Q&A Hero

Q: Wal-Mart exemplifies a firm pursuing a product-differentiation strategy while Victoria's Secret exemplifies a firm pursuing a cost-leadership strategy.

Q: Is it possible for a firm to implement a cost-leadership and product-differentiation strategy simultaneously?

Q: Discuss the similarities and differences of the organizational structures used by firms pursuing a cost-leadership and a product-differentiation strategy and discuss the importance of broad decision-making authority within a product-differentiation strategy.

Q: Identify the two primary forms that the substitutes for bases of product differentiation can take.

Q: Identify which bases of product differentiation are likely to be almost always easy to duplicate, which can sometimes be costly to duplicate and which are usually costly to duplicate and discuss under what conditions a base of differentiation is likely to be costly to imitate and can be a source of sustained competitive advantage.

Q: Describe the role of product differentiation and how product differentiation helps firms take advantage of opportunities in fragmented industries, in emerging industries, in mature industries and in declining industries.

Q: What is the impact of product differentiation on each of the environmental threats identified in the five forces framework?

Q: What is the relationship between product differentiation and managerial creativity?

Q: Identify the three broad categories of product differentiation and identify two bases of differentiation under each category.

Q: Define product differentiation and discuss the role that customer perceptions play in product differentiation.

Q: One feature of Coach's compensation policies is likely to be A) rewards for cost reduction. B) rewards for efficiency. C) rewards for creative flair. D) rewards for manufacturing efficiency.

Q: According to Coach's website, the company has built a distinctive style and prestigious image over the past 40 years to develop a reputation as "America's preeminent designer, producer, and marketer of fine accessories and gifts for women and men including handbags, business cases, luggage and travel accessories, wallets, outerwear, eyewear, gloves, scarves and fine jewelry." Coach employs a multi-channel distribution channel to reach its customers, including company-owned stores and boutiques in the stores of prominent specialty retailers both within the United States and abroad, and the company operates an online store. Consumers who purchase coach products are generally willing to pay the premium price due to the superior quality of Coach's products as well as the perceived prestige of owning a Coach product. Coach stresses these features in its advertising campaigns and regularly allows movies and television shows to favorably feature Coach products in appropriate scenes. Over the last five years. Coach has partnered with automobile manufacturers such as Lexus to produce automobiles with Coach interiors. In an effort to expand its international reach, Coach intends to increase its international distribution and is expanding into Japan through Coach Japan, Inc., a joint venture with a local company that will allow Coach to control international distribution and to maintain a consistent brand strategy domestically and abroad. If Coach had an organizational structure that used cross-functional teams, the members of which reported not only to their functional boss (i.e. the head of production) but also to the head of the team, Coach could be said to be using which organizational structure? A) product divisional B) matrix C) U-form D) multi-domestic

Q: According to Coach's website, the company has built a distinctive style and prestigious image over the past 40 years to develop a reputation as "America's preeminent designer, producer, and marketer of fine accessories and gifts for women and men including handbags, business cases, luggage and travel accessories, wallets, outerwear, eyewear, gloves, scarves and fine jewelry." Coach employs a multi-channel distribution channel to reach its customers, including company-owned stores and boutiques in the stores of prominent specialty retailers both within the United States and abroad, and the company operates an online store. Consumers who purchase coach products are generally willing to pay the premium price due to the superior quality of Coach's products as well as the perceived prestige of owning a Coach product. Coach stresses these features in its advertising campaigns and regularly allows movies and television shows to favorably feature Coach products in appropriate scenes. Over the last five years. Coach has partnered with automobile manufacturers such as Lexus to produce automobiles with Coach interiors. In an effort to expand its international reach, Coach intends to increase its international distribution and is expanding into Japan through Coach Japan, Inc., a joint venture with a local company that will allow Coach to control international distribution and to maintain a consistent brand strategy domestically and abroad. Coach's agreement with Lexus to produce automobiles with Coach leather interior is an example of A) cooperative strategic alliance. B) architectural competence. C) skunk works. D) product placement.

