Test bank for strategic management creating competitive advantages 10th edition gregory dess gerry m

Test Bank for Strategic Management: Creating Competitive Advantages, 10th Edition, Gregory D

Test Bank for Strategic Management: Creating Competitive Advantages, 10th Edition, Gregory Dess, Gerry McNamara, Alan Eisner, Seung-Hyun Lee To download the complete and accurate content document, go to: https://testbankbell.com/download/test-bank-for-strategic-management-creating-comp etitive-advantages-10th-edition-gregory-dess-gerry-mcnamara-alan-eisner-seung-hyu n-lee/

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Student name:__________ TRUE/FALSE - Write 'T' if the statement is true and 'F' if the statement is false.

1) Overall cost leadership is a generic strategy unlike others that does not require a tight set of interrelated tactics. ⊚ ⊚

true false

2) An example of a firm applying the overall cost leadership generic strategy in a valuechain activity would be to automate the production assembly line to reduce scrappage from quality errors. ⊚ ⊚

true false

3) The experience curve is a factor central to an overall cost leadership strategy and refers to how business learns to increase costs as it gains experience with production processes. ⊚ ⊚

true false

4) The five-forces model suggests that with intense competition an overall low-cost position will not enable a firm to achieve above-average returns. ⊚ ⊚

true false

5) Factors that lead to a low-cost position also provide substantial entry barriers to substitute and new products as is demonstrated by the retailer, Aldi, whose focus on minimizing costs across the entire operation permits it to position well against competitors such as Walmart. ⊚ ⊚

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true false

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6) If the overall cost leadership strategy is to provide sustainable competitive advantage, all activities in the value-chain need to be evaluated including the relationships among the valuechain activities. ⊚ ⊚

true false

7) A firm can differentiate itself in a support activity by purchasing high-quality components to enhance product image as Apple does with its laptop computers. ⊚ ⊚

true false

8) Zappos sells shoes. Its CEO, Tony Hsieh, considers the core element of its differentiation advantage to be its variety of shoes. ⊚ ⊚

true false

9) Combination strategies, such as integrating overall low cost and differentiation, makes it easier for rivals to duplicate or imitate because it is harder for the primary firm to provide value. ⊚ ⊚

true false

10) Airlines such as Emirates exploit the profit pool for competitive advantage by adding fees for a variety of services such as access to airport lounges. ⊚ ⊚

true false

11) A pitfall of integrated overall cost leadership and differentiation is underestimating the expenses associated with coordinating value-creating activities in the extended value chain. ⊚ ⊚

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true false

2

12) Once established, competitive advantages last forever whether the firm is in a high technology environment or not. ⊚ ⊚

true false

13) A platform business is like a matchmaker in that it can bring together buyers and sellers.

An example of a successful platform provider is Facebook. By attracting and retaining users through expanding services it differentiates itself from more narrowly-focused competitors such as Twitter. ⊚ ⊚

true false

14) A platform business such as Airbnb leverages data analytics to differentiate its offer from that of competitors such as VRBO. ⊚ ⊚

true false

15) The market life cycle should be used for short-run forecasting because it provides a conceptual framework for understanding what changes typically occur over the life of an industry. ⊚ ⊚

true false

16) An important advantage of first movers in a market is that they may establish brand recognition that may later serve as an important switching cost. ⊚ ⊚

true false

17) Given the attractiveness of premium pricing during the growth stage of the market life cycle, managers should emphasize short-term results to increase profits.

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⊚ ⊚

18)

true false

A need for turnaround occurs only during the maturity or declining stage of the life cycle. ⊚ ⊚

true false

19) Few turnarounds require firms to analyze both the external and internal environments relevant to their firm. ⊚ ⊚

true false

20) Piecemeal productivity improvements can be used by a mature business in need of a turnaround. ⊚ ⊚

true false

21) In the department store industry, sales at Nordstrom are declining but increasing at Nordstrom Rack. This is because Nordstrom is responding to customer expectations for lower costs. ⊚ ⊚

22)

true false

In declining industries, competition is fierce and profit margins are always low. ⊚ ⊚

true false

23) Firms achieve and sustain differentiation advantages and attain above-average performance when their price premiums do not exceed the extra costs incurred in being unique.

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⊚ ⊚

true false

24) A differentiator will always seek out ways of distinguishing itself from similar competitors to justify price premiums greater than the costs incurred by differentiating. ⊚ ⊚

true false

MULTIPLE CHOICE - Choose the one alternative that best completes the statement or answers the question.

