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Concept-Tutor no Five Generic Com 5 1919608 1

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A company's competitive strategy deals with:
the specific actions management plans to take to develop a better value chain than
rivals.
how it plans to unify its functional and operating strategies into a cohesive effort
aimed at successfully taking customers away from rivals.
deals exclusively with the specifics of management's game plan for competing
successfully–its specific efforts to please customers, its offensive and defensive
moves to counter the maneuvers of rivals, its responses to whatever market
conditions prevail at the moment, its initiatives to strengthen its market position, and
its approach to securing a competitive advantage vis-à-vis rivals.
its plans for under-pricing rivals and achieving product superiority.
the specific actions management intends to take to strongly differentiate its product
offering from the offerings of rival companies in the industry.

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A company achieves competitive advantage whenever:
it has a product offering that is differentiated from the product offerings of rivals.

its customers exhibit a high degree of loyalty to the company's brand.

it has more core competencies than its rivals.

 it has a better credit rating than rivals.
it has some type of edge over rivals in attracting customers and coping with
competitive forces.

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The five generic types of competitive strategies include:
offensive strategies, defensive strategies, differentiation strategies, low-cost
strategies, and first-mover strategies.
low-cost leadership, broad differentiation, best-cost provider, focused low-cost, and
focused differentiation.
offensive strategies, defensive strategies, striving to be a market leader,
technological leadership strategies, and product innovation strategies.
low-price strategies, premium price strategies, middle-of-the-road strategies, product
leadership strategies, and market share leadership strategies.
attacking competitor strengths, attacking competitor weaknesses, market leadership
strategies, low-cost leadership strategies, and product superiority strategies.

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A low-cost leader's basis for competitive advantage is:
using an everyday low pricing strategy to gain the biggest market share.

bigger profit margins than rival firms.

high buyer switching costs because of the company's differentiated product offering.

meaningfully lower overall costs than competitors.

a reputation for charging the lowest prices in the industry.

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A competitive strategy of striving to be the low-cost provider is particularly attractive
when:
buyers are large, have significant power to bargain down prices, use the product in
much the same ways, and incur low costs in switching their purchases from one
seller to another.
 most rivals are trying to differentiate their product offering from those of rivals.

there are many ways to achieve higher product quality that have value to buyers.

buyers are not swayed by advertising and are not very brand-loyal.

most rivals are pursuing best-cost or broad differentiation strategies.

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Which of the following is not a way that a company can try to manage the costs of its
value chain activities downward and thus be more cost-efficient than rivals?
Striving to capture all available economies of scale and taking full advantage of
experience and learning-curve effects
Having outsiders perform all those value chain activities in which a company odes
not have either a core competence or a distinctive competence
Substituting the use of low-cost for high-cost raw materials or component parts
Using the company's bargaining power vis-à-vis suppliers to gain concessions and
trying to operate facilities at full capacity
Adopting labor-saving operating methods and using online systems and
sophisticated software to achieve operating efficiencies

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Striving to be the industry's low-cost provider and achieving lower costs than rivals
entails:
doing a better job than rivals of performing value chain activities more cost-
effectively.
having a smaller labor force than rivals, paying lower wages than rivals, locating all
facilities in countries where labor costs are low, and outsourcing many value chain
activities to suppliers with world-class technological capabilities.
revamping the firm's overall value chain to eliminate or bypass cost-producing
activities that produce little value added insofar as customers are concerned.
aggressive use of activity-based costing, utilizing more best practices than rivals,
and having a narrower product line than rivals.
Both A and C.

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Which of the following is not an accurate characterization of a strategy to be the
industry's overall low-cost provider?
A low-cost provider strategy works well in market situations where many buyers are
price-sensitive and price competition among rival sellers is especially vigorous.
A low-cost provider strategy entails pursuing cost-saving initiatives that are difficult
for rivals to copy or match.
A low-cost provider strategy entails making a product with minimal features so as to
keeps cost per unit as low as absolutely possible.
A low-cost provider strategy is quite suitable for situations where there are few
ways to achieve product differentiation that have value to buyers, where most
buyers utilize the product in the same ways, and buyers incur low costs in switching
their purchases from one seller to another.
A low-cost provider strategy is a particularly powerful strategy when the industry's
product is essentially the same from rival to rival, many buyers are price sensitive,
and industry newcomers use low introductory prices to attract buyers and build a
customer base.

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A broad differentiation strategy:
is an attractive competitive approach whenever buyers' needs and preferences are
too diverse to be satisfied by a product that is essentially identical from seller to
seller.
can produce sustainable competitive advantage if the differentiating features possess
strong buyer appeal and can't be copied or easily matched by rivals.
works best when the basis for differentiation is superior performance features and
buyer switching costs are low.
offers a better chance for gaining market share than low-cost or best-cost provider
strategies, and typically allows a firm to charge the highest price in the industry.
Both A and B.

