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KitchenThings Inc.is a company that manufactures plastic kitchenware.It operates at an output level that allows it to keep its unit cost per output to the lowest in the industry.This in turn allows KitchenThings to be the price leader.Other competing companies cannot operate at the same level due to a lack of consumer demand for their products.This puts them at a competitive disadvantage.In this scenario,the cost driver behind KitchenThings's strategic position is


A) superior customer service.
B) economies of scale.
C) availability of complements.
D) learning-curve effects.

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

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Organic Eats is a restaurant that caters to the needs of a small percentage of highly health-conscious consumers.It has an all-organic,vegan menu.Since there are very few restaurants that offer the same unique services,customers are willing to pay a premium price for its products and services.In this scenario,Organic Eats is following a


A) product diversification strategy.
B) liquidation strategy.
C) mass market strategy.
D) focused differentiation strategy.

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

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When Jean Cult Inc.was operating at the minimum efficient scale of 10,000-12,000 units per month,the firm's cost per unit was $20.However,when the output level was increased beyond 12,000 units,the cost per unit increased to $22.This increase was attributed to the wear-and-tear of the machinery,and complexities of managing and coordinating.What is this phenomenon known as?


A) resource ambiguity
B) diseconomies of scale
C) network effect
D) learning-curve effect

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

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Why are differentiation and cost-leadership strategies referred to as generic business strategies?


A) They can be simultaneously pursued by a firm without any trade-offs.
B) They can be used by any organization independent of industry context.
C) They require similar strategic positions in order to increase a firm's chances to gain competitive advantage.
D) They can be applied only by businesses, which have a competitive advantage.

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

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When a blue ocean strategy goes bad,a firm has neither a clear differentiation nor a clear cost-leadership profile.This situation is referred to as


A) stuck in the middle.
B) buried at the bottom.
C) burned at the top.
D) caught in the transition.

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

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


A) move up a given experience curve.
B) move down a given learning curve.
C) jump to a less steeper learning curve.
D) jump to a flatter experience curve.

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

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Which of the following will hamper a differentiator's ability to achieve a competitive advantage?


A) lower production costs
B) premium prices
C) lower value gap
D) customized goods

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

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Which of the following is a key question managers must answer to formulate an appropriate business-level strategy?


A) When will we satisfy our customer needs?
B) How will we satisfy our customer needs?
C) Where will we satisfy our customer needs?
D) Can we satisfy our customer needs?

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

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When Internet service providers offer free routers for subscriptions to their wireless Internet packs,the perceived value of the service offering increases.In this case,the value driver would be


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

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

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Which of the following is a firm effect that has an impact on the competitive advantage of a firm?


A) the exit barriers within the industry in which the firm operates
B) the number of companies operating in the industry in which the firm operates
C) the intensity of rivalry among existing companies in the firm's chosen industry
D) the value and the cost position of the firm relative to its competitors

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

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Firms pursuing a differentiation strategy primarily seek to


A) keep their cost structures lower than that of the cost leader.
B) reduce the value gap to gain a competitive advantage.
C) provide products that are a direct imitation of the competitors' products.
D) create higher customer perceived value than the value that competitors create.

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

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Clean Machine Inc.produces a high-quality dishwashing machine that is reliable and durable.How would this product most likely act as a cost driver?


A) reduce purchase cost
B) increase after-sales service cost
C) reduce the total cost of ownership
D) increase shipping cost

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

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Diseconomies of scale refer to


A) decreases in cost as profit increases.
B) increases in cost as output increases.
C) increases in economic value as per-unit cost decreases.
D) decreases in profit when consumer demand decreases.

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

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_____ is best described as the output range needed to bring down the cost per unit as much as possible,allowing a firm to stake out the lowest-cost position that is achievable through economies of scale.


A) Minimum efficient scale
B) Break-even output
C) Maximum output capacity
D) Optimum sustainable yield

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

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

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Bass Watches Inc.initially spent eight man-hours to assemble a wristwatch.But as the production doubled,the number of hours spent on assembling a watch reduced by 20 percent.This increase in productivity reduced the company's cost per unit.What is this phenomenon referred to as?


A) learning-curve effect
B) network effect
C) black-swan event
D) time compression diseconomies

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

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Which of the following statements accurately brings out the difference between economies of scale and learning effects?


A) While there are no diseconomies to learning, there are diseconomies to scale.
B) Economies of scale occur over time, whereas learning effects are captured at one point in time.
C) Firms experience economies of scale when output increases, and learning effects when output decreases.
D) Economies of scale reduce cost per unit, learning effects increase cost per unit.

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

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Bargain Styles Inc.is an apparel company that caters to the highly price-conscious customers.Through its simple apparel designs,acceptable quality levels,and minimal customer service,the company has been able to sell its merchandise at the lowest prices in the industry.Which of the following generic business strategies is Bargain Styles applying?


A) cost-leadership
B) differentiation
C) niche marketing
D) product diversification

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 D)
F) B) and C)

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Both Viten Electronics Inc.and JL Electronics Inc.incur a cost of $400 to manufacture a LED television.However,the economic value created by JL Electronics is more than that created by Viten Electronics.What does this indicate?


A) Viten Electronics has a competitive advantage over JL Electronics.
B) Both Viten Electronics and JL Electronics have achieved competitive parity.
C) JL Electronics can charge a premium price on its televisions.
D) Viten Electronics has created a higher value gap than JL Electronics.

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

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