Q&A Hero

Q: A strategy to be the industry's overall low-cost provider tends to be more appealing than a differentiation or best-cost or focus/market niche strategy when: A. there are many ways to achieve product differentiation that buyers find appealing. B. buyers use the product in a variety of different ways and have high switching costs in changing from one seller's product to another. C. the offerings of rival firms are essentially identical, standardized, commodity-like products. D. entry barriers are high and competition from substitutes is relatively weak. E. the market is composed of many distinct segments with varying buyer needs and expectations.

Q: In which of the following circumstances is a strategy to be the industry's overall low-cost provider NOT particularly well-matched to the market situation? A. When the offerings of rival firms are essentially identical and readily available from many eager sellers B. When there are few ways to achieve differentiation that have value to buyers C. When price competition among rival sellers is especially vigorous D. When buyers have widely varying needs and special requirements, and the prices of substitute products are relatively high E. When the majority of industry sales are made to a few, large-volume buyers

Q: A competitive strategy predicated on low-cost leadership tends to work best when: A. there are widely varying needs and preferences among the various buyers of the product or service. B. there are many market segments and market niches, such that it is feasible for a low-cost leader to dominate the niche where buyers want a budget-priced product. C. price competition among rivals is especially vigorous and the offerings of rival firms are essentially identical, standardized, commodity-like products. D. buyers prefer that the products/services of competing sellers have widely varying attributes and prices. E. buyers have high switching costs and there is considerable diversity in how buyers use the product.

Q: A competitive strategy to be the low-cost provider in an industry works well when:A. price competition among rival sellers is especially sluggish.B. there are numerous ways to achieve product differentiation that have no value to buyers.C. buyers incur high costs in switching their purchases from one seller/brand to another.D. industry newcomers use introductory low prices to attract buyers and build a customer base.E. industry newcomers use high introductory prices to let buyers know they have a superior product to build a customer base.

Q: Being the overall low-cost provider in an industry has the attractive advantage of: A. building strong customer loyalty and locking customers into its product because customers have high switching costs. B. giving the firm a very appealing brand image. C. putting a firm in the best position to win the business of price-sensitive customers and earn profits by setting the floor on market price. D. putting the company in a strong position to be more profitable than companies pursuing a differentiation strategy. E. greatly reducing the strong bargaining power of rivals with the key distributors.

Q: A competitive strategy of striving to be the low-cost provider is particularly attractive when: A. buyers are not very price-conscious. B. most rivals are trying to be best-cost providers. C. there are many ways to achieve product differentiation that have value to buyers. D. most buyers use the product in much the same ways, with user requirements calling for a standardized product. E. most rivals are pursuing focused low-cost or focused differentiation strategies.

Q: A potato chip manufacturer purchases a potato farm. Which of the following regarding its strategy is true? A. The manufacturer has effectively used vertical integration to increase its bargaining position and reduce transaction costs. B. The manufacturer has efficiently capitalized on the experience and learning-curve effects within the company. C. The manufacturer has enhanced utilization by allowing depreciation and other fixed costs to be spread over a larger unit volume. D. The manufacturer has sacrificed quality by using a lower-cost input. E. The manufacturer has effectively reduced its operating costs by outsourcing its activities.

Q: Which of the following companies is using cost drivers effectively to manage value chain activities cost efficiently? A. Company A orders large amounts of supplies and keeps them stocked till customer demand rises to prevent falling behind schedule in meeting customer needs. B. Company B uses just-in-time inventories and produces made-to-order products as and when customer demand rises. C. Company C collects customer requests first and starts processing them only after reaching a certain number. D. Company D routes all its supplies to a warehouse for storage and then transports them to individual factories for processing. E. Company E substitutes lower-cost inputs with high-quality, high-cost inputs to gain customer attention and loyalty.

Q: An example of how companies can revamp their value chain to reduce costs is to: A. have suppliers locate their plants close to companies' own facilities. B. continue to utilize traditional methods of distribution and sales. C. not make any changes in product manufacturing but change end distribution methods. D. increase extra services to increase staffing requirements. E. facilitate the learning curve by providing superior training to new employees.