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0 Which of the following is not one of the four basic routes to achieving a differentiation-
based competitive advantage?
Appealing to high-income buyers who are willing and able to pay a premium price
for a high-performing, multi-featured product
Incorporating features that raise product performance
Incorporating product attributes and user features that lower the buyer's overall costs
of using the company's product
 Delivering value to customers via competencies and competitive capabilities that
rivals don't have or can't afford to match
Incorporating features that enhance buyer satisfaction in intangible or non-economic
ways

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1 The most appealing approaches to broad differentiation:
are those that hinge upon first-rate R&D and frequent product innovation.
involve features or attributes that (1) have considerable buyer appeal and (2) are
hard or expensive for rivals to duplicate.
are those that either lower buyer switching costs or enhance the differentiator's
brand image.
generally relate to product superiority or clever merchandising.

are typically based on either superior product quality or superior customer service.

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2 Successful differentiation allows a firm to:
gain buyer loyalty to its brand (because some buyers are strongly attracted to the
differentiating features and bond with the company and its products).
earn the highest profit margins of any company in the industry.
attract many more buyers by charging a lower price than rivals and thereby take
sales and market share away from rivals.
command a premium price for its product and/or increase unit sales (because
additional buyers are won over by the differentiating features).
Both A and D.

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3 In which one of the following market circumstances is a broad differentiation strategy
generally not well-suited?
When buyer needs and preferences are too diverse to be fully satisfied by a
standardized product
When few rivals are pursuing a similar differentiation approach
 When most competitors are using eye-catching ads to set their product offerings
apart and build a brand image that is differentiated
When there are many ways to differentiate the product or service and many buyers
perceive these differences as having value
When technological change is fast-paced and competition revolves around rapidly
evolving product features

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4 Which of the following is not one of the pitfalls of pursuing a differentiation strategy?
Trying to charge too high a price premium for the differentiating features
Over-differentiating so that the features and attributes incorporated exceed buyer
needs and requirements
Trying to create strong brand loyalty rather than being content with weak brand
loyalty (which usually means lower costs and higher profitability)
Differentiating on features or attributes that rivals can easily copy

Overspending on efforts to differentiate the company's product offering

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5 A strategy of being a best-cost provider:
is the easiest of the five generic types of competitive strategies to copy or imitate.
combines a strategic emphasis on low cost with a strategic emphasis on more than
minimally acceptable quality, service, features, and performance.
is almost always more profitable than focused or market niche strategies because of
the potential for selling more units and realizing higher revenues.
is the most attractive of all the competitive strategies because it combines the best
features of the four other generic types of competitive strategies.
is usually somewhat less profitable than either top-of-the-line differentiation or low-
cost leadership strategies because it is based on achieving a weaker type of
competitive advantage.

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6 What sets focused (or market niche) strategies apart from low-cost leadership and broad
differentiation strategies is:
 the extra attention paid to establishing a distinctive competence.
their concentrated attention on serving the needs of buyers in a narrow piece of the
overall market.
greater opportunity for brand loyalty.
their suitability for market situations where technological change is fast-paced and
continuous product innovation is a key success factor.
their bold strategic intent of global market leadership via heavy advertising.

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7 A focused low-cost strategy (see Table 5.1):
involves a marketing emphasis that communicates the attractiveness of a budget-
priced product tailored to fit the expectations of buyers comprising the target market
niche.
is the hardest of the five generic types of competitive strategies to employ
successfully.
involves the use of deep price discounting to capture customers.
entails trying to wrest market share away from rivals via extra advertising, above-
average expenditures for promotional programs, and heavy use of point-of-sale
merchandising techniques.
cannot be sustained over time unless the focuser is aggressive in entering other
segments where it also can achieve a low-cost advantage.

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8 A focused differentiation strategy aims at securing competitive advantage by:
providing buyers in the target market niche with the best performance features at the
best price.
catering to buyers looking for a medium-quality product at an average price.
offering buyers in the target market niche a product which they perceive is uniquely
well suited to their tastes and preferences.
developing unique product attributes.

convincing buyers that the company is a true leader in product innovation.

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9 Which of the following are distinguishing features of a best-cost provider strategy (see
Table 5.1)?
The strategic target is price-conscious buyers
A marketing emphasis on charging a slightly higher price than rival brands having
comparable features and attributes
A product line that stresses wide selection, many product variations, and emphasis
on differentiating features
A competitive advantage based on more value for the money
Using constant product innovation, excellent R&D skills, and periodic technological
breakthroughs to sustain the strategy

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0 Based on the information in Table 5.1, which of the following is not a distinguishing
feature of a low-cost provider strategy?
The product line consists of a few basic models having minimal frills and acceptable
quality
The production emphasis is on continuously searching for ways to reduce costs
without sacrificing acceptable quality and essential features
The marketing emphasis is on making virtues out of product features that lead to
low cost
The strategic target is value-conscious buyers and sustaining the strategy depends on
frequent advances in technology and occasional product innovations
Sustaining the strategy revolves around managing costs down year-after-year and
delivering good value at economical prices
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