Ch 6 Business Strategy, Differentiation, Cost Leadership, and Blue Oceans

Which of the following best describes a strategic tradeoff?

the tension between value creation and the pressure to keep costs in check

The fact that both Whole Foods (a high-end grocery store) and Aldi (an inexpensive grocery store) have a competitive advantage in the grocery store industry is an indication that

following a different generic business strategy within the same industry can lead to a competitive advantage for more than one organization.

The goal of a strategic position is to create the largest gap possible between the ________that a firm creates through its offerings and the ________required to create these offerings.

value; cost

StyleScape is a global fashion retailer that appeals to a wide range of consumers. It offers distinctive designs, frequent new collections, and a strong brand image that sets it apart from competitors. Because of its design quality and brand reputation, customers are willing to pay higher prices across multiple markets. In this scenario, StyleScape is following a ________strategy.

broad differentiation

Product features, customer service, and complements are all examples of important

value drivers.

Customer service and ________are two of the value drivers that managers can utilize when trying to improve a firm’s differentiation strategic position.

product uniqueness

When a differentiator charges a similar price as its competitors in the same strategic group but offers more perceived value, it

gains market share from other firms.

While Eye Windows incurs a cost of $12 for a pair of eyeglasses, Dura Frames, its competitor, manufactures a pair of glasses at $10. Both the companies are able to sell their glasses for a maximum of $30 per pair. Which of the following statements is true in this scenario?

Eye Windows and Dura Frames have achieved differentiation parity.

Durk’s Depot is a large chain of home improvement stores. It has cost benefits due to its extensive operation. The company’s marketing and sales, logistics, administrative, and other such related costs get divided between a large number of product units stocked in its stores. This makes it difficult for smaller hardware stores, flooring retailers, and specialty paint stores to compete against Durk’s low prices. Thus, Durk’s Depot has a competitive advantage due to its

economies of scale.

Combining economies of learning with the existing production technology allows a firm to

move down a given learning curve.

A firm that is producing at an output level beyond the minimum efficient scale experiences

diseconomies of scale.

One of the reasons that big box retailers like Home Depot are able to achieve economies of scale is that

they maximize their scale efficiencies by stocking more inventory and handling it more efficiently.

The concept of a(n) ________attempts to capture both learning effects and process improvements at firms.

experience curve

Which of the following sources of differential appeal is most effective in helping a firm sustain its advantage?

superior customer experience

Due to its large sales volume and low-cost structure, Bunny’s Lo-Cost enjoys a cost-leadership position. Which of the following scenarios might threaten Bunny’s competitive advantage?

A new competitor is perceived to provide similar value while offering better service than Bunny’s.

In a successful ________strategy, the trade-offs between differentiation and low cost are reconciled.

blue ocean

How did Marriott use economies of scope to achieve greater economic value than its competitors?

Marriott lowered its cost structure by sharing its production assets over several types of hotels, which increased the diversity of its hotel line and thus its differentiated appeal.

Evaluate the following statement: Strategic leaders should always try to pursue a blue ocean strategy because it is the most complex, coveted, and most desirable strategy that exists.

I disagree; firms should only pursue this strategy if they are able to reconcile the tradeoffs of each generic strategy.

Trader Joe’s successfully used a blue ocean strategy by offering lower-cost food than Whole Foods for the same market of patrons. By doing this, Trader Joe’s was able to

gain a market share and make up the loss in margin through increased sales.

Although JetBlue used a blue ocean strategy to achieve an initial competitive advantage, it failed to maintain this advantage. Which of the following provides the best reason for this development?

It failed to refine its strategic position over time.