Q: Which of the following is NOT one of the ways that a company that a non-capital-intensive can achieve a cost advantage by revamping its value chain? A. Creating a direct sales force and bypassing activities and costs of distributors and dealers B. Conducting sales operations at the company's website C. Increasing production capacity and then striving hard to operate at full capacity D. Relocating facilities so as to curb the cost for shipping and handling activities E. Streamlining operations by eliminating low value-added or unnecessary work steps and activities

Q: The culture of a company can be a cost-efficient value chain activity because it can: A. allow for safeguarding internalized operating benefits. B. distinguish a company's capacity integration efforts. C. spur worker pride in productivity and continuous improvement. D. foster quality technological enhancements. E. increase a company's bargaining power with suppliers.

Q: Cost-efficient management of a company's overall value chain activities requires that management: A. ferret out cost-saving opportunities in every part of the value chain. B. undertake an operations functionality redesign. C. establish sales productivity and operating practices guidelines. D. re-create rivals' assembly plant structuration savings. E. pursue a differentiation strategy that can be easily copied.

Q: Which of the following is NOT an action that a company should take to perform value chain activities more cost-effectively? A. Striving to capture all available economies of scale and taking advantage of experience and learning-curve effects B. Trying to operate facilities at full capacity C. Adopting labor-saving operating methods D. Improving supply chain efficiency E. Over-differentiating so that product features exceed the needs of most buyers

Q: A fast-food restaurant stocks bread, meat, sauces, and other main ingredients, but does not assemble and cook its burgers and sandwiches until a customer places an order. Which cost driver is the restaurant efficiently using to cut costs? A. Supply chain efficiencies B. Economies of scale C. Incentive systems and culture D. Bargaining power E. Capacity utilization

Q: Achieving a sure cost advantage over rivals entails: A. concentrating on the primary activities portion of the value chain and outsourcing all support activities. B. being a first-mover in pursuing backward and forward integration and controlling as much of the industry value chain as possible. C. selling a mostly standard product and increasing the scale of operation. D. minimizing R&D expenses and paying below-average wages and salaries to conserve on labor costs. E. producing a standard product, redesigning the product infrequently, and having minimal advertising.

Q: The major avenues for achieving a cost advantage over rivals include: A. performing value chain activities more cost-effectively than rivals or revamping the firm's overall value chain to eliminate or bypass some cost-producing activities. B. having a management team that is highly skilled in cutting costs. C. being a first-mover in adopting the latest state-of-the-art technologies, especially those relating to low-cost manufacture. D. outsourcing high-cost activities to cost-efficient vendors. E. paying lower wages and salaries than rivals.

Q: Domino's Pizza has a well-known slogan: "We'll deliver in 30 minutes or less, or it's free!" With it what has the pizza maker achieved? A. Built a unique customer value proposition B. Created a new delivery system C. Given a sense of exclusivity to its customers D. Coordinated with suppliers to better address customer needs E. Emphasized human resource management activities

Q: A low-cost leader can translate its low-cost advantage over rivals into superior profit performance by: A. underpricing rivals and attracting quality-sensitive buyers in great enough numbers. B. maintaining the present price, and using the lower-cost edge to earn a higher profit margin on each unit sold. C. going all out to use its cost advantage to capture a dominant share of the market. D. spending heavily on advertising to promote its cost advantage to build strong customer loyalty. E. out-producing rivals and thus having more available units for sale.

Q: How valuable a low-cost leader's cost advantage is depends on: A. whether it is easy or inexpensive for rivals to copy the low-cost leader's methods or otherwise match its low costs. B. how easy it is for the low-cost leader to gain the biggest market share. C. the aggressiveness with which the low-cost leader pursues converting the cost advantage into the absolute lowest possible costs. D. the leader's ability to combine the cost advantage with a reputation for good quality. E. the low-cost leader's ability to be the industry leader in manufacturing innovation so as to keep lowering its manufacturing costs.