25) The primary aim of strategic management at the business level is

A) B) C) D)

maximizing risk to return trade-offs through diversification. maximizing differentiation of products and/or services. achieving competitive advantage. achieving a low-cost position.

26) 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 which generic strategy?

A) B) C) D)

27)

differentiation differentiation focus stuck-in-the-middle overall cost leadership

A manufacturing business pursuing cost leadership is likely to

A) B) C) D)

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

5

28) One aspect of using a cost leadership strategy is that experience effects may lead to lower costs. Experience effects are achieved by

A) B) C) D)

spreading out a given expense or investment over a greater volume. hiring more experienced personnel. repeating a process until a task becomes easier. competing in an industry for a long time.

29) With experience, unit costs of production decline as ________ increases in most industries.

A) B) C) D)

costs volume output price

30) 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.

31) Global logistics firms such as DHL Supply Chain and Global Forwarding or C. H. Robinson Worldwide compete using an overall cost leadership strategy in primary activities such as

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A) B) C) D)

effective layout of receiving dock operations. effective use of automated technology to reduce scrappage rates. minimize costs associated with employee turnover through effective policies. standardized accounting practices to minimize personnel required.

32) Overhead costs associated with the number of layers of management in a firm are part of the ________ activities of the value chain.

A) B) C) D)

human resources management firm infrastructure operations marketing and sales

33) 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) B) C) D)

differentiation overall cost leadership focus broad differentiation

34) Aldi, a discount supermarket retailer, has grown from its German base to the rest of Europe, Australia, and the United States by replicating a simple business format. Aldi limits the number of products in each category to ensure product turn, to ease stocking shelves, and to increase its power over supplier. This is an example of an overall cost leadership strategy because it

A) B) C) D)

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gives them competitive advantage by decreasing productivity. gives them competitive advantage by tight cost and overhead control. eliminates the need to compete based on its products. requires the customer to recognize its efforts.

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35) A business that strives for a low-cost advantage must attain a(n) ________ cost advantage over rivals.

A) B) C) D)

relative evolutionary absolute potential

36) 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) B) C) D)

37) if it

Primark, an Irish clothing retailer, uses an overall cost leadership strategy. This could fail

A) B) C) D)

38)

no frills; narrow complex; narrow no frills; broad complex; diverse

maintains parity with competitors on low cost. cannot maintain parity on differentiation dimensions requested by customers. exceeds customer expectations. increases its sales prices while maintaining competitor parity.

Zulily, an online retailer, competes with Amazon and other online retailers by

A) B) C) D)

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maintaining a large inventory of products. running a labor-intensive distribution system. ordering products from vendors to keep in stock until a customer order comes in. keeping little inventory and ordering only when customers purchase a product.

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39) Which type of competitive strategy is characterized by 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?

A) B) C) D)

differentiation overall low-cost leadership differentiation focus cost leadership focus

40) An overall low-cost position enables a firm to achieve ________ returns despite strong competition.

A) B) C) D)

below average average no above average

41) An overall low-cost position protects a firm against rivalry from competitors because ________ allow a firm to earn returns even if its competitors eroded their profits through intense rivalry.

A) B) C) D)

higher costs higher prices lower costs lower prices

42) An overall ________ position enables a firm to achieve above-average returns because it protects firms against powerful buyers.

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A) B) C) D)

differentiation low-cost focused high-cost

43) A low-cost position permits buyers to exert power to drive ________ prices only to the level of the next most efficient producer.

A) B) C) D)

up down increasing decreasing

44) A low-cost position provides ________ flexibility to cope with demands from powerful suppliers for input cost increases.

A) B) C) D)

less decreasing more no

45) 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) B) C) D)

46)

entry; substitute exit; primary product; substitute entry; primary

Zulily protects itself from buyer power and intense rivalry from competitors by

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A) B) C) D)

47)

Which of the following is a risk (or potential pitfall) of cost leadership?

A) B) C) D)

48)

increasing the bargaining power of its customers. paying close attention to costs. increasing costs. increasing the buyer power.

Cost cutting in one area of the value chain might increase costs in another.

Attempts to stay ahead of the competition may lead to gold plating.

Cost differences increase as the market matures.

Producers are more able to withstand increases in supplier costs.