Q: According to Coach's website, the company has built a distinctive style and prestigious image over the past 40 years to develop a reputation as "America's preeminent designer, producer, and marketer of fine accessories and gifts for women and men including handbags, business cases, luggage and travel accessories, wallets, outerwear, eyewear, gloves, scarves and fine jewelry." Coach employs a multi-channel distribution channel to reach its customers, including company-owned stores and boutiques in the stores of prominent specialty retailers both within the United States and abroad, and the company operates an online store. Consumers who purchase coach products are generally willing to pay the premium price due to the superior quality of Coach's products as well as the perceived prestige of owning a Coach product. Coach stresses these features in its advertising campaigns and regularly allows movies and television shows to favorably feature Coach products in appropriate scenes. Over the last five years. Coach has partnered with automobile manufacturers such as Lexus to produce automobiles with Coach interiors. In an effort to expand its international reach, Coach intends to increase its international distribution and is expanding into Japan through Coach Japan, Inc., a joint venture with a local company that will allow Coach to control international distribution and to maintain a consistent brand strategy domestically and abroad. Given that the leather handbag market that Coach largely competes in can be considered a mature market, Coach should focus its product-differentiation efforts on A) exploiting a first-mover advantage as a basis of product differentiation. B) introducing radically new technologies as a basis of product differentiation. C) seeking a viable market niche that will enable it to survive. D) refining products as a basis of product differentiation.

Q: According to Coach's website, the company has built a distinctive style and prestigious image over the past 40 years to develop a reputation as "America's preeminent designer, producer, and marketer of fine accessories and gifts for women and men including handbags, business cases, luggage and travel accessories, wallets, outerwear, eyewear, gloves, scarves and fine jewelry." Coach employs a multi-channel distribution channel to reach its customers, including company-owned stores and boutiques in the stores of prominent specialty retailers both within the United States and abroad, and the company operates an online store. Consumers who purchase coach products are generally willing to pay the premium price due to the superior quality of Coach's products as well as the perceived prestige of owning a Coach product. Coach stresses these features in its advertising campaigns and regularly allows movies and television shows to favorably feature Coach products in appropriate scenes. Over the last five years. Coach has partnered with automobile manufacturers such as Lexus to produce automobiles with Coach interiors. In an effort to expand its international reach, Coach intends to increase its international distribution and is expanding into Japan through Coach Japan, Inc., a joint venture with a local company that will allow Coach to control international distribution and to maintain a consistent brand strategy domestically and abroad. The business level strategy Coach is pursuing is likely to A) reduce the threat of rivalry to virtually zero. B) increase the threat of substitutes due to premium pricing. C) decrease the threat of new entrants due to the additional cost they would face to overcome Coach's reputation advantages. D) decrease the threat of buyers since Coach can lower its prices due to its efficient manufacturing operations.

Q: According to Coach's website, the company has built a distinctive style and prestigious image over the past 40 years to develop a reputation as "America's preeminent designer, producer, and marketer of fine accessories and gifts for women and men including handbags, business cases, luggage and travel accessories, wallets, outerwear, eyewear, gloves, scarves and fine jewelry." Coach employs a multi-channel distribution channel to reach its customers, including company-owned stores and boutiques in the stores of prominent specialty retailers both within the United States and abroad, and the company operates an online store. Consumers who purchase coach products are generally willing to pay the premium price due to the superior quality of Coach's products as well as the perceived prestige of owning a Coach product. Coach stresses these features in its advertising campaigns and regularly allows movies and television shows to favorably feature Coach products in appropriate scenes. Over the last five years. Coach has partnered with automobile manufacturers such as Lexus to produce automobiles with Coach interiors. In an effort to expand its international reach, Coach intends to increase its international distribution and is expanding into Japan through Coach Japan, Inc., a joint venture with a local company that will allow Coach to control international distribution and to maintain a consistent brand strategy domestically and abroad. Which of the following bases of Coach's competitive advantage is likely to be the easiest to duplicate? A) product features B) consumer marketing C) location D) reputation

