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1) ________ is a business strategy whereby firms attempt to gain a competitive advantage by increasing the perceived value of their products or services relative to the perceived value of other firms' products or services.
A) Product differentiation
B) Related diversification
C) Cost leadership
D) Best-cost provider
Answer: A
2) By increasing the perceived value of a firm's products or services, a firm will be able to
A) charge a lower price than it would otherwise be able to do.
B) charge a higher price than it would otherwise be able to do.
C) sell its products at lower prices than firms pursuing a cost-leadership strategy.
D) gain significantly more market share than firms pursuing a cost-leadership strategy.
Answer: B
3) While firms often alter the ________ of their products or services in order to implement a product-differentiation strategy, the existence of product differentiation, in the end, is always a matter of ________.
A) customer perceptions; objective properties
B) objective properties; price
C) customer perceptions; price
D) objective properties; customer perception
Answer: D
4) If an individual is considering purchasing a Toyota Camry or a Ferrari and decides that it is worth paying the extra money for the prestige that is associated with the Ferrari, the additional money the customer is willing to pay for the prestige is known as a(n)
A) altruistic price.
B) hedonic price.
C) fair market value.
D) margin price.
Answer: B
5) The most obvious way that firms can try to differentiate their products is by
A) making the product more complex.
B) introducing the product at the right time.
C) customizing the product for a particular segment.
D) altering the features of the products they sell.
Answer: D
6) Which of the following bases of product differentiation attempts to create the perception that a firm's products or services are unusually valuable by focusing directly on the attributes of the products or services a firm sells?
A) product complexity
B) product customization
C) consumer marketing
D) reputation
Answer: A
7) The ability of companies that produce complex software packages to tailor these packages to the specific needs of their customers is an example of product differentiation through
A) complexity.
B) consumer marketing.
C) product customization.
D) timing.
Answer: C
8) A firm's ________ is really no more than a socially complex relationship between a firm and its customers and can serve as a basis for product differentiation.
A) location
B) reputation
C) consumer marketing
D) architectural competence
Answer: B
9) In the bicycle industry, the feel of high-end bicycles when they are ridden is important. As a serious rider becomes accustomed to a particular bicycle, it is very difficult for that rider to switch to an alternative supplier. This is an example of product differentiation through which of the following?
A) linkages between functions
B) product customization
C) location
D) product complexity
Answer: B
10) Through which bases of competitive advantage do firms attempt to alter the perceptions of current and potential customers, whether or not specific attributes of a firm's products or services are altered?
A) reputation
B) location
C) product customization
D) consumer marketing
Answer: D
11) ________ is the ability to use organizational structure to facilitate coordination among specific disciplines to conduct research.
A) Architectural competence
B) Cross-functional linking
C) Organizational coordination
D) Managerial leverage
Answer: A
12) Which of the following bases of product differentiation attempts to create the perception that a firm's products or services are unusually valuable by focusing on links within and between firms?
A) reputation
B) product complexity
C) consumer marketing
D) product mix
Answer: D
13) ________ can be can be a source of product differentiation when a single set of customers purchases several of a firm's products.
A) Product placements
B) Reputation
C) Product mix
D) Architectural competence
Answer: C
14) Product differentiation is ultimately an expression of the ________ of individuals and groups within firms and is limited only by the ________ that exist, or that can be created, in a particular industry.
A) creativity; resources
B) resources; opportunities
C) creativity; opportunities
D) opportunities; resources
Answer: C
According to Coach's website, the company has built a distinctive style and prestigious image over the past 40 years to develop a reputation as "America's preeminent designer, producer, and marketer of fine accessories and gifts for women and men including handbags, business cases, luggage and travel accessories, wallets, outerwear, eyewear, gloves, scarves and fine jewelry." Coach employs a multi-channel distribution channel to reach its customers, including company-owned stores and boutiques in the stores of prominent specialty retailers both within the United States and abroad, and the company operates an online store. Consumers who purchase coach products are generally willing to pay the premium price due to the superior quality of Coach's products as well as the perceived prestige of owning a Coach product. Coach stresses these features in its advertising campaigns and regularly allows movies and television shows to favorably feature Coach products in appropriate scenes. Over the last five years. Coach has partnered with automobile manufacturers such as Lexus to produce automobiles with Coach interiors. In an effort to expand its international reach, Coach intends to increase its international distribution and is expanding into Japan through Coach Japan, Inc., a joint venture with a local company that will allow Coach to control international distribution and to maintain a consistent brand strategy domestically and abroad.