Q: Low-cost leaders who have the lowest industry costs are likely to: A. have out managed rivals in finding ways to perform value chain activities more cost-effectively. B. be considering exiting the current product market and use their competitive low-cost strength to gain a competitive advantage in other product arenas. C. be favorites to win the game of strategy in the long run. D. understand that driving costs to the lowest possible level is the only way to sell cheap products to consumers. E. understand that they have lower bargaining power with suppliers than rivals who employ a different strategy.

Q: A low-cost leader's basis for competitive advantage is: A. lowest possible prices for comparable products. B. a low-cost/moderate price approach to gain the biggest market share. C. high buyer switching costs. D. meaningful lower overall costs than rivals on comparable products. E. higher unit sales than rivals.

Q: Which of the following generic types of competitive strategies is typically the "best" strategy for a company to employ? A. A strategy that seeks to underprice rivals on comparable products that attract a broad spectrum of buyers B. A strategy that seeks to differentiate product offerings from rivals by offering superior attributes that attract a broad spectrum of buyers C. A strategy that concentrates on a narrow buyer segment and outcompetes rivals by offering niche members customized attributes D. A strategy that concentrates on value-conscious buyers and outcompetes rivals by offering products at attractive prices E. A strategy that is customized to fit the macro-environment and industry and employs resources and capabilities that rivals have trouble duplicating

Q: The generic types of competitive strategies include: A. market share growth provider, sales revenue leader strategy, and market share retention strategy. B. offensive strategies, defensive strategies, and counter maneuvers strategies. C. low-cost provider, broad differentiation, best-cost provider, focused low-cost, and focused differentiation strategies. D. low-cost/low-price strategies, high-quality/high-price strategies, and medium quality/medium price strategies. E. price leader strategies, price follower strategies, technology leader strategies, and first-mover strategies.

Q: An automotive manufacturer sells a limited number of high-end, custom-built cars, using technologically advanced power systems. What strategy is the manufacturer using to gain competitive advantage? A. A low-cost provider strategy B. A broad differentiation strategy C. A focused low-cost strategy D. A focused differentiation strategy E. A best-cost provider strategy

Q: The biggest and most important differences among the competitive strategies of different companies boil down to: A. how they go about building a brand name image that buyers trust and whether they are a risk-taker or risk-avoider. B. the different ways the companies try to cope with the five competitive forces. C. whether a company's market target is broad or narrow and whether the company is pursuing a competitive advantage linked to low cost or differentiation. D. the kinds of actions companies take to improve their competitive assets and reduce their competitive liabilities. E. the relative emphasis they place on offensive versus defensive strategies.

Q: Whatever strategic approach is adopted by a company to deliver value, it nearly always requires: A. that management undertake formal planning sessions with functional departments to ensure productivity improvement. B. the identification of strengths and weaknesses within the company. C. matching corporate identity with the corporate culture in order to integrate effort and build sales momentum. D. performing value chain activities differently than rivals and building competitively valuable resources and capabilities that rivals cannot readily match. E. constant efforts to thwart entry of new rivals and their attempts to create differentiated products with unit costs above price premium.

Q: While there are many routes to competitive advantage, the two biggest factors that distinguish one competitive strategy from another are: A. whether a company can build a brand name and an image that buyers trust. B. whether a company's target market is broad or narrow and whether the company is pursuing a low cost or differentiation strategy. C. whether a company can achieve lower costs than rivals and whether the company is pursuing the industry's sales and market share leader's role. D. whether a company can offer the lowest possible prices and whether the company can get the best suppliers in the market. E. whether a company's overall costs are lower than competitors' and whether the company can achieve strong product differentiation.

Q: Which of the following would NOT lead to cost savings? A. A company that sets up its own direct sales force B. A company that eliminates low-value-added work steps C. A company that motivates employees through incentives D. A company that conducts sales operations at its website E. A company that sources the best from suppliers across the world

Q: A ketchup manufacturer convinces a supplier who makes vinegar to set up a nearby plant. Which of the following benefits will the ketchup manufacturer be least assured of? A. Improved value chain system B. Improved overall quality control C. Lower incoming shipping costs D. Just-in-time deliveries E. Reduced storage needs

Q: For a company's competitive strategy to succeed in delivering favorable performance and the intended competitive edge over rivals, it has to be well-matched to a company's internal situation and underpinned by an appropriate set of resources, know-how, and competitive capabilities. True or false? Explain your answer.