A firm can achieve differentiation through all the following means except

A) B) C) D)

improving brand image. offering lower prices to frequent customers. better customer service. adding additional product features.

49) Value-chain support activities that involve excellent applications engineering support (technology development) and facilities that promote a positive firm image (firm infrastructure) characterize which generic strategy?

A) B) C) D)

50)

overall cost leadership differentiation focus differentiation stuck-in-the middle

High product differentiation is generally accompanied by

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A) B) C) D)

higher market share. higher profit margins and lower costs. significant economies of scale. decreased emphasis on competition based on price.

51) 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) Firms will enjoy high customer loyalty.

B) By increasing firm margins, it avoids the need for a low-cost position.

C) It reduces buyer power because buyers lack comparable alternatives.

D) Supplier power is increased, because suppliers will be able to charge higher prices for their inputs.

52)

A differentiation strategy enables a business to address the five competitive forces by

A) B) C) D)

53)

having brand-loyal customers become more sensitive to prices. increasing economies of scale. providing protection against rivalry. serving a broader market segment.

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

A) B) C) D)

Uniqueness that is not valuable.

The price premium is too high.

All rivals share a common input or raw material.

Perceptions of differentiation may vary between buyers and sellers.

54) Hardware chains such as Ace and True Value are losing market share to rivals such as Lowe's and Home Depot in spite of them using a focus strategy. Why?

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A) B) C) D)

Achieving parity on costs for specialty retailers is difficult.

They have too broad a product line.

They have equivalent purchasing power as the national chains.

Their costs are the same as those of the national chains.

55) Early pioneer in online education, University of Phoenix, has faced increasing challenges from traditional university online programs who are able to offer their programs at the same cost.

Which generic strategy has gone wrong?

A) B) C) D)

differentiation overall cost leadership focus strategy low cost leadership

56) Marlin Steel Wire Products is a manufacturer of commodity wire products out of Baltimore, MD. Marlin has many rivals based in China and other emerging markets. The company cannot compete on labor costs so it used a ________ strategy to automate its production and now specializes in high-end products.

A) B) C) D)

57)

differentiation overall cost leadership focus strategy low cost leadership

Which statement regarding competitive advantages is true?

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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.

58) Porsche has enhanced power over buyers because its strong reputation makes buyers more willing to pay a premium price. This ________ rivalry, since buyers become ________ price-sensitive.

A) B) C) D)

59)

A firm following a focus strategy must focus on

A) B) C) D)

60)

increases; more lessens; more lessens; less increases; less

governmental regulations. a market segment or group of segments. rising cost of inputs. avoiding entering international markets.

Which of the following is not a potential pitfall of a focus strategy?

A) Erosion of cost advantages can arise within the narrow segment.

B) Product/service offerings that are highly focused are subject to competition from new entrants.

C) Focusers can become too focused to satisfy buyer needs.

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

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61) At one CVS drugstore, a four-pack of Energizer AA batteries was on sale at 2.99 USD compared with a Duracell four-pack at 4.59 USD. The Duracell market share dropped 2 percent in a recent two-year period, and its profits declined over 30 percent. Why did this happen?

A) B) C) D)

The price differential was too high.

The market for batteries is saturated.

The customer perceived the products to be different.

There are valid alternatives for batteries.

62) The text discusses three approaches to combining overall cost leadership and differentiation competitive advantages. Which of the following is not one of these three approaches?

A) B) C) D)

automated and flexible manufacturing systems deriving benefits from highly-focused and high-technology markets exploiting the profit pool concept for competitive advantage coordinating the extended value chain by way of information technology

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

A) B) C) D)

profit maximizer revenue enhancer profit pool profit outsourcing

64) Which of the following is not a potential pitfall of an integrated overall low cost and differentiation strategy?

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A) Firms that target too large a market that causes unit costs to increase.

B) Firms that underestimate the expenses associated with coordinating value-creating activities in the extended value chain.

C) Firms that fail to attain both strategies may end up with neither and become stuckin-the-middle.

D) Firms that miscalculate sources of revenue and profit pools in the company industry.

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

A) B) C) D)

large; higher large; lower small; higher small; lower

66) Andersen Windows lowered costs, enhanced quality and variety, and improved its response time to customers by

A) creating a new paper-based catalog.

B) creating an interactive computer version of its paper catalogs.

C) creating an integrated computer system of catalogs, products, orders, and manufacturing.

D) creating a manufacturing system for ordering parts.