15) Which generic business level strategy is Coach pursuing?
A) cost leadership
B) related diversification
C) product differentiation
D) unrelated diversification
Answer: C
16) The price premium that customers are willing to pay for the superior quality and perceived prestige of Coach's products over the prices of similar products are known as
A) marginal prices.
B) hedonic prices.
C) heroic prices.
D) elastic prices.
Answer: B
17) Which of the following bases of product differentiation does Coach appear to be employing?
A) product features, product complexity, and consumer marketing
B) location, linkages between functions, and reputation
C) reputation, consumer marketing, and product features
D) distribution channels, service and support, and links with other firms
Answer: C
18) Coach's agreement with Lexus to produce automobiles with Coach leather interior is an example of
A) cooperative strategic alliance.
B) architectural competence.
C) skunk works.
D) product placement.
Answer: A
19) Warby Parker exemplifies a firm pursuing a product-differentiation strategy while Victoria's Secret exemplifies a firm pursuing a cost-leadership strategy.
Answer: FALSE
20) Product differentiation is a business strategy whereby firms attempt to gain a competitive advantage by increasing the perceived value of their products and services relative to the perceived value of other firms' products or services.
Answer: TRUE
21) Attempts to create differences in the relative perceived value of a firm's products or services are rarely made by altering the objective properties of those products or services.
Answer: FALSE
22) While firms often alter the objective properties of their products or services in order to implement a product-differentiation strategy, the existence of product differentiation is always a matter of customer perception.
Answer: TRUE
23) If products or services are perceived as being different in a way that is valued by customers, even if there is no physical differentiation, then product differentiation exists.
Answer: TRUE
24) A hedonic price is that part of a products' or services' actual price that is not attributable to a particular attribute of that product or service.
Answer: FALSE
25) Bentley's introduction of a new 48-volt electric system in one of its high-end SUVs was an attempt at differentiation through product features.
Answer: TRUE
26) To the extent that differences in product complexity lead customers to conclude that the products of some firms are more valuable than the product of other firms, then product complexity can be a basis of product differentiation.
Answer: TRUE
27) Timing-based product differentiation relies solely on being a first mover.
Answer: FALSE
28) The physical location of a firm cannot be a source of product differentiation.
Answer: FALSE
29) Products can be differentiated by the extent to which they are customized for particular customer applications.
Answer: TRUE
30) Through advertising and other consumer marketing efforts, firms attempt to alter the perceptions of current and potential customers, but only when specific attributes of a firm's products or services are altered.
Answer: FALSE
31) Once developed, a firm's reputation can last a long time, even if the basis for that reputation no longer exists.
Answer: TRUE
32) The ability to use organization structure to facilitate coordination among scientific disciplines to conduct research is known as architectural competence.
Answer: TRUE
33) Differentiation can be based on explicit linkages between one firm's products and the products and services of other firms.
Answer: TRUE
34) In the information technology business, interconnectivity is a relatively unimportant basis of potential product differentiation.
Answer: FALSE
35) Product differentiation is ultimately an expression of the creativity of individuals and groups within firms and is limited only by the opportunities that exist, or that can be created, in a particular industry and by the willingness and ability of firms to creatively explore ways to take advantage of those opportunities.
Answer: TRUE
36) It is reasonable to expect that in the near future a marketing specialist will develop a definitive list of bases of product differentiation.
Answer: FALSE
40) In general, firms selling differentiated products face a demand curve that is
A) upward sloping.
B) horizontal.
C) vertical.
D) downward sloping.
Answer: D
41) According to Chamberlin, firms selling differentiated products and facing a downward sloping demand curve are in an industry described as
A) perfect competition.