Q: According to Coach's website, the company has built a distinctive style and prestigious image over the past 40 years to develop a reputation as "America's preeminent designer, producer, and marketer of fine accessories and gifts for women and men including handbags, business cases, luggage and travel accessories, wallets, outerwear, eyewear, gloves, scarves and fine jewelry." Coach employs a multi-channel distribution channel to reach its customers, including company-owned stores and boutiques in the stores of prominent specialty retailers both within the United States and abroad, and the company operates an online store. Consumers who purchase coach products are generally willing to pay the premium price due to the superior quality of Coach's products as well as the perceived prestige of owning a Coach product. Coach stresses these features in its advertising campaigns and regularly allows movies and television shows to favorably feature Coach products in appropriate scenes. Over the last five years. Coach has partnered with automobile manufacturers such as Lexus to produce automobiles with Coach interiors. In an effort to expand its international reach, Coach intends to increase its international distribution and is expanding into Japan through Coach Japan, Inc., a joint venture with a local company that will allow Coach to control international distribution and to maintain a consistent brand strategy domestically and abroad. Which of the following bases of Coach's competitive advantage is likely to be the most difficult to duplicate? A) product features B) consumer marketing C) location D) reputation

Q: According to Coach's website, the company has built a distinctive style and prestigious image over the past 40 years to develop a reputation as "America's preeminent designer, producer, and marketer of fine accessories and gifts for women and men including handbags, business cases, luggage and travel accessories, wallets, outerwear, eyewear, gloves, scarves and fine jewelry." Coach employs a multi-channel distribution channel to reach its customers, including company-owned stores and boutiques in the stores of prominent specialty retailers both within the United States and abroad, and the company operates an online store. Consumers who purchase coach products are generally willing to pay the premium price due to the superior quality of Coach's products as well as the perceived prestige of owning a Coach product. Coach stresses these features in its advertising campaigns and regularly allows movies and television shows to favorably feature Coach products in appropriate scenes. Over the last five years. Coach has partnered with automobile manufacturers such as Lexus to produce automobiles with Coach interiors. In an effort to expand its international reach, Coach intends to increase its international distribution and is expanding into Japan through Coach Japan, Inc., a joint venture with a local company that will allow Coach to control international distribution and to maintain a consistent brand strategy domestically and abroad. Which of the following bases of product differentiation does Coach appear to be employing? A) product features, product complexity, and consumer marketing B) location, linkages between functions, and reputation C) reputation, consumer marketing, and product features D) distribution channels, service and support, and links with other firms

Q: According to Coach's website, the company has built a distinctive style and prestigious image over the past 40 years to develop a reputation as "America's preeminent designer, producer, and marketer of fine accessories and gifts for women and men including handbags, business cases, luggage and travel accessories, wallets, outerwear, eyewear, gloves, scarves and fine jewelry." Coach employs a multi-channel distribution channel to reach its customers, including company-owned stores and boutiques in the stores of prominent specialty retailers both within the United States and abroad, and the company operates an online store. Consumers who purchase coach products are generally willing to pay the premium price due to the superior quality of Coach's products as well as the perceived prestige of owning a Coach product. Coach stresses these features in its advertising campaigns and regularly allows movies and television shows to favorably feature Coach products in appropriate scenes. Over the last five years. Coach has partnered with automobile manufacturers such as Lexus to produce automobiles with Coach interiors. In an effort to expand its international reach, Coach intends to increase its international distribution and is expanding into Japan through Coach Japan, Inc., a joint venture with a local company that will allow Coach to control international distribution and to maintain a consistent brand strategy domestically and abroad. The price premium that customers are willing to pay for the superior quality and perceived prestige of Coach's products over the prices of similar products are known as A) marginal prices. B) hedonic prices. C) heroic prices. D) elastic prices.

Q: According to Coach's website, the company has built a distinctive style and prestigious image over the past 40 years to develop a reputation as "America's preeminent designer, producer, and marketer of fine accessories and gifts for women and men including handbags, business cases, luggage and travel accessories, wallets, outerwear, eyewear, gloves, scarves and fine jewelry." Coach employs a multi-channel distribution channel to reach its customers, including company-owned stores and boutiques in the stores of prominent specialty retailers both within the United States and abroad, and the company operates an online store. Consumers who purchase coach products are generally willing to pay the premium price due to the superior quality of Coach's products as well as the perceived prestige of owning a Coach product. Coach stresses these features in its advertising campaigns and regularly allows movies and television shows to favorably feature Coach products in appropriate scenes. Over the last five years. Coach has partnered with automobile manufacturers such as Lexus to produce automobiles with Coach interiors. In an effort to expand its international reach, Coach intends to increase its international distribution and is expanding into Japan through Coach Japan, Inc., a joint venture with a local company that will allow Coach to control international distribution and to maintain a consistent brand strategy domestically and abroad. Which generic business level strategy is Coach pursuing? A) cost leadership B) related diversification C) product differentiation D) unrelated diversification

