Capstone Chapter 5

There are several basic approaches to competing successfully and gaining a competitive advantage over rivals, such as:

delivering more value to its customers than rivals or delivering value more efficiently than rivals (or both).

A company’s competitive strategy deals with:

the specifics of management’s game plan for competing successfully—its specific efforts to please customers, strengthen its market position, counter the maneuvers of rivals, respond to shifting market conditions, and achieve a particular kind of competitive advantage.

While there are many routes to competitive advantage, the two biggest factors that distinguish one competitive strategy from another involves:

whether a company’s target market is broad or narrow and whether the company is pursuing a competitive advantage linked to low costs or differentiation.

Whatever strategic approach is adopted by a company to deliver value, it nearly always:

requires performing value chain activities differently than rivals and building competitively valuable resources and capabilities that rivals cannot readily match or trump.

The biggest and most important differences among the competitive strategies of different companies boil down to:

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.

Which of the following is NOT one of the five generic types of competitive strategy?

A market share dominator strategy

The generic types of competitive strategies include:

low-cost provider, broad differentiation, best-cost provider, focused low-cost and focused differentiation strategies.

Which one of the following generic types of competitive strategy is typically the "best" strategy for a company to employ?

One that is customized to fit the macro-environment, industry and competitive conditions, and the company’s own resources and competitive capabilities

A low-cost leader’s basis for competitive advantage is:

meaningfully lower overall costs than rivals on comparable products.

Low-cost leaders, who have the lowest industry costs, are exceptionally good at finding ways to drive costs out of their businesses and still provide a product or service that buyers find acceptable:

positioned to deliver affordable luxury products at mass market quality.

How valuable a low-cost leader’s cost advantage is depends on:

whether it is easy or inexpensive for rivals to copy the low-cost leader’s methods or otherwise match its low costs.

A low-cost leader translates its low-cost advantage over rivals into superior profit performance by:

either using its lower-cost edge to under-price competitors and attract price-sensitive buyers in great enough numbers to increase total profits or maintain the present price, and using the lower-cost edge to earn a higher profit margin on each unit sold, thereby raising total profits and overall return on investment.

The major avenues for achieving a cost advantage over rivals include:

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.

To succeed with a low-cost provider strategy, company managers have to:

do two things: (1) perform value chain activities more cost-effectively than rivals, and (2) act proactively in revamping the firm’s overall value chain to eliminate or bypass "nonessential" cost-producing activities.

Achieving a cost advantage over rivals entails:

performing value chain activities more cost-effectively than rivals and finding ways to eliminate or bypass some cost-producing activities altogether.

A factor that has a strong influence on a company’s costs is termed:

a cost driver.

Which of the following is NOT an action that a company can take to do a better job than rivals of performing value chain activities more cost-effectively?

Eliminate product features that might have market appeal, but excessively increase production costs

Cost-efficient management of a company’s overall value chain activities requires that management:

ferret out cost-saving opportunities in every part of the value chain.

Which of the following is NOT one of the ways that a company can achieve cost-efficient management of its value chain activities?

Striving to ensure a corporate diversity policy is introduced with effective controls

The culture of a company can be a cost-efficient value chain activity because it can:

allow for safeguarding internalized operating benefits.

Which of the following is NOT one of the ways that a company can achieve a cost advantage by revamping its value chain?

Increasing production capacity and then striving hard to operate at full capacity

An example of how companies can revamp their value chain to reduce costs is:

to increase service availability while reducing staffing requirements.

Success in achieving a low-cost edge over rivals comes from:

out-managing rivals in finding ways to perform value chain activities faster, more accurately, and more cost efficiently.

While low-cost providers are champions of frugality, they:

seldom hesitate to spend aggressively on resources and capabilities that promise to drive costs out of the business.

A competitive strategy of striving to be the low-cost provider is particularly attractive when:

most buyers use the product in much the same ways, with user requirements calling for a standardized product.

Being the overall low-cost provider in an industry has the attractive advantage of:

putting a firm in the best position to win the business of price-sensitive customers, set the floor on market price, and still earn a profit.

A competitive strategy to be the low-cost provider in an industry works well when:

industry newcomers use introductory low prices to attract buyers and build a customer base.

A competitive strategy predicated on low-cost leadership tends to work best when:

price competition among rivals is especially vigorous and the offerings of rival firms are essentially identical, standardized, commodity-like products.

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?

When buyers have widely varying needs and special requirements, and the prices of substitute products are relatively high.

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:

the offerings of rival firms are essentially identical, standardized, commodity-like products.

Which of the following is NOT one of the pitfalls of a low-cost provider strategy?

Setting the industry’s price ceiling to capture volume gains and achieve economies of scale

A low-cost provider’s product does NOT have to always:

suggest that a low price, by itself, is not always that appealing to buyers.

The essence of a broad differentiation strategy is to:

offer unique product attributes in ways that are valuable and appealing and that buyers consider worth paying for.

A company attempting to be successful with a broad differentiation strategy has to:

study buyer needs and behavior carefully to learn what buyers consider important, what they think has value, and what they are willing to pay for.

Successful differentiation allows a firm to:

command a premium price for its product, and/or increase unit sales, and/or gain buyer loyalty to its brand.

A broad differentiation strategy improves profitability when:

the higher price the product commands exceeds the added costs of achieving the differentiation.

Opportunities to differentiate a company’s product offering:

can exist in activities all along an industry’s value chain.

Uniqueness drivers are a:

set of factors (analogous to cost drivers) that are particularly effective in having a strong differentiation effect.

Which of the following is NOT one of the ways managers can enhance differentiation based on uniqueness drivers?

Seeking out low-quality inputs

Brands create customer loyalty, which in turn:

increases the perceived cost of switching to another product.

