Essentials of Strategic Management
The Five Generic Competitive Strategies- CH5
Your Results:
The  answer for each question is indicated by a  .

1    
A company’s competitive strategy deals with _______________
    A)
the specific actions management plans to take to develop a better value chain than rivals.
    B)
how it plans to unify its functional and operating strategies into a cohesive effort aimed at successfully taking customers away from rivals.
    C)
the specifics of management’s game plan for competing successfully.
    D)
its plans for underpricing rivals and achieving product superiority.
    E)
the specific actions management intends to take to strongly differentiate its product offering from the offerings of rival companies in the industry.
    

 
2    
The biggest factors that distinguish one competitive strategy from another are _______________
    A)
a customer value proposition, profit formula, and collection of valuable resources.
    B)
striving for a high degree of customer loyalty to the company’s brand.
    C)
assembling a wide portfolio of company resources, competitive capabilities, and core competencies.
    D)
developing a better credit rating than rivals.
    E)
choosing between (1) a market target that is either broad or narrow, and (2) whether the company should pursue a competitive advantage linked to lower costs or product differentiation.
    

 
3    
The five generic types of competitive strategies include _______________
    A)
offensive strategies, defensive strategies, differentiation strategies, and low-cost strategies.
    B)
low-cost provider, broad differentiation, focused low-cost, focused differentiation, and best-cost provider.
    C)
offensive strategies, defensive strategies, technological leadership strategies, and product innovation strategies.
    D)
low-price strategies, premium price strategies, middle-of-the-road strategies, and market share leadership strategies.
    E)
attacking competitor strengths, attacking competitor weaknesses, market leadership strategies, and product superiority strategies.
    

 
4    
A low-cost provider’s basis for competitive advantage is _______________
    A)
using an everyday low pricing strategy to gain the biggest market share.
    B)
bigger profit margins than rival firms.
    C)
high buyer switching costs because of the company’s differentiated product offering.
    D)
meaningfully lower overall costs than competitors.
    E)
a reputation for charging the lowest prices in the industry.
    

 
5    
Striving to be the industry’s low-cost provider and achieving lower costs than rivals entails _______________
    A)
eliminating or curbing nonessential activities.
    B)
having a smaller labor force than rivals, paying lower wages than rivals, locating all facilities in countries where labor costs are low, and outsourcing many value chain activities to suppliers with world-class technological capabilities.
    C)
doing a better job than rivals in performing essential activities.
    D)
aggressive use of activity-based costing, utilizing more best practices than rivals, and having a narrower product line than rivals.
    E)
Both A and C.
    

 
6    
Which of the following is not a distinguishing feature of a low-cost provider strategy?
    A)
The product line consists of a few basic models having minimal frills and acceptable quality.
    B)
The production emphasis is on continuously searching for ways to reduce costs without sacrificing acceptable quality and essential features.
    C)
The marketing emphasis is on making virtues out of product features that lead to low cost.
    D)
The strategic target is value-conscious buyers and sustaining the strategy depends on frequent advances in technology and occasional product innovations.
    E)
Sustaining the strategy revolves around managing costs down year-after-year and delivering good value at economical prices.
    

 
7    
A competitive strategy of striving to be the low-cost provider is particularly attractive when _______________
    A)
a company pays particular attention to cost drivers such as number of products in the product line, capacity utilization, production technology and design, and labor productivity and compensation costs.
    B)
most rivals are trying to differentiate their product offering from those of rivals.
    C)
there are many ways to achieve higher product quality that have value to buyers.
    D)
buyers are not swayed by advertising and are not very brand-loyal.
    E)
most rivals are pursuing best-cost or broad differentiation strategies.
    

 
8    
Successful differentiation allows a firm to _______________
    A)
gain buyer loyalty to its brand (because some buyers are strongly attracted to the differentiating features and bond with the company and its products).
    B)
earn the highest profit margins of any company in the industry.
    C)
attract many more buyers by charging a lower price than rivals and thereby take sales and market share away from rivals.
    D)
command a premium price for its product and/or increase unit sales (because additional buyers are won over by the differentiating features).
    E)
Both A and D.
    

 
9    
Examples of uniqueness drivers do not include _______________
    A)
product features, design, and performance.
    B)
production R&D.
    C)
customer service.
    D)
continuous quality improvement.
    E)
eliminating low value-added activities and work steps.
    

 
10    
A broad differentiation strategy _______________
    A)
is an attractive competitive approach whenever buyers’ needs and preferences are too diverse to be satisfied by a product that is essentially identical from seller to seller.
    B)
can produce sustainable competitive advantage if the differentiating features possess strong buyer appeal and can’t be copied or easily matched by rivals.
    C)
works best when the basis for differentiation is superior performance features and buyer switching costs are low.
    D)
offers a better chance for gaining market share than low-cost or best-cost provider strategies, and typically allows a firm to charge the highest price in the industry.
    E)
Both A and B.
    