Q: One of the big dangers in crafting a competitive strategy is that managers, torn between the pros and cons of the various generic strategies, will opt for "stuck in the middle" strategies that represent compromises between lower costs and greater differentiation and between broad and narrow market appeal. True or false? Explain your answer.

Q: What are the keys to sustaining a focused low-cost strategy?

Q: Explain how the keys to sustaining a broad differentiation strategy differ from the keys to sustaining a best-cost producer strategy.

Q: Explain how the marketing emphasis of a low-cost provider differs from the marketing emphasis of a best-cost provider.

Q: In what market and competitive circumstances are focused low-cost and focused differentiation strategies attractive?

Q: A mobile manufacturer decides to reduce the price of its latest line of smart phones, which are not the cheapest but have features that are popular among most users. Which strategy is the manufacturer using?

Q: What strategy would you recommend for a small-sized company entering a highly segmented market, each segment with a complex set of needs and spending power?

Q: What are the distinctive features of a focused differentiation strategy? How is it different from a broad differentiation strategy?

Q: What are the distinctive features of a focused low-cost strategy? How does it differ from a low-cost leadership strategy?

Q: Explain how the strategic target of a low-cost provider differs from the strategic target of a best-cost provider.

Q: What type of competitive advantage does a best-cost provider strategy aim at achieving? Explain what a company has to do to achieve this advantage.

Q: What are the distinctive features of a best-cost provider strategy? Under what circumstances is a best-cost provider strategy appealing?

Q: What are the pitfalls to be avoided in pursuing a broad differentiation strategy?

Q: What are the distinctive features of a broad differentiation strategy? Under what circumstances is a broad differentiation strategy appealing?

Q: What market conditions and circumstances make a low-cost provider strategy attractive? What are the pitfalls in pursuing a low-cost provider strategy? What can go wrong?

Q: Which of the five generic competitive strategies are most likely to be best suited for an industry whose product may be customized to create a cheaper version? Explain.

Q: Describe the two basic cost-reducing approaches a company can take to become a low-cost provider in its industry.

Q: Describe the strategy of striving to be the industry's overall low-cost provider. What does a company have to do to achieve low-cost provider status?

Q: What are the five generic competitive strategies? Briefly describe each one and identify the type of competitive advantage that each strategy is aimed at achieving.

Q: Each of the following is likely to help a company's low-cost provider strategy succeed EXCEPT: A. resources and capabilities to keep costs below those of its competitors. B. cost-effective management of value chain activities better than rivals. C. effective leveraging of cost drivers. D. having the innovative capability to bypass certain value chain activities being performed by rivals. E. capabilities to simultaneously deliver lower cost and higher-quality/differentiated features.

Q: A production-based emphasis toward a low-cost provider strategy usually requires a company to strive for: A. product superiority. B. continuous cost reductions without sacrificing acceptable quality and essential features. C. small-scale production or custom-made products that match the tastes and requirements of niche members. D. appealing features and better quality at lower costs than rivals. E. whatever differentiating features buyers are willing to pay for.

Q: The underlying criteria of a best-cost provider strategy usually is found in the ability of a company to: A. offer better goods at attractive prices. B. create attributes that appeal specifically to niche members. C. lower overall costs more than rivals in serving niche members. D. offer buyers something attractively different from competitors' offerings. E. offer the best product at the industry's lowest possible price.

Q: The marketing emphasis of a company pursuing a focused low-cost provider strategy usually is to: A. tout the company's lower prices. B. tout the lack of frills and extras. C. out-advertise rivals and make frequent use of discount coupons. D. communicate the attractive features of a budget-priced product offering that fits niche members' expectations. E. communicate the product's ability to serve the customer's every need.