Pursuing continuous quality improvement as a uniqueness factor is sound because:

it can often reduce product defects, improve economy of use, and result in more end-user convenience.

Approaches to enhancing differentiation through changes in the value chain include:

All of these.

The objective of differentiation:

is to offer customers something rivals can’t, at least in terms of the level of satisfaction.

A route to take in developing a differentiation advantage includes:

incorporating tangible features that add functionality, increase customer satisfaction with the product specifications, functions, and styling.

Easy-to-copy differentiating features:

cannot produce sustainable competitive advantage.

Which of the following is NOT one of the four basic routes to achieving a differentiation-based competitive advantage?

Appealing to buyers who are sophisticated and shop hard for the best, stand-out differentiating attributes

Perceived value and signaling value are often an important part of a successful differentiation strategy because:

buyers seldom will pay for value they don’t perceive, no matter how real the value of the differentiating extras may be.

Broad differentiation strategies are well-suited for market circumstances where:

there are many ways to differentiate the product or service that have value to buyers.

Broad differentiation strategies generally work best in market circumstances where:

buyer needs and uses of the product are diverse and they are not fully satisfied by a standardized product.

A broad differentiation strategy works best in situations where:

technological change is fast-paced and competition revolves around rapidly evolving product features.

A broad differentiation strategy generally produces the best results in situations where:

few rival firms are following a similar differentiation approach.

In which one of the following market circumstances is a broad differentiation strategy generally NOT well-suited?

When the products of rivals are weakly differentiated and most competitors are resorting to clever advertising to try to set their product offerings apart

…

trying to differentiate on the basis of attributes or features that are easily and quickly copied.

Which of the following is NOT one of the pitfalls of pursuing a differentiation strategy?

Over-emphasizing efforts to strongly differentiate the company’s product from those of rivals rather than be content with weak product differentiation

Focused strategies keyed either to low-cost or differentiation are especially appropriate for situations where:

the market is composed of distinctly different buyer groups who have different needs or use the product in different ways.

What sets focused (or market niche) strategies apart from low-cost leadership and broad differentiation strategies is:

their concentrated attention on serving the needs of buyers in a narrow piece of the overall market.

A focused low-cost strategy seeks to achieve competitive advantage by:

serving buyers in a narrow piece of the total market (target market niche) at a lower cost and lower price than rivals.

The chief difference between a low-cost provider strategy and a focused low-cost strategy is:

the size of the buyer group that a company is trying to appeal to.

A focused low-cost strategy can lead to attractive competitive advantage when:

a firm can lower costs significantly by limiting its customer base to a well-defined buyer segment.

A focused differentiation strategy aims at securing competitive advantage:

with a product offering carefully designed to appeal to the unique preferences and needs of a narrow, well-defined group of buyers.

A focused strategy aimed at securing a competitive edge and which is based either on low cost or differentiation becomes more attractive when:

the target market niche is small enough to limit profitability and the outlook is ripe for differentiating.

The risks of a focused strategy based on either low-cost or differentiation include:

the potential for the preferences and needs of niche members to shift over time toward product attributes desired by buyers in the mainstream portion of the market.

Best-cost provider strategies are:

a hybrid of low-cost provider and differentiation strategies that aim at providing desired quality/features/performance/service attributes while beating rivals on price.

To profitably employ a best-cost provider strategy, a company must have the resources and capabilities to:

incorporate attractive or upscale attributes into its product offering at a lower cost than rivals.

A firm pursuing a best-cost provider strategy:

seeks to deliver superior value to buyers by satisfying their expectations on key quality/service/features/performance attributes and beating their expectations on price (given what rivals are charging for much the same attributes).

The objective of a best-cost provider strategy is to:

deliver superior value to value-conscious buyers at a comparatively lower price than rivals

The competitive objective of a best-cost provider strategy is to:

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).

What is the primary target market for a best cost-provider?

Value-conscious buyers

The competitive advantage of a best-cost provider is:

its capability to incorporate upscale or attractive attributes into its product offering at lower costs than rivals.

For a best-cost provider strategy to be successful, a company must have:

resource strengths and competitive capabilities that allow it to incorporate upscale attributes at lower costs than rivals whose products have similar upscale attributes.

The target market of a best-cost provider is:

value-conscious buyers.

Best-cost provider strategies are appealing in those market situations where:

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.

The big danger or risk of a best-cost provider strategy is:

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.

A company’s biggest vulnerability in employing a best-cost provider strategy is:

getting squeezed between the strategies of firms employing low-cost provider strategies and high-end differentiation strategies.

Success with a best-cost provider strategy designed to outcompete high-end differentiators requires:

achieving significantly lower costs in providing the upscale features

Each of the five generic strategies positions the company differently, except when it concerns:

creating differentiation barriers within economies of scope.

The production emphasis of a company pursuing a broad differentiation strategy usually involves:

emphasis on building differentiating features that buyers are willing to pay for and includes wide selection and many product variations.

The marketing emphasis of a company pursuing a broad differentiation strategy usually is to:

tout differentiating features and charge a premium price that more than covers the extra costs of differentiating features.

The keys to maintaining a broad differentiation strategy are:

to stress constant innovation to stay ahead of imitative rivals and to concentrate on a few differentiating features.

The marketing emphasis of a company pursuing a focused low-cost provider strategy usually is to:

communicate the attractive features of a budget-priced product offering that fits niche members’ expectations.

The underlying criteria of a best-cost provider strategy usually is found in the ability of a company to:

offer similar goods at more attractive prices.

At the heart of a production-based emphasis toward a low-cost provider strategy usually requires a company to:

strive for continuous cost reductions without sacrificing acceptable quality and essential features.

A company’s strategy is likely to succeed if:

All of these.