 
11    
The most appealing approaches to broad differentiation _______________
    A)
are those that hinge upon first-rate R&D and frequent product innovation.
    B)
involve features or attributes that have considerable buyer appeal and are hard or expensive for rivals to duplicate.
    C)
are those that either lower buyer switching costs or enhance the differentiator’s brand image.
    D)
generally relate to product superiority or clever merchandising.
    E)
are typically based on either superior product quality or superior customer service.
    

 
12    
In which one of the following market circumstances is a broad differentiation strategy generally not well suited?
    A)
When buyer needs and preferences are too diverse to be fully satisfied by a standardized product.
    B)
When few rivals are pursuing a similar differentiation approach.
    C)
When most competitors are using eye-catching ads to set their product offerings apart and build a brand image that is differentiated.
    D)
When there are many ways to differentiate the product or service and many buyers perceive these differences as having value.
    E)
When technological change is fast-paced and competition revolves around rapidly evolving product features.
    

 
13    
Which of the following is not one of the hazards of pursuing a differentiation strategy?
    A)
Trying to charge too high a price premium for the differentiating features.
    B)
Over-differentiating so that the features and attributes incorporated exceed buyer needs and requirements.
    C)
Trying to create strong brand loyalty rather than being content with weak brand loyalty (which usually means lower costs and higher profitability).
    D)
Differentiating on features or attributes that rivals can easily copy.
    E)
Overspending on efforts to differentiate the company’s product offering.
    

 
14    
What sets focused (or market niche) strategies apart from low-cost leadership and broad differentiation strategies is _______________
    A)
the extra attention paid to establishing a distinctive competence.
    B)
their concentrated attention on serving the needs of buyers in a narrow piece of the overall market.
    C)
greater opportunity for brand loyalty.
    D)
their suitability for market situations where technological change is fast-paced and continuous product innovation is a key success factor.
    E)
their bold strategic intent of global market leadership via heavy advertising.
    

 
15    
A focused low-cost strategy _______________
    A)
involves serving buyers in the target market niche at a lower cost and a lower price than rival competitors.
    B)
is the hardest of the four generic types of competitive strategies to employ successfully.
    C)
involves the use of deep price discounting to capture customers.
    D)
entails trying to wrest market share away from rivals via extra advertising, above-average expenditures for promotional programs, and heavy use of point-of-sale merchandising techniques.
    E)
cannot be sustained over time unless the focuser is aggressive in entering other segments where it also can achieve a low-cost advantage.
    

 
16    
A focused differentiation strategy aims at securing competitive advantage by _______________
    A)
providing buyers in the target market niche with the best performance features at the best price.
    B)
catering to buyers looking for a medium-quality product at an average price.
    C)
offering carefully designed products or services to appeal to the unique preferences and needs of a narrow, well-defined group of buyers.
    D)
developing unique product attributes.
    E)
convincing buyers that the company is a true leader in product innovation.
    

 
17    
A firm pursuing a best-cost provider strategy _______________
    A)
seeks to offer more value-adding features than the industry’s low-cost providers and lower prices than those pursuing differentiation.
    B)
tries to have the best cost (as compared to rivals) for each activity in the industry’s value chain.
    C)
achieves competitive advantage because its operating activities are “best-in-industry” or “best-in-world.”
    D)
follows a hybrid strategy based upon superior resources and a narrow market niche.
    E)
seeks a “middle of the road” strategic approach that attempts to satisfy the product or service needs of consumers with average household incomes.
    

 
18    
Which of the following are distinguishing features of a best-cost provider strategy?
    A)
The strategic target is price-conscious buyers.
    B)
A marketing emphasis on charging a slightly higher price than rival brands having comparable features and attributes.
    C)
A product line that stresses wide selection, many product variations, and emphasis on differentiating features.
    D)
A competitive advantage based on more value for the money.
    E)
Using constant product innovation, excellent R&D skills, and periodic technological breakthroughs to sustain the strategy.
    

 
19    
For a best-cost provider strategy to be successful, a company must have _______________
    A)
excellent supply chain capabilities and product design expertise.
    B)
economies of scope or greater scale economies than rivals.
    C)
a superior value chain configuration and unmatched efficiency in managing essential value chain activities.
    D)
superior product innovation skills and manufacturing capabilities.
    E)
a short, low-cost value chain.
    

 
20    
A company’s biggest vulnerability in employing a best-cost provider strategy is _______________
    A)
relying too heavily on price discounting.
    B)
adding features not needed by the majority of buyers.
    C)
not having the needed efficiencies in managing value chain activities to add differentiating features without significantly increasing costs.
    D)
being timid in cutting its prices far enough below high-end differentiators to win away many of their customers.
    E)
relying excessively on outsourcing in an attempt to boost gross profit margins.