understand Learning Objective: 05-07 The importance of considering the industry life cycle to determine a firm's business-level strategy and its relative emphasis on functional area strategies and value-creating activities. Level of Difficulty: 2 Medium Topic: Industry Life Cycle Stages: Strategic Implications

77.

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.  growth B.  maturity C.  introduction D.  decline In the introduction stage, products are unfamiliar to consumers. Market segments are not well defined, and product features are not clearly specified. The early development of an industry typically involves low sales growth, rapid technological change, operating losses, and the need for strong sources of cash to finance operations. Since there are few players and not much growth, competition tends to be limited.

AACSB: Analytic Blooms: Remember Learning Objective: 05-07 The importance of considering the industry life cycle to determine a firm's business-level strategy and its relative emphasis on functional area strategies and value-creating activities. Level of Difficulty: 1 Easy Topic: Industry Life Cycle Stages: Strategic Implications

78.

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 The growth stage is the second stage of the product life cycle, characterized by strong increases in sales and growing competition.

AACSB: Analytic Blooms: Remember Learning Objective: 05-07 The importance of considering the industry life cycle to determine a firm's business-level strategy and its relative emphasis on functional area strategies and value-creating activities. Level of Difficulty: 1 Easy Topic: Industry Life Cycle Stages: Strategic Implications

79.

In the __________ stage of the industry life cycle, there are many segments, competition is very intense, and the emphasis on process design is high.    A.  introduction B.  growth C.  maturity D.  decline In the maturity stage of the industry life cycle, there are many segments, competition is very intense, and the emphasis on process design is high.

AACSB: Analytic Blooms: Remember Learning Objective: 05-07 The importance of considering the industry life cycle to determine a firm's business-level strategy and its relative emphasis on functional area strategies and value-creating activities. Level of Difficulty: 1 Easy Topic: Industry Life Cycle Stages: Strategic Implications

80.

In a given market, key technology no longer has patent protection, experience is not an advantage, and there is a growing need to compete on price. What stage of its life cycle is the market in?    A.  introduction B.  growth C.  maturity D.  decline In the maturity stage of the industry life cycle, rivalry among existing rivals intensifies because of fierce price competition at the same time that expenses associated with attracting new buyers are rising. Advantages based on efficient manufacturing operations and process engineering become more important for keeping costs low as customers become more price sensitive. It also becomes more difficult for firms to differentiate their offerings, because users have a greater understanding of products and services.

AACSB: Analytic Blooms: Understand Learning Objective: 05-07 The importance of considering the industry life cycle to determine a firm's business-level strategy and its relative emphasis on functional area strategies and value-creating activities. Level of Difficulty: 2 Medium Topic: Industry Life Cycle Stages: Strategic Implications