67) A risk for a firm that tries to attain both cost and differentiation advantages is that it can be stuck in the middle. An example of this is supermarkets because their ________ structure is ________ than discount retailers, and customers do not value their products and services as being high-end such as those offered by Whole Foods.

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A) B) C) D)

cost; higher price; higher price; lower cost; lower

68) Indochino is a retailer of male clothing that sells custom-made suits online and in brickand-mortar stores. They use ________ operations to outcompete traditional retailers.

A) B) C) D)

traditional unscaled scaled reverse

69) Indochino uses sophisticated technology to improve the efficiency of its operations and boost its sales. It collects information on a(n) ________ basis on ________ trends to optimize the selections of cloth purchases and the promotions it offers on its website and in its stores.

A) B) C) D)

systematic; reject ongoing; sales frequent; material systematic; material

70) Many firms have achieved success by integrating activities throughout the extended value chain by using ________ to link their own value chain with the value chains of their customers and suppliers.

A) B) C) D)

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customization information technology human resources competitive advantage

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71) Outside the flight experience itself, airlines are generating revenue by charging fees for credit cards, frequent-flyer programs, and access to airport lounges. This serves to

A) B) C) D)

increase competition. expand the profit pool. provide better customer service. satisfy regulators.

72) Waze, a GPS Navigation app, relies on inputs from users to provide information on traffic conditions and uses artificial intelligence to develop algorithms for each user, tailoring the route map for that user at that particular moment. This is an example of

A) B) C) D)

a focused strategy. an overall cost leadership strategy. unscaling to create a combination strategy. exploiting the profit pool.

73) Underestimating expenses associated with coordinating value-creating activities in the extended value chain can be a result of ________ integration of cost leadership and differentiation.

A) B) C) D)

good poor intentional structured

74) Which of the following is not a reason for the possible erosion of company competitive advantage?

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A) B) C) D)

rapid change in technology globalization actions by rivals from within and outside of the industry company commitment to innovation

75) Atlas Door created competitive advantage by reducing the time to receive and process an order and through installing a just-in-time logistics operation. Which of the following is not a reason for their favorable position relative to the five forces of industry competition?

A) The service was easily imitable.

B) It created high entry barriers for new entrants.

C) The integration of many company value-chain activities provided causal ambiguity and path dependency.

D) It exerted power over its customers.

76)

BlackBerry lost its competitive advantage by 2016 because it

A) B) C) D)

77)

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

Company competitive advantages can be eroded by all the following except

A) B) C) D)

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rapid changes in technology. globalization. actions by rivals within the industry. actions by workers outside of the industry.

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78) Barnes and Noble lost its market share in book retailing to Amazon. It tried to regain market share by offering a similar electronic reader, the Nook, to the Amazon Kindle series. This demonstrates that Barnes and Noble lacked

A) B) C) D)

a short-term strategy. a company-wide strategy. a sustainable competitive advantage. good suppliers.

79) Atlas Door tightly controlled logistics so that it always shipped only fully complete orders to construction sites. In regard to the five forces model, which of the following is a reason this might give them competitive advantage?

A) It helps to reduce the threat of new entrants.

B) It created low entry barriers for new entrants.

C) It created a high threat of substitution.

D) It gave more power to buyers.

80) In evaluating the sustainability of the Atlas Door competitive advantages over the long run, it is important to evaluate the ability of rivals to

A) B) C) D)

easily imitate its strategy. communicate with its customers. consistently overprice their products. find new suppliers.

81) Atlas Door created competitive advantages in overall low cost and differentiation by creating ________ among value-chain activities.

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A) B) C) D)

substitutes advantages disadvantages linkages

82) Atlas Door relies on technologies that are rather well known and non-proprietary. This opens it up to the potential of

A) B) C) D)

imitation by rivals. customer abandonment. increased supplier power. government regulation.

83) Which of the following reasons is not a reason that Atlas Door could lose competitive advantage?

A) Its technologies are non-proprietary.

B) A rival easily could hire away its talented employees.

C) A new rival with a strong resource base could undercut its prices.

D) It has strong power over its distributors.

84)

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

A) B) C) D)

85)

strong customer loyalty. low barriers to entry. high threat of substitution. low buyer switching costs.

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

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A) B) C) D)

86)

weak customer loyalty. high barriers to entry. high threat of substitution. low buyer switching costs.

Which of these statements regarding the industry life cycle is true?

