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?

47.

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 How firms compete with each other and how they attain and sustain competitive advantages goes to the heart of strategic management. In short, the key issue becomes to identify why some firms outperform others and enjoy such advantages over time.

AACSB: Analytic Blooms: Remember Learning Objective: 05-01 The central role of competitive advantage in the study of strategic management; and the three generic strategies: overall cost leadership; differentiation; and focus. Level of Difficulty: 1 Easy Topic: Types of Competitive Advantage and Sustainability

48.

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.  differentiation focus C.  overall cost leadership D.  stuck-in-the-middle Examples of overall cost leadership within primary value chain activities may involve the effective layout of receiving dock operations (inbound logistics) and support value chain activities may include expertise in process engineering (technology development).

AACSB: Analytic Blooms: Understand Learning Objective: 05-01 The central role of competitive advantage in the study of strategic management; and the three generic strategies: overall cost leadership; differentiation; and focus. Level of Difficulty: 2 Medium Topic: Types of Competitive Advantage and Sustainability

49.

A manufacturing business pursuing cost leadership is likely to _______.    A.  focus on a narrow market segment B.  use advertising to build brand image C.  rely on experience effects to raise efficiency D.  put heavy emphasis on product engineering Key to an overall cost leadership strategy is the experience curve, which refers to how business learns to lower costs as it gains experience with production processes. With experience, unit costs of production decline as output increases in most industries.

AACSB: Analytic Blooms: Understand Learning Objective: 05-01 The central role of competitive advantage in the study of strategic management; and the three generic strategies: overall cost leadership; differentiation; and focus. Level of Difficulty: 2 Medium Topic: Types of Competitive Advantage and Sustainability

50.

One aspect of using a cost leadership strategy is that experience effects may lead to lower costs. Experience effects are achieved by ____________.    A.  repeating a process until a task becomes easier B.  hiring more experienced personnel C.  spreading out a given expense or investment over a greater volume D.  competing in an industry for a long time Key to an overall cost leadership strategy is the experience curve, which refers to how business learns to lower costs as it gains experience with production processes. With experience, unit costs of production decline as output increases in most industries.

AACSB: Analytic Blooms: Understand Learning Objective: 05-01 The central role of competitive advantage in the study of strategic management; and the three generic strategies: overall cost leadership; differentiation; and focus. Level of Difficulty: 2 Medium Topic: Types of Competitive Advantage and Sustainability

51.

With experience, unit costs of production decline as _________ increases in most industries.    A.  costs B.  output C.  price D.  volume With experience, unit costs of production decline as output increases in most industries. The experience curve, developed by the Boston Consulting Group in 1968, is a way of looking at efficiency gains that come with experience. For a range of products, as cumulative experience doubles, costs and labor hours needed to produce a unit of product decline by 10 to 30 percent.

AACSB: Analytic Blooms: Understand Learning Objective: 05-01 The central role of competitive advantage in the study of strategic management; and the three generic strategies: overall cost leadership; differentiation; and focus. Level of Difficulty: 2 Medium Topic: Types of Competitive Advantage and Sustainability

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.  higher than firms that achieve either a cost or a differentiation advantage D.  lower than firms that achieve differentiation advantages but higher than firms that achieve cost advantages Research supports the notion that firms that identify with one or more of the forms of competitive advantage outperform those that do not. There has been a rich history of strategic management research addressing this topic. One study found that businesses combining multiple forms of competitive advantage (differentiation and overall cost leadership) outperformed businesses that used only a single form.

AACSB: Analytic Blooms: Understand Learning Objective: 05-01 The central role of competitive advantage in the study of strategic management; and the three generic strategies: overall cost leadership; differentiation; and focus. Level of Difficulty: 2 Medium Topic: Types of Competitive Advantage and Sustainability

53.

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.  differentiation B.  overall cost leadership C.  differentiation focus D.  cost leadership focus An overall low-cost position enables a firm to achieve above-average returns despite strong competition. It protects a firm against rivalry from competitors, because lower costs allow a firm to earn returns even if its competitors eroded their profits through intense rivalry. It protects firms against powerful buyers, who can only drive down prices to the level of the next most efficient producer. A low-cost position provides more flexibility to cope with supplier demands for input cost increases.

AACSB: Analytic Blooms: Remember Learning Objective: 05-02 How the successful attainment of generic strategies can improve a firm's relative power vis-à-vis the five forces that determine an industry's average profitability. Level of Difficulty: 1 Easy Topic: Types of Competitive Advantage and Sustainability

54.

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 supplier costs. Potential pitfalls of overall cost leadership strategy include too much focus on one or a few value-chain activities; all rivals share a common input or raw material; the strategy is imitated too easily; a lack of parity on differentiation; and erosion of cost advantages when the pricing information available to customers increases.

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

55.

A firm can achieve differentiation through all of the following means EXCEPT ________.    A.  improving brand image B.  better customer service C.  adding additional product features D.  offering lower prices to frequent customers A differentiation strategy consists of creating differences in the product or service offering of the firm by creating something that is perceived industrywide as unique and valued by customers. Differentiation can take many forms, including prestige or brand image, technology, innovation, features, customer service, or a dealer network.

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

56.

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.  overall cost leadership B.  differentiation C.  differentiation focus D.  stuck-in-the middle Examples of value chain activities for differentiation include support value chain activities like excellent applications engineering support (technology development) and facilities that promote a positive firm image (firm infrastructure).

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

57.

High product differentiation is generally accompanied by __________.    A.  higher market share B.  higher profit margins and lower costs C.  decreased emphasis on competition based on price D.  significant economies of scale Differentiation provides protection against rivalry since brand loyalty lowers customer sensitivity to price and raises customer switching costs. By increasing company margins, differentiation also avoids the need for a low-cost position.

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

58.

Which of the following is FALSE regarding how a differentiation strategy can help a firm to improve its competitive position relative to the Porter five forces model?    A.  By increasing firm margins, it avoids the need for a low cost position. B.  It reduces buyer power because 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. Supplier power is also decreased, because there is a certain amount of prestige associated with being the supplier to a producer of highly differentiated products and services.

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

59.

A differentiation strategy enables a business to address the five competitive forces by ______.    A.  having brand-loyal customers become more sensitive to prices B.  lessening competitive rivalry by distinguishing itself C.  increasing economies of scale D.  serving a broader market segment Differentiation provides protection against rivalry since brand loyalty lowers customer sensitivity to price and raises customer switching costs.

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

60.

Which of the following is not a potential pitfall of a differentiation strategy?    A.  Uniqueness that is not valuable. B.  All rivals share a common input or raw material. C.  The price premium is too high. D.  Perceptions of differentiation may vary between buyers and sellers. Potential pitfalls of a differentiation strategy include uniqueness that is not valuable; too much differentiation; too high a price premium; differentiation that is easily imitated; dilution of brand identification through product-line extensions; or perceptions of differentiation may vary between buyers and sellers.

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