Ch. 6 Business Strategy: Differentiation, Cost Leadership, and Blue Oceans Smartbook review

The most significant challenge JetBlue faced in implementing its business strategy was ______.

reconciling the trade-offs between cutting costs and providing superior service

A ______ outlines the steps a manager will take to achieve competitive advantage in a single product market.

business-level strategy

Which two of the following variables can managers primarily manipulate in order to answer the question, "How should we compete?"

cost

value

Which type of strategy is being used if a company offers a product at a lower cost than its competitors?

cost-leadership strategy

Which of the following best exemplifies a company that successfully uses a differentiation strategy?

Company X strengthens its brand by marketing a product with an innovative feature.

As JetBlue grew, which of the following occurred during the years following 2007?

It suffered a competitive disadvantage.

Economies of ______ are the savings that come from producing two or more different outputs at a lower cost than producing each output individually.

scope

Business-level strategy addresses which overarching question?

How should we compete?

Two important features that managers can adjust in an effort to improve the firm's strategic position are ______.

product features and customer service

How to compete on a business level is defined by the variables value and cost. Together they define the ______.

economic value created

A ______ strategy aims to create higher value for customers by offering products with unique features but a similar level of costs to those of competing products.

differentiation

A ______ strategy attempts to create products with unique and attractive features in order to increase the price that consumers are willing to pay.

differentiation

Different value drivers contribute to competitive advantage only if ______.

the increase in perceived value exceeds the corresponding cost increase

Which of the following best defines economies of scope?

They are the savings that come from producing two or more outputs at less cost than producing each output individually.

Which capability is required to create superior product features?

R&D

What are the three most important value drivers that managers can use to create a competitive advantage?

product features

complements

customer service

Which of the following are examples of ways that a large retailing firm can increase the perceived value of its offerings by focusing on customer service?

offering a "no questions asked" return policy

maintaining a domestic call center that is open 24 hours per day

The perceived value that a company creates for consumers less the company's costs to create the value equals ______.

economic value created

A tablet manufacturer that includes a free stylus with every purchase is using ______ to enhance users' experiences and increase the perceived value of its tablets.

complements

Which of the following are considered the two generic business-level strategies?

differentiation

cost-leadership

A cost leader can achieve a competitive advantage by ______.

reducing costs below those of competitors while maintaining a similar value

Which of the following scenarios would result in strengthening a firm's strategic position?

A firm adds a new product feature that greatly increases the perceived value of the product at a minimal cost to the firm.

An auto manufacturer that has access to cheaper labor and raw materials than its rivals will have a competitive advantage regarding lower cost of ______ factors.

input

Unique features and attributes that differentiate a product from competitors' offerings allow the firm to ______.

charge premium pricing

A firm that increases its output of a given product and experiences a simultaneous decrease in per unit costs is taking advantage of ______.

economies of scale

Which value driver would be the focus of a company that sells products that are similar to competing products and that provides a 60-day guarantee with no questions asked?

customer service

Economies of scale present an opportunity to increase profits because as the number of units within the relevant range increases, fixed costs _____.

stay the same

Value drivers known as ______ add value to a product or service when they are consumed in tandem with the focal product.

complements

Larger output allows firms to invest in more specialized systems such as which of the following?

enterprise resource planning software

manufacturing robots

True or false: A company that achieves differentiation parity at a lower cost has implemented a successful cost-leadership strategy.

True

In terms of productivity, which of the following is true of learning curves?

they go down

Which of the following are input factors?

capital

raw materials

labor

information technology services

Patti's Potato Chips is a national potato-chip manufacturer. Calpurnia's Crisps is a small-batch gourmet potato-chip maker. Based on just this information, which of the following is the greatest advantage Patti's has over Calpurnia's?

economies of scale

The concept of a(n) ______ attempts to combine both learning effects and process improvements.

experience curve

What is the relationship between fixed costs and economies of scale?

The amount of fixed costs allocated to each unit of output decreases as output increases.

Which of the following situations would justify the use of manufacturing robots by a producer of packaged foods?

an increase in demand from the market

What is one of the benefits of pursuing a differentiation strategy when it comes to the power of suppliers?

Differentiation provides protection against an increase in input prices.

Why does the learning curve go down when productivity is considered?

As workers repeatedly engage in an activity, they become more efficient, driving down costs.

A(n) _____ strategy attempts to increase the perceived value of a product while controlling costs.

differentiation

An auto manufacturer that has access to cheaper labor and raw materials than its rivals will have a competitive advantage regarding lower cost of _____ factors.

input

If two firms produce very similar products at the same rate of output, and firm A is able to achieve lower per-unit costs than firm B by taking advantage of a new manufacturing technology, firm A is benefiting from ______.

an experience-curve effect based on process innovation

In terms of business strategy, blue oceans represent which of the following

increased demand

untapped market space

Implementing a blue ocean strategy requires making competition irrelevant and creating a new market space, otherwise known as ______.

value innovation

Which of the following competitive forces can result in the erosion of margins for both differentiation and cost-leadership business strategies?

Power of buyers

Threat of entry

Power of suppliers

Why do many firms fail to successfully implement a blue ocean strategy?

because they end up being "stuck in the middle," unable to increase value and lower costs at the same time

A producer of consumer headphones that successfully differentiates its products with a patented noise-canceling technology and celebrity endorsements will enjoy which of the following benefits?

the ability to charge a premium price

less intense competition from imitators

True or false: Formulating a business strategy is a relatively easy task because only a few strategic options are available.

False

Which of the following are components of a cost-leadership strategy?

lowest costs in the industry

acceptable value

A successful blue ocean strategy requires strategists to reconcile the trade-offs between ______.

differentiation and cost-leadership

A firm that manages to avoid competition entirely by offering a product or service that creates an uncontested market space is engaging in ______.

value innovation

A struggling retailer seeking to implement a blue ocean strategy is likely to experience difficulty with ______.

cutting costs and increasing value at the same time

What must strategic leaders keep in mind if they are going to achieve successful strategic positioning?

To achieve strategic positioning, firms must make important trade-offs.