B) monopolistic competition.
C) oligopolistic competition.
D) semi-structured competition.
Answer: B
42) Which of the following statements regarding the impact of product differentiation on the threat of new entry is accurate?
A) Product differentiation helps reduce the threat of new entry by forcing potential new entrants to absorb costs associated with overcoming incumbent firms' product-differentiation advantages.
B) Product differentiation increases the threat of new entry by allowing potential new entrants to avoid costs associated with overcoming incumbent firms' product-differentiation advantages.
C) Product differentiation has no impact on the threat of new entry.
D) It is not possible to determine the impact of product differentiation on the threat of new entry.
Answer: A
43) When considering the impact of product differentiation on the threat of rivalry, product differentiation
A) reduces the threat of rivalry to zero.
B) increases the threat of rivalry by forcing each firm in an industry to compete directly with one another instead of allowing them to carve out their own unique product niche.
C) has no impact on the threat of rivalry.
D) reduces the threat of rivalry because each firm in an industry attempts to carve out its own unique product niche.
Answer: D
44) With regard to the threat of suppliers, product differentiation
A) reduces the threat of suppliers because a firm with a highly differentiated product can pass increased costs on to customers.
B) increases the threat of suppliers because a firm with a highly differentiated product is unable to pass increased costs on to customers.
C) has no impact on the threat of suppliers.
D) can either increase or reduce the threat of suppliers.
Answer: A
45) In emerging industries
A) firms that are first movers are unlikely to gain product-differentiation advantages based on buyer loyalty and high switching costs.
B) firms that are first movers can gain product-differentiation advantages based on perceived technological leadership.
C) product-differentiation efforts are focused on product refinement as a basis of product differentiation.
D) firms can sometimes be tempted to exaggerate the extent to which they have refined and improved their products and services.
Answer: B
46) In a declining industry
A) product-differentiation efforts are focused on product refinement as a basis of product differentiation.
B) firms that are first movers can gain product-differentiation advantages based on perceived technological leadership.
C) highly differentiated firms may be able to gain product-differentiation advantages by preempting strategically valuable assets.
D) highly differentiated firms may be able to discover a viable market niche that will enable them to survive despite the overall decline in the market.
Answer: D
According to Coach's website, the company has built a distinctive style and prestigious image over the past 40 years to develop a reputation as "America's preeminent designer, producer, and marketer of fine accessories and gifts for women and men including handbags, business cases, luggage and travel accessories, wallets, outerwear, eyewear, gloves, scarves and fine jewelry." Coach employs a multi-channel distribution channel to reach its customers, including company-owned stores and boutiques in the stores of prominent specialty retailers both within the United States and abroad, and the company operates an online store. Consumers who purchase coach products are generally willing to pay the premium price due to the superior quality of Coach's products as well as the perceived prestige of owning a Coach product. Coach stresses these features in its advertising campaigns and regularly allows movies and television shows to favorably feature Coach products in appropriate scenes. Over the last five years. Coach has partnered with automobile manufacturers such as Lexus to produce automobiles with Coach interiors. In an effort to expand its international reach, Coach intends to increase its international distribution and is expanding into Japan through Coach Japan, Inc., a joint venture with a local company that will allow Coach to control international distribution and to maintain a consistent brand strategy domestically and abroad.
47) The business level strategy Coach is pursuing is likely to
A) reduce the threat of rivalry to virtually zero.
B) increase the threat of substitutes due to premium pricing.
C) decrease the threat of new entrants due to the additional cost they would face to overcome Coach's reputation advantages.
D) decrease the threat of buyers since Coach can lower its prices due to its efficient manufacturing operations.
Answer: C
48) Given that the leather handbag market that Coach largely competes in can be considered a mature market, Coach should focus its product-differentiation efforts on
A) exploiting a first-mover advantage as a basis of product differentiation.
B) introducing radically new technologies as a basis of product differentiation.
C) seeking a viable market niche that will enable it to survive.
D) refining products as a basis of product differentiation.
Answer: D
49) Firms selling differentiated products face a horizontal demand curve.