Q: The keys to maintaining a broad differentiation strategy are to:A. stress constant innovation to stay ahead of imitative rivals and to concentrate on a few differentiating features.B. charge a premium price that more than covers the extra costs of differentiating features and to convince customers to be brand loyal.C. out-innovate and out-advertise rivals.D. emphasize personalized customer service and to add as many differentiating features as possible.E. keep prices close to the average of all rivals and to spend heavily on new product R&D.

Q: The marketing emphasis of a company pursuing a broad differentiation strategy usually is to:A. under-price rival brands with comparable features.B. tout differentiating features and charge a premium price that more than covers the extra costs of differentiating features.C. out-advertise rivals and make frequent use of discount coupons.D. emphasize selling directly to end-users and promoting personalized customer service.E. communicate the product's ability to serve the customer's every need.

Q: The production emphasis of a company pursuing a broad differentiation strategy usually involves: A. eliminating cost reduction and decreasing quality and essential features to boost profitability. B. strong efforts to be a leader in manufacturing process innovation. C. emphasis on building differentiating features that buyers are willing to pay for and includes wide selection and many product variations. D. the aggressive pursuit of economies of scale and experience-curve effects. E. developing a distinctive competence in zero-defect manufacturing techniques.

Q: Each of the five generic strategies positions the company differently, EXCEPT when it concerns: A. its market and competitive environment. B. establishing a central theme for how the company will endeavor to outcompete rivals. C. having resources and capabilities that rivals have trouble duplicating. D. defining differences in terms of product line and production emphasis. E. defining differences in terms of marketing emphasis and the means of maintaining strategy.

Q: Success with a best-cost provider strategy designed to outcompete high-end differentiators requires: A. achieving significantly lower costs in providing the upscale features. B. providing significantly better product attributes in order to justify a price above what low-cost leaders are charging. C. matching the company's resources and capabilities to a low-cost provider status. D. motivating buyers to purchase upscale features that match rivals. E. achieving the lowest costs in the industry.

Q: A company's biggest vulnerability in employing a best-cost provider strategy is: A. relying too heavily on outsourcing. B. getting squeezed between the strategies of firms employing low-cost provider strategies and high-end differentiation strategies. C. getting trapped in a price war with low-cost leaders. D. being timid in cutting its prices far enough below high-end differentiators to win away many of their customers. E. not having a sustainable distinctive competence in cost reduction.

Q: The big danger or risk of a best-cost provider strategy is: A. that buyers will be highly skeptical about paying a relatively low price for upscale attributes/features. B. not establishing strong alliances and partnerships with key suppliers. C. that rivals with low-cost provider strategies will be able to steal away some customers on the basis of a lower price, and high-end differentiators will be able to steal away customers with the appeal of better product attributes. D. that it will be unable to achieve top-notch quality at a rock-bottom cost. E. becoming too highly integrated and not relying enough on outsourcing.

Q: Best-cost provider strategies are appealing in those market situations where: A. diverse buyer preferences make product differentiation the norm and where a large number of value-conscious buyers can be induced to purchase mid-range products. B. a company is positioned between competitors who have ultra-low prices and competitors who have top-notch products in terms of both quality and performance. C. buyers are more quality-conscious than price-conscious. D. there are numerous buyer segments, buyer needs are diverse across these segments, only a few of the segments are growing rapidly, and sellers' products are strongly differentiated. E. buyers are more performance-conscious than value-conscious.

Q: The target market of a best-cost provider is: A. value-conscious buyers. B. brand-conscious buyers. C. price-sensitive buyers. D. middle-income buyers. E. young adults (in the 18"35 age group).

Q: For a best-cost provider strategy to be successful, a company must have: A. excellent marketing and sales skills in convincing buyers to pay a premium price for the attributes/features incorporated in its product. B. resource strengths and competitive capabilities that allow it to incorporate upscale attributes at lower costs than rivals whose products have similar upscale attributes. C. access to greater learning/experience curve effects and scale economies than rivals. D. one of the best-known and most respected brand names in the industry. E. a short, low-cost value chain.