A) Partial power of the market life cycle is its ability to serve as a short-run forecasting device.

B) Trends suggested by the market life cycle model are generally not reversible or repeatable.

C) It points out the need to maintain a differentiation advantage and a low cost advantage.

D) It is important for company generic strategies, functional areas, value-creating activities, and overall objectives.

87) Which of the following statements about the introduction stage of the market life cycle is true?

A) It produces relatively large, positive cash flows.

B) Strong brand recognition seldom serves as an important switching cost.

C) Market share gains by pioneers are usually easily sustained for many years.

D) Products offered by pioneers may be perceived as differentiated because they are new.

88) 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) B) C) D)

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growth maturity introduction decline

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89)

The growth stage of the industry life cycle is characterized by

A) B) C) D)

in-kind competition (from the same type of product). premium pricing. a growing trend to compete on the basis of price. retaliation by competitors whose customers are stolen.

90) In the ________ stage of the industry life cycle, there are many segments, competition is very intense, and the emphasis on process design is high.

A) B) C) D)

growth introduction decline maturity

91) In a given market, key technology no longer has patent protection, experience is not an advantage, and there is a growing need to compete on price. What stage of its life cycle is the market in?

A) B) C) D)

introduction growth maturity decline

92) A market that mainly competes on the basis of price and has stagnant growth is characteristic of what life cycle stage?

A) B) C) D)

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introduction growth maturity decline

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93)

As markets mature,

A) B) C) D)

costs continue to increase. application for patents increase. differentiation opportunities increase. there is increasing emphasis on efficiency.

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

A) B) C) D)

95)

introduction growth maturity decline

Which of the following is most often true of mature markets?

A) Some competitors enjoy a significant operating advantage due to increasing experience effects.

B) The market supports premium pricing, which attracts additional competitors.

C) Advantages that cannot be duplicated by other competitors are difficult to achieve.

D) The magnitude of pricing differences and product differentiation is larger than in the growth stage.

96) In the ________ stage of the industry life cycle, there are few segments, the emphasis on process design is low, and the major functional areas of concern are general management and finance.

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A) B) C) D)

97)

introduction growth decline maturity

The most likely time to pursue a harvest strategy is in a situation of

A) B) C) D)

high growth. strong competitive advantage. mergers and acquisitions. decline.

98) Research shows that which one of the following is not a strategy used by firms engaged in successful turnarounds?

A) B) C) D)

99)

asset and cost surgery selective product and market pruning piecemeal productivity improvements global expansion

Piecemeal productivity improvements during a turnaround typically do not involve

A) B) C) D)

business process reengineering. increased capacity utilization. benchmarking. expansion of company product market scope.

100) Proctor and Gamble announced that it would sell off or close down up to 100 of its brands. This is an example of which turnaround strategy used by successful companies?

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A) B) C) D)

asset and cost surgery selective product and market pruning piecemeal productivity improvements global expansion

101) 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) B) C) D)

asset and cost surgery selective product and market pruning piecemeal productivity improvements global expansion

102) Improving business processes by reengineering them, benchmarking specific activities against industry leaders, encouraging employee input to identify excess costs, increasing capacity utilization, and improving employee productivity lead to a significant overall gain.

These are examples of which turnaround strategy used by successful companies?

A) B) C) D)

asset and cost surgery selective product and market pruning piecemeal productivity improvements global expansion

103) Most turnarounds require a firm to carefully analyze its relevant environments. The ________ analysis leads to identification of market segments or customer groups that may still find the product attractive.

A) B) C) D)

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external internal global environmental

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104) Most turnarounds require a firm to carefully analyze its relevant environments. ________ analysis results in actions aimed at reduced costs and higher efficiency.

A) B) C) D)

External Internal Global Environmental

105) Nordstrom plans to grow by driving traffic to their stores though the integration of ________ and ________ operations with its service culture.

A) B) C) D)

technology; sales marketing; innovative technology; innovative marketing; sales

106) According to the Issue for Debate, increasing technology for connecting with customers is one of the solutions that Nordstrom settled on to increase foot traffic to its full-service stores.

They have foregone ________ to finance these new solutions.

A) B) C) D)

107)

customer service in-store improvements back office infrastructure marketing

Nordstrom significantly cut back on its capital spending in the last years because

A) B) C) D)

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customers do not care about capital improvements. of pressure from investors to increase profits. mall locations are bringing increased food traffic. investors are more interested in customer service.