Answer: FALSE
50) Edward Chamberlin described firms selling differentiated products and facing a downward-sloping demand curve as being in an industry characterized by monopolistic competition.
Answer: TRUE
51) Product differentiation helps reduce the threat of new entry by forcing potential entrants to an industry to absorb not only the standard costs of beginning business but also the additional costs associated with overcoming incumbent firms' product-differentiation advantages.
Answer: TRUE
52) Product differentiation effectively reduces rivalry to zero.
Answer: FALSE
53) Product differentiation increases the threat of substitutes by making a firm's current products appear less attractive than substitutes.
Answer: FALSE
54) Firms with highly differentiated products may have loyal customers, or customers who are unable to purchase similar products or services from other firms and are therefore more likely to accept increased prices due to a firm passing on increased costs by a powerful supplier.
Answer: TRUE
55) When a firm sells a highly differentiated product, it enjoys a quasi-monopoly in that segment of the market.
Answer: TRUE
56) In fragmented industries firms can use product differentiation to help consolidate a market.
Answer: TRUE
57) In emerging industries, product-differentiation efforts often focus on product refinement as a basis for product differentiation.
Answer: FALSE
60) Which of the following bases of product differentiation is almost always easy to duplicate?
A) product features
B) product mix
C) product customization
D) consumer marketing
Answer: A
61) Which of the following bases of product differentiation is usually costly to duplicate?
A) product features
B) links with other firms
C) reputation
D) product mix
Answer: C
62) Which of the following bases of product differentiation is by far the most popular way for firms to try to differentiate their products but is identified as almost always being easy to duplicate?
A) product mix
B) product features
C) customization
D) distribution channels
Answer: B
63) Product features, by themselves, are
A) usually not a source of temporary competitive advantage, but they can be a source of a sustainable competitive advantage.
B) usually not a source of either a temporary competitive advantage, or a source of a sustainable competitive advantage.
C) usually can be a source of both a temporary competitive advantage and a source of a sustainable competitive advantage.
D) usually not a source of sustained competitive advantage, but they can be a source of a temporary competitive advantage.
Answer: D
64) Under which of the following conditions is the product mix advantage as a basis of product differentiation the least difficult to duplicate?
A) when the base of a product mix advantage is a common customer
B) when the mix of products is highly integrated with each other
C) if each of the products in a product mix has unique features
D) if a firm brings a series of products to market
Answer: A
65) Research on architectural competence in pharmaceutical firms suggests that
A) not only do some firms possess this competence, but that other firms do not; firms without this competence have, on average, been able develop it with minimal investment.
B) very few firms possess this competence, but firms without this competence, on average, are able to develop it.
C) not only do some firms possess this competence, but also that other firms do not and firms without this competence have, on average, been unable to develop it.
D) virtually every firm possesses this competence to some extent.
Answer: C
66) Which of the following bases of product differentiation is generally viewed as the most difficult to duplicate?
A) product features
B) reputation
C) linkages with other firms
D) location
Answer: B
67) Ultimately the ________ of a product differentiation strategy depends on the ability of individual firms to be creative in finding new ways to differentiate their products.
A) sustained competitive advantage
B) rarity
C) imitation
D) innovation
Answer: B
According to Coach's website, the company has built a distinctive style and prestigious image over the past 40 years to develop a reputation as "America's preeminent designer, producer, and marketer of fine accessories and gifts for women and men including handbags, business cases, luggage and travel accessories, wallets, outerwear, eyewear, gloves, scarves and fine jewelry." Coach employs a multi-channel distribution channel to reach its customers, including company-owned stores and boutiques in the stores of prominent specialty retailers both within the United States and abroad, and the company operates an online store. Consumers who purchase coach products are generally willing to pay the premium price due to the superior quality of Coach's products as well as the perceived prestige of owning a Coach product. Coach stresses these features in its advertising campaigns and regularly allows movies and television shows to favorably feature Coach products in appropriate scenes. Over the last five years. Coach has partnered with automobile manufacturers such as Lexus to produce automobiles with Coach interiors. In an effort to expand its international reach, Coach intends to increase its international distribution and is expanding into Japan through Coach Japan, Inc., a joint venture with a local company that will allow Coach to control international distribution and to maintain a consistent brand strategy domestically and abroad.