Q: The competitive advantage of a best-cost provider is:A. having the best value chain in the industry.B. its brand name reputation.C. its capability to incorporate upscale or attractive attributes into its product offering at lower costs than rivals.D. a distinctive competence in delivering top-notch quality and customer service.E. a distinctive competence in supply chain management.

Q: What is the primary target market for a best cost-provider? A. Value hunting buyers B. Price-conscious buyers C. Best-price driven buyers D. Value-conscious buyers E. Brand-conscious buyer

Q: The competitive objective of a best-cost provider strategy is to: A. outmatch the resource strengths of both low-cost providers and differentiators. B. position the company outside the competitive arena of low-cost producers and differentiators. C. meet or exceed buyer expectations on key quality/performance/features/service attributes and beat their expectations on price (given what rivals are charging for much the same attributes). D. deliver superior value to buyers by doing such a good job of cost control that it ends up with the best cost (as compared to rivals) in performing each activity in its value chain. E. identify and concentrate on those differentiating features that are inexpensive to incorporate.

Q: The objective of a best-cost provider strategy is to: A. deliver superior value to value-conscious buyers at a comparatively lower price than rivals. B. offer buyers the industry's best-performing product at the best cost and best (lowest) price in the industry. C. attract buyers on the basis of having the industry's overall best-performing product at a price that is slightly below the industry-average price. D. out-compete rivals using low-cost provider strategies. E. translate its best-cost status into achieving the highest profit margins of any firm in the industry.

Q: A firm pursuing a best-cost provider strategy:A. seeks to be the low-cost provider in the largest and fastest growing (or best) market segment.B. tries to have the best cost (as compared to rivals) for each activity in the industry's value chain.C. tries to outcompete a low-cost provider by attracting buyers on the basis of charging the best price.D. seeks to deliver superior value to buyers by satisfying their expectations on key attributes and beating rivals in meeting customer expectations on price.E. seeks to achieve the best costs by using the best operating practices and incorporating the best features and attributes.

Q: To profitably employ a best-cost provider strategy, a company must have the resources and capabilities to: A. sell a product with the best cost at the best price. B. have the best cost (as compared to rivals) for each activity in the industry's value chain. C. provide buyers with the best attributes at the best cost. D. incorporate attractive or upscale attributes into its product offering at a lower cost than rivals. E. do a better job than rivals of adopting the best operating practices.

Q: Best-cost provider strategies are those that:A. are a hybrid of low-cost provider and differentiation strategies that aim at providing desired attributes while beating rivals on price.B. are rewarded by providing buyers with the best attributes at a premium.C. have strategy elements related to the lowest-cost provider in the largest and fastest growing (or best) market segment.D. look for a low-cost advantage rather than a differentiation advantage.E. look for a differentiation advantage rather than a low-cost advantage.

Q: Why is it important for company managers to develop a "worry list" of strategic issues and problems that they need to address and resolve? What should they consider to develop this list?

Q: In determining the various strategic issues that a company needs to address, managers need to consider BOTH the results of its analysis of the company's external environment and the results of its evaluation of the company's resources and competitive position. True or false? Explain and defend your answer.

Q: Explain why a weighted competitive strength assessment is important.

Q: Assume a firm is at a cost disadvantage with rivals because of higher distributor/dealer costs than rivals. Identify three strategic moves that it can make to restore cost parity.

Q: Assume a firm is at a cost disadvantage with rivals because its internal costs are higher than rivals. Identify three strategic moves that it can make to restore cost parity.

Q: What is meant by the term "best practices"? Why does it matter whether a company utilizes "best practices" in performing the activities comprising its value chain?

Q: Draw a typical company value chain and briefly explain why the proficiency with which a firm performs the activities comprising its value chain matters.

Q: In conducting a SWOT analysis, is it enough to simply compile lists of the company's strengths, weaknesses, opportunities, and threats? Why or why not?

Q: A company lacking stand-alone resource strength should focus on bundling several resource strengths into a core competence. True or false? Explain and support your answer.

Q: What are the four tests that should be used to measure the competitive power of a company's resource strengths?