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108)

Which of the following turnaround strategies is Nordstrom primarily using?

A) B) C) D)

selective market pruning piecemeal productivity improvements selective product pruning asset and cost surgery

109) A turnaround strategy involves reversing performance decline and reinvigorating growth toward profitability. The firm should analyze the external and internal environments carefully.

What will the internal analysis reveal?

A) B) C) D)

customer groups that find the product attractive market segments that are likely to be interested in the product potential actions for reducing costs locations that would improve traffic

110) Fortnite game designers purposefully add content to differentiate their products, enticing players to play more and longer on the game platform. Which value chain support activity are they leveraging?

A) B) C) D)

procurement firm infrastructure human resource management technology development

111) Firms used to build efficiently run large-scale operations in order to dominate markets.

This gave them cost advantages over rivals, but this also meant they were ________ in responding to market changes and were ________ in their ability to customize their products to specific customer needs.

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A) B) C) D)

rapid; fast limited; rapid fast; limited slow; limited

112) ________ firms build small-scale operations to meet the needs efficiently of particular customers.

A) B) C) D)

Behemoth Unscaled Scaled Hybrid

113) Duracell, under Berkshire Hathaway, and Energizer, under Edgewell Personal Care Company, continue to succeed in the declining disposable battery industry because they

A) B) C) D)

increase prices to increase sales volume. feel less pressure to meet profit expectations under the new owners. focus on cutting costs by streamlining supply chains. focus on cutting costs by ignoring underperforming and less efficient plants.

114) According to Strategy Spotlight 5.5, which of the following is not a primary reason competitors in the disposable battery industry are succeeding in the declining market?

A) B) C) D)

The industry is highly consolidated.

Firms now have a diminished degree of pricing flexibility.

Competitors have become much more profit-focused.

Firms are focused on cutting costs by streamlining supply chains.

115) In the Issue for Debate, Bon-Ton Stores, Sears, and JC Penney were listed as struggling or in bankruptcy. Which of the following is not a challenge they face?

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A) B) C) D)

dwindling mall customer traffic inefficient competition a declining middle-class customer base the threat of online retailing

SHORT ANSWER. Write the word or phrase that best completes each statement or answers the question.

116) What are the pitfalls of the overall cost leadership strategy? Provide an example for each pitfall and explain why it is a pitfall.

117) Discuss how each stage of the industry life cycle (introduction, growth, maturity, and decline) can play a role in decisions that managers must make at the business level. Provide an example for each stage.

118) Two-sided or platform markets are an emerging trend according to the textbook authors.

Choose an example of an existing platform market and explain how this firm positions itself to become the dominant player linking suppliers and customers.

119) What is a focus strategy? Provide an example where this has been implemented successfully.

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120) Proctor and Gamble, Dollar Shave Club, and The Honest Company all use elements of unscaling to be more nimble in meeting needs of different customers in an efficient way. Proctor and Gamble calls its offer the Connect plus Develop initiative in which investors rent Proctor and Gamble distribution and marketing to get their products to market. Compare this model to that of the Dollar Shave Club subscription model and The Honest Company environmentally friendly diaper.

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Answer Key Test name: Unnamed Test5 1) FALSE 2) TRUE 3) FALSE 4) FALSE 5) TRUE 6) TRUE 7) TRUE 8) FALSE 9) FALSE 10) TRUE 11) TRUE 12) FALSE 13) TRUE 14) TRUE 15) FALSE 16) TRUE 17) FALSE 18) FALSE 19) FALSE 20) TRUE 21) TRUE 22) FALSE 23) FALSE 24) TRUE 25) C 26) D Version 1

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27) D 28) C 29) C 30) C 31) A 32) B 33) B 34) B 35) C 36) C 37) B 38) D 39) B 40) D 41) C 42) B 43) B 44) C 45) A 46) B 47) A 48) B 49) C 50) D 51) D 52) C 53) C 54) A 55) C 56) C Version 1

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87) D 88) C 89) A 90) D 91) C 92) C 93) D 94) C 95) C 96) C 97) D 98) D 99) D 100) B 101) A 102) C 103) A 104) B 105) C 106) B 107) B 108) B 109) C 110) D 111) D 112) B 113) C 114) B 115) B

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116) Potential pitfalls of overall cost leadership strategies include: too much focus on one or a few value-chain activities; increase in the cost of the inputs on which the advantage is based; a strategy that can be imitated too easily; a lack of parity on differentiation; reduced flexibility; and obsolescence of the basis of cost advantage.