68) Which of the following bases of Coach's competitive advantage is likely to be the most difficult to duplicate?
A) product features
B) consumer marketing
C) location
D) reputation
Answer: D
69) Which of the following bases of Coach's competitive advantage is likely to be the easiest to duplicate?
A) product features
B) consumer marketing
C) location
D) reputation
Answer: A
70) The concept of product differentiation generally assumes that the number of firms that have been able to differentiate their products in a particular way is, at some point in time, less than the number of firms needed to generate perfect competition dynamics.
Answer: TRUE
71) Firms that pursue a product-differentiation strategy can choose whether or not they want to reveal this strategic choice to their competition by adjusting their prices.
Answer: FALSE
72) Knowing how a firm is differentiating its products means that competitors will be able to duplicate a firm's product-differentiation strategy at a lower cost.
Answer: FALSE
73) Product features as a basis for product differentiation are generally not easy to duplicate.
Answer: FALSE
74) While product features, by themselves, are usually not a source of sustained competitive advantage, they can be a source of a temporary competitive advantage.
Answer: TRUE
75) Product features, product customization, and product complexity have few obvious close substitutes and may be sources of sustained competitive advantages.
Answer: FALSE
76) Timing, location, distribution channels, and service and support are all very similar bases of product differentiation and can act as substitutes for each other.
Answer: FALSE
79) The U-form structure used to implement a product-differentiation strategy
A) rarely uses temporary cross-divisional and cross-functional teams to manage the development and implementation of new, innovative, and highly differentiated products.
B) has simple reporting relationships.
C) often uses temporary cross-divisional and cross-functional teams to manage the development and implementation of new, innovative, and highly differentiated products.
D) has a small corporate staff.
Answer: C
80) A ________ structure exists when individuals in a firm have two or more bosses simultaneously.
A) U-form
B) multidivisional
C) cross-divisional
D) matrix
Answer: D
81) The Lockheed Corporation Skunk Works is an example of a(n)
A) cross-divisional or cross-functional team.
B) M-form structure.
C) U-form structure.
D) multidivisional structure.
Answer: A
82) A ________ exists when firms are committed to engage in several related product-differentiation strategies simultaneously.
A) policy of substitution
B) policy of extrapolation
C) policy of exploration
D) policy of experimentation
Answer: D
83) In developing a compensation policy used to implement a product-differentiation strategy, firms will
A) hold individuals responsible for experiments that fail.
B) punish individuals for taking risks when their projects are not successful.
C) simultaneously use multiple dimensions to examine employee performance.
D) provide appropriate incentives for managers and employees to reduce costs.
Answer: C
84) Cross-functional product development teams are suitable for a firm pursuing a ________ strategy.
A) cost-leadership
B) confrontation
C) product-differentiation
D) stuck-in-the-middle
Answer: C
According to Coach's website, the company has built a distinctive style and prestigious image over the past 40 years to develop a reputation as "America's preeminent designer, producer, and marketer of fine accessories and gifts for women and men including handbags, business cases, luggage and travel accessories, wallets, outerwear, eyewear, gloves, scarves and fine jewelry." Coach employs a multi-channel distribution channel to reach its customers, including company-owned stores and boutiques in the stores of prominent specialty retailers both within the United States and abroad, and the company operates an online store. Consumers who purchase coach products are generally willing to pay the premium price due to the superior quality of Coach's products as well as the perceived prestige of owning a Coach product. Coach stresses these features in its advertising campaigns and regularly allows movies and television shows to favorably feature Coach products in appropriate scenes. Over the last five years. Coach has partnered with automobile manufacturers such as Lexus to produce automobiles with Coach interiors. In an effort to expand its international reach, Coach intends to increase its international distribution and is expanding into Japan through Coach Japan, Inc., a joint venture with a local company that will allow Coach to control international distribution and to maintain a consistent brand strategy domestically and abroad.