Q: Cross-functional product development teams are suitable for a firm pursuing a ________ strategy. A) cost-leadership B) confrontation C) product-differentiation D) stuck-in-the-middle

Q: Recent research shows that firms can simultaneously implement cost-leadership and product-differentiation strategies if they learn how to manage the ________ inherent in these two strategies. A) consistencies B) similarities C) contradictions D) superfluousness

Q: Recent research suggests that ________ firms must have competitive levels of cost to survive. A) low-cost B) all C) domestic D) product-differentiation

Q: While cost leadership requires rewards for cost reduction, product differentiation requires rewards for ________. A) creative flair B) efficiency C) quantitative goals D) production goals

Q: Firms that are stuck in the middle attempt to sell A) high-priced products and gain small market share. B) low-priced products and gain large market share. C) high-priced products and gain a large market share. D) medium-priced products and gain medium market share.

Q: More recent work in the area of strategic management regarding assertions about being stuck in the middle A) supports the argument that firms that attempt to simultaneously pursue cost leadership and product differentiation will find themselves at a competitive disadvantage. B) contradicts the argument and finds that firms that successfully pursue cost leadership and product differentiation simultaneously can often expect to gain a sustained competitive advantage. C) partially contradicts the argument and finds that firms that successfully simultaneously pursue cost leadership and product differentiation can only expect to gain a temporary competitive advantage. D) partially contradicts the argument and finds that only firms in certain select industries can successfully simultaneously pursue cost leadership and product differentiation and gain a temporary competitive advantage.

Q: In developing a compensation policy used to implement a product-differentiation strategy, firms will A) hold individuals responsible for experiments that fail. B) punish individuals for taking risks when their projects are not successful. C) simultaneously use multiple dimensions to examine employee performance. D) provide appropriate incentives for managers and employees to reduce costs.

Q: A ________ exists when firms are committed to engage in several related product-differentiation strategies simultaneously. A) policy of substitution B) policy of extrapolation C) policy of exploration D) policy of experimentation

Q: Ultimately the ________ of a product differentiation strategy depends on the ability of individual firms to be creative in finding new ways to differentiate their products. A) sustained competitive advantage B) rarity C) imitation D) innovation

Q: The Lockheed Corporation Skunk Works is an example of a(n) A) cross-divisional or cross-functional team. B) M-form structure. C) U-form structure. D) multidivisional structure.

Q: A ________ structure exists when individuals in a firm have two or more bosses simultaneously. A) U-form B) multidivisional C) cross-divisional D) matrix

Q: The U-form structure used to implement a product-differentiation strategy A) rarely uses temporary cross-divisional and cross-functional teams to manage the development and implementation of new, innovative, and highly differentiated products. B) has simple reporting relationships. C) often uses temporary cross-divisional and cross-functional teams to manage the development and implementation of new, innovative, and highly differentiated products. D) has a small corporate staff.

Q: Which of the following bases of product differentiation is generally viewed as the most difficult to duplicate? A) product features B) reputation C) linkages with other firms D) location

Q: Research on architectural competence in pharmaceutical firms suggests that A) not only do some firms possess this competence, but that other firms do not; firms without this competence have, on average, been able develop it with minimal investment. B) very few firms possess this competence, but firms without this competence, on average, are able to develop it. C) not only do some firms possess this competence, but also that other firms do not and firms without this competence have, on average, been unable to develop it. D) virtually every firm possesses this competence to some extent.

Q: Under which of the following conditions is the product mix advantage as a basis of product differentiation the least difficult to duplicate? A) when the base of a product mix advantage is a common customer B) when the mix of products is highly integrated with each other C) if each of the products in a product mix has unique features D) if a firm brings a series of products to market

Q: Product features, by themselves, are A) usually not a source of temporary competitive advantage, but they can be a source of a sustainable competitive advantage. B) usually not a source of either a temporary competitive advantage, or a source of a sustainable competitive advantage. C) usually can be a source of both a temporary competitive advantage and a source of a sustainable competitive advantage. D) usually not a source of sustained competitive advantage, but they can be a source of a temporary competitive advantage.

