mgmt final ch 5

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Answer

True or false? Michael Porter's 3 generic strategies can be depicted on 2 dimensions: competitive advantage and product life cycle

false

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concentrating solely on one form of competitive advantage generally leads to the highest possible level of profitability.

False

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True or false? A firm striving for cost leadership will typically spend relatively more on product related R&D than on process related R&D.

False

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True or false? To generate above average returns, a firm following an overall cost leadership position should not be concerned with attain attaining parity or proximity on the basis of differentation relative to its peers.

false

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True or false? The experience curve concept suggests that production costs tend tend to decrease as production increases regardless of where an industry is at in its life cycle.

false

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firms that compete on overall cost leadership are vulnerable if all rivals share a common input or raw material that contributes a significant amount to total costs.

true

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True or false? the example of Lexus automobiles in the text points out that a firm can strengthen its differentation strategy by achieving integration at multiple points along the value chain.

true

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true or false? a successful differentation strategy lowers entry barriers because of customer loyalty and the firm's ability to provide uniqueness in its products and services

false

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true or false? a successful differentation strategy increases rivalry since buyers become more price sensitive

false

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true or false? if a firm has a successful differentiation strategy, it is not necessary to attain parity on cost.

false

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One potential pitfall of a differentiation strategy is that a brand's identification in the marketplace may become diluted through excessive product line extensions.

true

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With a focus strategy, creating niche by differentiating one's product or service often allows small firms to compete successfully with market leaders. True or false?

true

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focus by itself often constitutes a competitive advantage. true or false?

false

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A potential pitfall of a focus strategy is that focusers can become too focused to satisfy buyer needs. true or false?

true

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a disadvantage of firms that successfully integrate overall cost leadership and differentiation strategies is that they are relatively easy for competitors to imitate. true or false?

false

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Mass customization enables manufacturers to be more responsive to customer demands for high quality products. true or false?

true

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an important idea behind the profit pool concept is that there is always a strong relationship between the generation of revenues and the capturing of profits. true or false?

false

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an important potential pitfall of an integrated overall cost leadership and differentiation strategy is that firms may fail to implement either one and become stuck in the middle. true or false?

true

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Most analysts agree that use of the Internet will lower transaction costs. true or false?

true

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One way the internet and digital technologies are creating opportunities for firms with differentiation strategies is by enabling mass customization. true or false?

true

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The internet offers few advantages for focusers because niche players and small companies cannot implement capabilities as effectively as their large competitors. true or false?

false

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The internet has provided a small subset of companies with greater tools for managing costs. true or false?

false

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Incumbent firms that thought a niche market was too small to enter in the past may use internet technologies to enter that segment with focusers. true or false?

true

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the market life cycle should be used as a short run forecasting device because it provides a conceptual framework for understanding what changes typically occur. true or false?

false

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An important advantage of first movers or pioneers in a market is that they may establish brand recognition that may later serve as an important switching cost. true or false?

true

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during the growth stage of the market life cycle, customers are very likely to establish brand loyalty. true or false?

false

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given the attractiveness of premium pricing during the growth stage of the market life cycle, managers should emphasize short term results to increase profits. true or false?

false

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as markets mature, competition on the basis of differentiation is preferable to price competition. true or false?

true

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as markets mature, the magnitude of differentiation and cost leadership advantages among competitors decrease. true or false?

true

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with reverse positioning, a strategy to be used during the mature stage of the industry life cycle, a product escapes its category by deliberately associating with a different one. true or false?

false

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businesses that compete in markets that are in decline should simply be harvested or divested since they are no longer profitable. true or false?

false

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during the decline stage of the product life cycle,harvesting strat means that a firm keeps a product going without significantly reducing market support, technological development, or other investments, while hoping competitors exit the market. T or F?

false

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the decline stage of the industry life cycle is inevitably followed by death. true or false?

false

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many firms facing a turnaround situation try to reduce their costs by outsourcing the production of many inputs. true or false?

true

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the primary aim of strategic management at the business level is:

achieving competitive advantage.

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primary value chain activities that involve the effective layout of receiving dock operations and support value chain activities that include expertise in process engineering characterize what generic strategy?

overall cost leadership

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A manufacturing business pursuing cost leadership will likely:

rely on experience effects to raise efficiency

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

repeating a process until a task becomes easier.

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The experience curve suggests that cutting prices is a good strategy:

if it can induce greater demand and thereby help a firm travel down the experience curve faster

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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 characterize which type of competitive strategy?

overall cost leadership

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potential pitfall of cost leadership

cost cutting may lead to the loss of desirable features

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A firm can achieve differentiation through all of the following means

improving brand image, better customer service, adding additional product features

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Support value chain activities that involve excellent applications engineering support and facilities that promote a positive firm image characterize what generic strategy?

differentiation

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high product differentiation is generally accompanied by:

decreased emphasis on competition based on price

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

lessening the competitive rivalry by distinguishing itself

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potential pitfalls of a differentiation strategy

uniqueness that is not valuable, too high a price premium, perceptions of differentiation may vary between buyers and sellers

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a narrow market focus is to differentiation based strategy as a

broadly defined market is to a cost leadership strategy

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a firm following a focus strategy must

focus on a market segment or group of segments

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potential pitfalls of a focus strategy

erosion of cost advantages within the narrow segment, even product and service offerings that are highly focused are subject to competition from new entrants and from imitation, focusers can become too focused to satisfy buyer needs

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research has consistently shown that firms that achieve both cost leadership and differentiation advantages tend to perform

higher than firms that achieve either a cost of differentiation advantage

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The text discusses 3 approaches to combining overall cost leadership and differentiation competitive advantages. These are:

automated and flexible manufacturing systems, exploiting the profit pool concept for competitive advantage, coordinating the extended value chain by way of information and technology

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defined as the total profits in an industry at all points along the industry's value chain

profit pool

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potential pitfalls of an integrated overall low cost and differentiation strategy

firms that fail to attain both may end up with neither and become stuck in the middle, underestimating the challenges and expenses associated with coordinating value creating activities, miscalculating the sources of revenue and profit pools in the firm

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ways the Internet is lowering transaction costs

eliminating supply chain intermediaries, minimizing office expenses, reducing business travel

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Dell Computer has an online ordering system that allows consumers to configure their own computers before Dell builds them. This capability is an example of:

mass customization

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Method of implementing a differentiation strategy that has been greatly enhanced because of internet technologies

mass customization

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Because of the internet, firms that use a focus strategy have new opportunities to:

access niche markets in a highly specialized fashion

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One of the reasons the internet is eroding sustainable competitive advantages is:

nearly all competitors will have greater access to tools for managing costs making it hard for any one to achieve an advantage

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The industry life cycle has important implications for a firm's

generic strategies, functional areas, value creating activities, and overall objectives

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in this 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

introduction

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the growth stage of the industry life cycle is characterized by

premium pricing

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

maturity

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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?

maturity

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

maturity

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As markets mature,

there is increasing emphasis on efficiency

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

maturity

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Advantages that cannot be duplicated by other competitors are

difficult to achieve

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

decline

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

decline in the market life cycle

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During the decline stage of the industry life cycle, this refers to obtaining as much profit as possible and requires that costs be decreased quickly.

harvesting

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Research shows that these are all strategies used by firms engaged in successful turnarounds

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

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Piecemeal productivity improvements during a turnaround typically does not involve

expansion of a firm's product market scope

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