85) If Coach had an organizational structure that used cross-functional teams, the members of which reported not only to their functional boss (i.e. the head of production) but also to the head of the team, Coach could be said to be using which organizational structure?
A) product divisional
B) matrix
C) U-form
D) multi-domestic
Answer: B
86) While the U-form structure for a firm pursuing cost leadership is relatively simple, the U-form structure for a firm implementing a product-differentiation strategy can be somewhat more complex.
Answer: TRUE
87) Firms pursuing a differentiation strategy often use temporary cross-divisional and cross-functional teams to manage the development and implementation of new, innovative and highly differentiated products.
Answer: TRUE
89) More recent work in the area of strategic management regarding assertions about being stuck in the middle
A) supports the argument that firms that attempt to simultaneously pursue cost leadership and product differentiation will find themselves at a competitive disadvantage.
B) contradicts the argument and finds that firms that successfully pursue cost leadership and product differentiation simultaneously can often expect to gain a sustained competitive advantage.
C) partially contradicts the argument and finds that firms that successfully simultaneously pursue cost leadership and product differentiation can only expect to gain a temporary competitive advantage.
D) partially contradicts the argument and finds that only firms in certain select industries can successfully simultaneously pursue cost leadership and product differentiation and gain a temporary competitive advantage.
Answer: B
90) Firms that are stuck in the middle attempt to sell
A) high-priced products and gain small market share.
B) low-priced products and gain large market share.
C) high-priced products and gain a large market share.
D) medium-priced products and gain medium market share.
Answer: D
91) While cost leadership requires rewards for cost reduction, product differentiation requires rewards for ________.
A) creative flair
B) efficiency
C) quantitative goals
D) production goals
Answer: A
92) Recent research suggests that ________ firms must have competitive levels of cost to survive.
A) low-cost
B) all
C) domestic
D) product-differentiation
Answer: D
93) Recent research shows that firms can simultaneously implement cost-leadership and product-differentiation strategies if they learn how to manage the ________ inherent in these two strategies.
A) consistencies
B) similarities
C) contradictions
D) superfluousness
Answer: C
According to Coach's website, the company has built a distinctive style and prestigious image over the past 40 years to develop a reputation as "America's preeminent designer, producer, and marketer of fine accessories and gifts for women and men including handbags, business cases, luggage and travel accessories, wallets, outerwear, eyewear, gloves, scarves and fine jewelry." Coach employs a multi-channel distribution channel to reach its customers, including company-owned stores and boutiques in the stores of prominent specialty retailers both within the United States and abroad, and the company operates an online store. Consumers who purchase coach products are generally willing to pay the premium price due to the superior quality of Coach's products as well as the perceived prestige of owning a Coach product. Coach stresses these features in its advertising campaigns and regularly allows movies and television shows to favorably feature Coach products in appropriate scenes. Over the last five years. Coach has partnered with automobile manufacturers such as Lexus to produce automobiles with Coach interiors. In an effort to expand its international reach, Coach intends to increase its international distribution and is expanding into Japan through Coach Japan, Inc., a joint venture with a local company that will allow Coach to control international distribution and to maintain a consistent brand strategy domestically and abroad.
94) One feature of Coach's compensation policies is likely to be
A) rewards for cost reduction.
B) rewards for efficiency.
C) rewards for creative flair.
D) rewards for manufacturing efficiency.
Answer: C
95) More recent work contradicts the argument about being "stuck in the middle" and suggests that firms that are successful in both cost leadership and product differentiation often can expect to gain a sustained competitive advantage.
Answer: TRUE
96) McDonald's is an excellent example of a firm that simultaneously employs both a product-differentiation and a cost-leadership strategy since their product differentiation based on cleanliness, consistency and fun in its fast food outlets allowed the company to become the market share leader in the industry and to reduce its costs.
Answer: TRUE
97) Firms able to successfully differentiate their products and services are likely to see a decrease in their volume of sales.
Answer: FALSE
98) Product differentiation can lead to high market share and low costs.
Answer: TRUE