Q: Which of the following bases of product differentiation is by far the most popular way for firms to try to differentiate their products but is identified as almost always being easy to duplicate? A) product mix B) product features C) customization D) distribution channels

Q: Which of the following bases of product differentiation is usually costly to duplicate? A) product features B) links with other firms C) reputation D) product mix

Q: Which of the following bases of product differentiation is almost always easy to duplicate? A) product features B) product mix C) product customization D) consumer marketing

Q: In a declining industry A) product-differentiation efforts are focused on product refinement as a basis of product differentiation. B) firms that are first movers can gain product-differentiation advantages based on perceived technological leadership. C) highly differentiated firms may be able to gain product-differentiation advantages by preempting strategically valuable assets. D) highly differentiated firms may be able to discover a viable market niche that will enable them to survive despite the overall decline in the market.

Q: In emerging industries A) firms that are first movers are unlikely to gain product-differentiation advantages based on buyer loyalty and high switching costs. B) firms that are first movers can gain product-differentiation advantages based on perceived technological leadership. C) product-differentiation efforts are focused on product refinement as a basis of product differentiation. D) firms can sometimes be tempted to exaggerate the extent to which they have refined and improved their products and services.

Q: With regard to the threat of suppliers, product differentiation A) reduces the threat of suppliers because a firm with a highly differentiated product can pass increased costs on to customers. B) increases the threat of suppliers because a firm with a highly differentiated product is unable to pass increased costs on to customers. C) has no impact on the threat of suppliers. D) can either increase or reduce the threat of suppliers.

Q: When considering the impact of product differentiation on the threat of rivalry, product differentiation A) reduces the threat of rivalry to zero. B) increases the threat of rivalry by forcing each firm in an industry to compete directly with one another instead of allowing them to carve out their own unique product niche. C) has no impact on the threat of rivalry. D) reduces the threat of rivalry because each firm in an industry attempts to carve out its own unique product niche.

Q: Which of the following statements regarding the impact of product differentiation on the threat of new entry is accurate? A) Product differentiation helps reduce the threat of new entry by forcing potential new entrants to absorb costs associated with overcoming incumbent firms' product-differentiation advantages. B) Product differentiation increases the threat of new entry by allowing potential new entrants to avoid costs associated with overcoming incumbent firms' product-differentiation advantages. C) Product differentiation has no impact on the threat of new entry. D) It is not possible to determine the impact of product differentiation on the threat of new entry.

Q: According to Chamberlin, firms selling differentiated products and facing a downward sloping demand curve are in an industry described as A) perfect competition. B) monopolistic competition. C) oligopolistic competition. D) semi-structured competition.

Q: In general, firms selling differentiated products face a demand curve that is A) upward sloping. B) horizontal. C) vertical. D) downward sloping.

Q: Product differentiation is ultimately an expression of the ________ of individuals and groups within firms and is limited only by the ________ that exist, or that can be created, in a particular industry. A) creativity; resources B) resources; opportunities C) creativity; opportunities D) opportunities; resources

Q: ________ can be can be a source of product differentiation when a single set of customers purchases several of a firm's products. A) Product placements B) Reputation C) Product mix D) Architectural competence

Q: Which of the following bases of product differentiation attempts to create the perception that a firm's products or services are unusually valuable by focusing on links within and between firms? A) reputation B) product complexity C) consumer marketing D) product mix

Q: ________ is the ability to use organizational structure to facilitate coordination among specific disciplines to conduct research. A) Architectural competence B) Cross-functional linking C) Organizational coordination D) Managerial leverage

Q: Through which bases of competitive advantage do firms attempt to alter the perceptions of current and potential customers, whether or not specific attributes of a firm's products or services are altered? A) reputation B) location C) product customization D) consumer marketing

Q: In the bicycle industry, the feel of high-end bicycles when they are ridden is important. As a serious rider becomes accustomed to a particular bicycle, it is very difficult for that rider to switch to an alternative supplier. This is an example of product differentiation through which of the following? A) linkages between functions B) product customization C) location D) product complexity

Q: A firm's ________ is really no more than a socially complex relationship between a firm and its customers and can serve as a basis for product differentiation. A) location B) reputation C) consumer marketing D) architectural competence

Q: The ability of companies that produce complex software packages to tailor these packages to the specific needs of their customers is an example of product differentiation through A) complexity. B) consumer marketing. C) product customization. D) timing.

