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In contrast to a differentiator, a cost leader will:


A) charge a premium price for its products and services.
B) build an organization culture where creativity and customer responsiveness thrive.
C) focus its research and development on process technologies to improve efficiency.
D) avoid an organizational structure that relies on strict budget controls.

E) A) and B)
F) None of the above

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Body Sync Inc.is a chain of gyms.It offers a fitness package that allows its members to use the gym facilities for 12 months by paying only for 10 months.Included in the package are two health check-ups and a gym kit.These add-ons by themselves are not very valuable, but as a package they can enhance the perceived value of the service offerings.In this case, Body Sync's primary value driver is:


A) economies of scale.
B) learning-curve effects.
C) availability of complements.
D) experience-curve effects.

E) All of the above
F) A) and D)

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How does productivity frontier help a firm attain competitive advantage?

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Productivity frontier is the value-cost ...

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How does operating at the minimum efficient scale benefit a firm?

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Minimum efficient scale (MES)is the outp...

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A firm experiences diseconomies of scale when it:


A) has a constant returns to scale.
B) moves down the experience curve.
C) produces at an output level beyond the minimum efficient scale.
D) has a steep learning curve when compared to its competitors.

E) B) and D)
F) B) and C)

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The productivity frontier function is concave, and it captures the:


A) negative correlation between economies of scale and economies of scope.
B) complementary relationship between differentiation and cost-leadership strategies.
C) trade-off between value creation and production cost.
D) inverse relationship between experience effects and learning effects.

E) C) and D)
F) A) and C)

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A differentiation strategy works best when a:


A) firm has tangible resources, its focus of competition shifts to price, and equivalent substitutes are readily available.
B) firm's focus of competition shifts to price, and when increasing differentiation of product features do not create additional value.
C) firm's differentiated products are commoditized, and costs of providing uniqueness do not rise above the customer's willingness to pay.
D) firm has intangible resources, is able to pass on increases in supplier cost to the customer, and its differentiation appeal creates customer loyalty.

E) A) and B)
F) A) and C)

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An integration strategy differs from a low-cost strategy in that:


A) the intent of an integration strategy is not to be the absolute lowest-cost provider because an integrator must also increase perceived value.
B) the focus of an integrator is on lowering the economic value created, whereas a cost leader focuses on increasing the economic value created.
C) economies of scale are more important to an integrator, while economies of scope are more important to a cost leader.
D) an integrator's research and development focus is on process technologies, and a cost-leader's focus is on product technologies.

E) A) and D)
F) A) and B)

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TrueDisk Inc.manufactures external hard disks for $32 per unit, and the maximum price customers are willing to pay is $47 per unit.SW Storage Inc.is a competitor of TrueDisk Inc.that produces external hard disks for $37 per unit, and customers are willing to pay a maximum price of $50 per unit.What does this imply?


A) TrueDisk and SW Storage share differentiation parity.
B) SW Storage has a competitive advantage over TrueDisk in terms of perceived value.
C) TrueDisk creates a greater economic value than SW Storage.
D) SW Storage is a cost leader when compared to TrueDisk.

E) None of the above
F) All of the above

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Both BioThink Inc.and GD Pharma Inc.have discovered similar vaccines to prevent cancer.While GD Pharma's vaccine sells at $100 per unit, BioThink sells its vaccine at $90 per unit.This price differentiation has mainly been attributed to the companies' capital decisions.While BioThink used its retained earnings to develop the vaccine, GD Pharma borrowed funds from banks to develop the vaccine.Thus, GD Pharma pays a higher interest on its capital, which makes it necessary to price its vaccine higher.Thus, the key driver for BioThink's competitive advantage is:


A) low-cost input factors.
B) economies of scale.
C) superior customer service.
D) availability of complements.

E) A) and D)
F) A) and C)

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Evia Cycles Inc.incurs $400 to manufacture a bicycle, and the maximum price customers are willing to pay is $550 per unit.Archer Cycles Inc., its competitor, incurs $450 to manufacture a similar bicycle, and customers are willing to pay a maximum price of $620 for it.What does this indicate?


A) Both Evia Cycles and Archer Cycles have achieved differentiation parity.
B) Evia Cycles has a competitive advantage over Archer Cycles.
C) Archer Cycles has created a greater economic value than Evia Cycles.
D) Both Evia Cycles and Archer Cycles have achieved cost parity.

E) A) and B)
F) A) and C)

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A firm is said to have a competitive advantage over its rivals when it:


A) experiences diseconomies of scale.
B) reaches the productivity frontier.
C) moves up a given learning curve.
D) lowers the value gap created.

E) B) and C)
F) B) and D)

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Discuss mass customization.

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Customization allows firms to go beyond ...

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A firm's learning curve is steeper than that of its competitor.What does this imply?


A) The firm is at an advantage when compared to its competitor.
B) The firm and its competitor have achieved cost parity.
C) The firm experiences negative returns to scale.
D) The firm experiences diseconomies of scale when compared to the competitor.

E) A) and B)
F) B) and C)

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When a firm makes choices between a cost or value position to achieve competitive advantage, it is primarily involved in _____.


A) collective bargaining
B) strategic trade-offs
C) arbitration
D) mediation

E) All of the above
F) A) and C)

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What condition must value drivers fulfill in order to enhance a firm's competitive advantage?

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When attempting to increase the perceive...

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Discuss the pricing options available to a firm pursuing a cost-leadership strategy.

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A firm pursuing a cost-leadership strate...

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Economies of scale do NOT allow firms to:


A) spread their fixed costs over a larger output.
B) employ specialized systems and equipment.
C) spread their variable costs over a larger output.
D) take advantage of certain physical properties.

E) B) and D)
F) B) and C)

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Value drivers contribute to a firm's competitive advantage only if:


A) the increase in value creation exceeds the increase in costs.
B) they can shrink the firm's value gap.
C) they can restrict the firm from claiming a premium price for its products.
D) the decrease in perceived value leads to an increase in costs.

E) B) and C)
F) None of the above

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A cost-leader is protected from the threat of new entrants primarily due to its:


A) superior customer service.
B) luxury goods.
C) economies of scale.
D) premium pricing.

E) B) and D)
F) A) and D)

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