chapter 5 practice questions

Question 1

2. Primark, a fashion retailer, has found a way to keep its cost structure lower than its
   rivals by leveraging streamlined logistics, a low marketing budget, and negotiating
   bargain prices from its suppliers. They are using a(n) ________ strategy.

A) differentiation
B) overall cost leadership
C) focus
D) broad differentiation

Answer 1

B) overall cost leadership

Question 2

1. A manufacturing business pursuing cost leadership is likely to

A) focus on a narrow market segment.
B) use advertising to build brand image.
C) put heavy emphasis on product engineering.
D) rely on experience effects to raise efficiency

Answer 2

D) rely on experience effects to raise efficiency

Question 3

3. A firm typically achieves an absolute cost advantage by offering a ________
   product or service to a ________ target market using standardization to derive the
   greatest benefits from economies of scale and experience.

A) no frills; narrow
B) complex; narrow
C) no frills; broad
D) complex; diverse

Answer 3

C) no frills; broad

Question 4

4. The factors that lead to a low-cost position also provide a substantial ________
   barriers position with respect to ________ products introduced by new and existing
   competitors.

A) entry; substitute
B) exit; primary
C) product; substitute
D) entry; primary

Answer 4

A) entry; substitute

Question 5

5. High product differentiation is generally accompanied by

A) higher market share.
B) higher profit margins and lower costs.
C) significant economies of scale.
D) decreased emphasis on competition based on price

Answer 5

D) decreased emphasis on competition based on price

Question 6

6. Which of the following is not a potential pitfall of a differentiation strategy?

A) Uniqueness that is not valuable.
B) The price premium is too high.
C) All rivals share a common input or raw material.
D) Perceptions of differentiation may vary between buyers and sellers.

Answer 6

C) All rivals share a common input or raw material.

Question 7

7. Which statement regarding competitive advantages is true?

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

Answer 7

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

Question 8

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

A) profit maximizer
B) revenue enhancer
C) profit pool
D) profit outsourcing

Answer 8

C) profit pool

Question 9

Mass customization permits companies to manufacture unique products in relatively
________ quantities at ________ costs.

A) large; higher
B) large; lower
C) small; higher
D) small; lower

Answer 9

D) small; lower

Question 10

10. BlackBerry lost its competitive advantage by 2016 because it

A) did not deliver innovations to respond to changing market demand.
B) developed a highly performant just-in-time delivery system.
C) did not reward its employees.
D) let suppliers have dominant power

Answer 10

A) did not deliver innovations to respond to changing market demand.

Question 11

11. Rivals would find it difficult to challenge Atlas Door in the short run because of

A) strong customer loyalty.
B) low barriers to entry.
C) high threat of substitution.
D) low buyer switching costs

Answer 11

A) strong customer loyalty.

Question 12

12. 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

Answer 12

C) introduction

Question 13

13. The size of pricing and differentiation advantages between competitors decreases in which stage of the market life cycle?

A) introduction
B) growth
C) maturity
D) decline

Answer 13

C) maturity

Question 14

14. Outright sales or sale and leaseback free up considerable cash and improve returns.
    This is an example of which turnaround strategy used by successful companies?

A) asset and cost surgery
B) selective product and market pruning
C) piecemeal productivity improvements
D) global expansion

Answer 14

A) asset and cost surgery