117) The industry life cycle refers to the stages of introduction, growth, maturity, and decline that occur over the life of an industry. In considering the industry life cycle, it is useful to think in terms of broad product lines such as personal computers, photocopiers, or long-distance telephone service. Changes tend to be slower than what is needed for forecasting. Why are industry life cycles important? The emphasis on various generic strategies, functional areas, value-creating activities, and overall objectives varies over the course of an industry life cycle.

Managers must become even more aware of the strengths and weaknesses of their firm in many areas to attain competitive advantages.

For example, firms depend on their research and development (R&D) activities in the introductory stage. R&D is the source of new products and features that everyone hopes will appeal to customers. Firms develop products and services to stimulate consumer demand. Later, during the maturity phase, the functions of the product have been defined, more competitors have entered the market, and competition is intense. Managers then place greater emphasis on production efficiencies and process (as opposed to the product) engineering in order to lower manufacturing costs. This helps to protect the market position of the firm and to extend the product life cycle because the lower costs of the firm can be passed on to consumers in the form of lower prices, and price-sensitive customers will find the product more appealing.

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118) Successful platform firms create a business that attracts a large range of suppliers and a wide population of customers, becoming the goto clearinghouse that both suppliers and customers turn to in order to facilitate a transaction. In doing so, they typically successfully combine elements of both cost and differentiation advantages. But how do firms position themselves to succeed in these two-sided markets? It involves a combination of actions to build a strong position and facilitate optimal interactions between suppliers and users. In doing so, these firms strive to simultaneously limit costs to users and also provide differentiated service. The issues platform businesses need to master to succeed include the following: draw in users; create easy and informative customer interfaces; facilitate the best connections between suppliers and customers; sequencing the growth of the business.

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119) A focus strategy is based on the choice of a narrow competitive scope within an industry. A firm following this strategy selects a segment or group of segments and tailors its strategy to serve them. The essence of focus is the exploitation of a particular market niche. A narrow focus (like merely being different as a differentiator) is simply not sufficient for above-average performance.The focus strategy, has two variants. In a cost focus, a firm strives to create a cost advantage in its target segment. In a differentiation focus, a firm seeks to differentiate in its target market. Both variants of the focus strategy rely on providing better service than broad-based competitors that are trying to serve the target segment of the focuser. Cost focus exploits differences in cost behavior in some segments, while differentiation focus exploits the special needs of buyers in other segments. Two firms that have successfully implemented focus strategies are LinkedIn and Facebook.

LinkedIn has staked out a position as the business social media site of choice. Rather than compete with Facebook head on, LinkedIn created a strategy that focuses on individuals who wish to share their business experience and make connections with individuals with whom they share or could potentially share business ties. In doing so, it has created an extremely strong business model. LinkedIn monetizes its user information in three ways: subscription fees from some users, advertising fees, and recruiter fees. The first two are fairly standard for social media sites, but the advertising fees are higher for LinkedIn since the ads can be more effectively targeted as a result of LinkedIn's focus.

The third income source is fairly unique for LinkedIn. Headhunters and human resource departments pay significant user fees, up to 8,200 USD a year, to have access to the LinkedIn recruiting search engine, which can sift through LinkedIn profiles to identify individuals with desired skills and experiences. The power of this business model can be seen in the difference in user value for LinkedIn when compared to Facebook.

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Test Bank for Strategic Management: Creating Competitive Advantages, 10th Edition, Gregory D

For every hour that a user spends on the site, LinkedIn generates 1.30 USD in income. For Facebook, it is a paltry 6.2 cents.

120) Larger firms that have previously relied on scale are also employing elements of unscaling. Proctor and Gamble faces a slew of unscaled competitors, such as the Dollar Shave Club subscription model and The Honest Company environmentally friendly diapers. Proctor and Gamble has responded with its Connect plus Develop initiative. After relying on the internal development of products for 175 years, Proctor and Gamble now invites outside inventors to submit development proposals to the company. If their proposals are approved, these inventors can effectively rent Proctor and Gamble distribution and marketing to get their products to market. Doing so allows Proctor and Gamble to be more nimble in meeting the needs of different customers in an efficient way because the firm does not bear the entire cost of product development. In essence, Proctor and Gamble is slowly translating itself into becoming a consumer product platform rented by an ever-changing set of small, focused product developers.

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