Q: Which of the following bases of product differentiation attempts to create the perception that a firm's products or services are unusually valuable by focusing directly on the attributes of the products or services a firm sells? A) Product complexity B) Product customization C) Consumer marketing D) Reputation

Q: The most obvious way that firms can try to differentiate their products is by A) making the product more complex. B) introducing the product at the right time. C) customizing the product for a particular segment. D) altering the features of the products they sell.

Q: If an individual is considering purchasing a Toyota Camry or a Ferrari and decides that it is worth paying the extra money for the prestige that is associated with the Ferrari, the additional money the customer is willing to pay for the prestige is known as a(n) A) altruistic price. B) hedonic price. C) fair market value. D) margin price.

Q: While firms often alter the ________ of their products or services in order to implement a product-differentiation strategy, the existence of product differentiation, in the end, is always a matter of ________. A) customer perceptions; objective properties B) objective properties; price C) customer perceptions; price D) objective properties; customer perception

Q: By increasing the perceived value of a firm's products or services, a firm will be able to A) charge a lower price than it would otherwise be able to do. B) charge a higher price than it would otherwise be able to do. C) sell its products at lower prices than firms pursuing a cost-leadership strategy. D) gain significantly more market share than firms pursuing a cost-leadership strategy.

Q: ________ is a business strategy whereby firms attempt to gain a competitive advantage by increasing the perceived value of their products or services relative to the perceived value of other firms' products or services. A) Product differentiation B) Related diversification C) Cost leadership D) Best-cost provider

Q: Product differentiation can lead to high market share and low costs.

Q: Firms able to successfully differentiate their products and services are likely to see a decrease in their volume of sales.

Q: McDonald's is an excellent example of a firm that simultaneously employs both a product-differentiation and a cost-leadership strategy since their product differentiation based on cleanliness, consistency and fun in its fast food outlets allowed the company to become the market share leader in the industry and to reduce its costs.

Q: More recent work contradicts the argument about being "stuck in the middle" and suggests that firms that are successful in both cost leadership and product differentiation often can expect to gain a sustained competitive advantage.

Q: Firms pursuing a differentiation strategy often use temporary cross-divisional and cross-functional teams to manage the development and implementation of new, innovative and highly differentiated products.

Q: While the U-form structure for a firm pursuing cost leadership is relatively simple, the U-form structure for a firm implementing a product-differentiation strategy can be somewhat more complex.

Q: Timing, location, distribution channels, and service and support are all very similar bases of product differentiation and can act as substitutes for each other.

Q: Product features, product customization, and product complexity have few obvious close substitutes and may be sources of sustained competitive advantages.

Q: While product features, by themselves, are usually not a source of sustained competitive advantage, they can be a source of a temporary competitive advantage.

Q: Product features as a basis for product differentiation are generally not easy to duplicate.

Q: Knowing how a firm is differentiating its products means that competitors will be able to duplicate a firm's product-differentiation strategy at a lower cost.

Q: Firms that pursue a product-differentiation strategy can choose whether or not they want to reveal this strategic choice to their competition by adjusting their prices.

Q: The concept of product differentiation generally assumes that the number of firms that have been able to differentiate their products in a particular way is, at some point in time, less than the number of firms needed to generate perfect competition dynamics.

Q: In emerging industries, product-differentiation efforts often focus on product refinement as a basis for product differentiation.

Q: In fragmented industries firms can use product differentiation to help consolidate a market.

Q: When a firm sells a highly differentiated product, it enjoys a quasi-monopoly in that segment of the market.

Q: Firms with highly differentiated products may have loyal customers, or customers who are unable to purchase similar products or services from other firms and are therefore more likely to accept increased prices due to a firm passing on increased costs by a powerful supplier.

Q: Product differentiation increases the threat of substitutes by making a firm's current products appear less attractive than substitutes.

Q: Product differentiation effectively reduces rivalry to zero.

Q: Product differentiation helps reduce the threat of new entry by forcing potential entrants to an industry to absorb not only the standard costs of beginning business but also the additional costs associated with overcoming incumbent firms' product-differentiation advantages.