Chapter 1: The Strategic Management Process

Chapter 1
The Strategic Management Process

TRUE/FALSE QUESTIONS

1. Strategic management includes a process by which organizations analyze and learn

from their internal and external environments.
Answer: T

2. External stakeholders are groups or individuals outside the organization that have a
particular interest in and a major impact on the organization.
Answer: T

3. Strategic management begins with the creation and execution of strategies, followed
by the definition of goals that can be met by following these strategies.
Answer: F

4. Enactment is the process of influencing the environment through strategic actions.

Answer: T

5. Adaptation is the process associated with attempting to control the environment to

make it less hostile and more conducive to organizational success.
Answer: F

6. Environmental determinism is the view that good management is associated with

determining which strategy will best fit the environment and then carrying it out.
Answer: T

7. Unless an internal capability or resource is costly or difficult to imitate by competitors,

the capability or resource is unlikely to lead to a sustainable competitive advantage.
Answer: T

8. Stakeholder analysis includes identifying and prioritizing key stakeholders.

Answer: T

9. Strategic thinking deals with the rigid and systematic parts of the strategic
management process.
Answer: F

MULTIPLE CHOICE QUESTIONS

10. Strategic management includes the following:

A. Establishment of strategic direction
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B. Implementation of strategies
C. Analysis of the internal environment
D. Strategic restructuring
E. All of these are true
Answer: E

11. Domain direction and navigation pertain to which aspect of the strategic management
process?
A. Corporate strategy formulation
B. Human resources strategy formulation
C. Strategy implementation
D. Business strategy formulation
E. Functional strategy formulation
Answer: D

12. Which of the following is not a stakeholder of an organization?

A. Employees
B. Stockholders
C. Customers
D. Competitors
E. These are all stakeholders. None of the above answers is correct.
Answer: E

13. Which of the following is not a major activity of the strategic management process?
A. Analysis of the internal and external environments
B. Establishment of strategic direction
C. Formulation of strategies
D. Production scheduling
E. Implementation of strategies
Answer: D

14. An organization’s environment typically:

A. Consists only of employees and managers
B. Includes all groups and individuals that are significantly influenced by or have a
major impact on the organization
C. Includes only stockholders
D. Consists only of competitors, suppliers, and customers
E. Reflects only owners, customers, and competitors
Answer: B

15. Which of the following is a part of an organization’s broad environment?

A. Society
B. Employees
C. Managers
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D. Stockholders
E. Board of directors
Answer: A

16. All of the following are members of an organization’s task environment except:
A. Activist groups
B. Managers
C. Suppliers
D. Financial intermediaries
E. Local communities
Answer: B

17. Opportunities:
A. Allow a firm to take advantage of organizational strengths, overcome
weaknesses, or neutralize threats
B. Are the same for all firms in an industry
C. Are related only to new customers and new markets
D. Are a firm’s resources and capabilities
E. None of these
Answer: A

18. Threats:
A. Come only from the broad environment
B. Typically cannot be overcome
C. Can stand in the way of organizational competitiveness and stakeholder
satisfaction
D. Are generally the result of moving too slowly against competitors
E. None of these
Answer: C

19. In a SWOT analysis, a strength:

A. Leads to overconfidence on the part of top managers
B. Cannot be duplicated by competitors
C. Is a condition in the broad or task environment that can allow a firm to
overcome organizational weaknesses
D. Is an internal capability or resource that may lead to a competitive advantage
E. Both C and D are correct
Answer: D

20. In a SWOT analysis, an organizational weakness can be:

A. Something an organization does not do well
B. An important resource that an organization does not possess
C. Either deliberate or emergent
D. A sustainable competitive advantage
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E. Both A and B are correct

Answer: E

21. Strategy formulation involves which of the following?

A. Corporate-level, business-level, and division-level strategy formulation
B. Functional-level, employee-level, and customer-level strategy formulation
C. Corporate-level, business-level, and functional-level strategy formulation
D. Domain navigation, market orientation, and customer definition strategy
formulation
E. Domain navigation, functional-level formulation, and corporate-level
formulation
Answer: C

22. Corporate strategy formulation deals primarily with:

A. How firms compete in the business areas they have selected
B. High-level financial analysis
C. The details of functional area strategies
D. The selection of business areas in which the firm will compete
E. All of the above
Answer: D

23. Corporate-level decisions are typically made by:

A. Low-level employees
B. The CEO and/or board of directors
C. Functional managers
D. Department heads
E. Stockholders
Answer: B

24. Business-level strategy formulation pertains to:

A. Domain direction and navigation
B. Domain definition
C. Domain recognition
D. Domain precondition
E. Organizational inertia
Answer: A

25. Regarding strategy implementation and strategic control:

A. Strategy implementation is more important than strategic control
B. Strategy implementation refers to the details of strategy execution whereas
strategic control refers to ongoing evaluation of and adjustments to strategy
C. Strategic control is more important than strategy implementation
D. Strategy implementation refers primarily to domain definition whereas strategic
control refers primarily to domain navigation
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E. None of these
Answer: B

26. What is the most logical relationship between a sustainable competitive advantage and
an organizational strength?
A. A sustainable competitive advantage is a strength that is difficult for
competitors to imitate
B. A strength cannot be duplicated while a sustainable competitive advantage is
easily copied
C. Every strength leads to a sustainable competitive advantage
D. Every sustainable competitive advantage leads to a strength
E. There is no relationship between these two concepts
Answer: A

27. The industrial organization economics perspective suggests that:

A. Firm strategies are more important than industry structure in
determining financial performance
B. The performance of an industry is dependent on the conduct of the
firms it contains, which is dependent on the structure of the industry
C. Stakeholder determinism will drive the strategic management process in
successful firms
D. Firm structure leads to the creation of resources that, in turn determine
performance
E. All of the above
Answer: B

28. Enactment is the process of:

A. Responding to the environment
B. Evaluating the environment
C. Influencing the environment
D. Retreating from the environment
E. Ignoring the environment
Answer: C

29. Adaptation is the process of:

A. Responding to the environment
B. Evaluating the environment
C. Influencing the environment
D. Retreating from the environment
E. Ignoring the environment
Answer: A

30. According to the resource-based view of the firm:

A. Strategies are neither deliberate nor emergent
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B. Competitors may all develop the same competitive strength

C. The environment offers significant challenges to be overcome
D. Organizations are bundles of resources
E. None of these
Answer: D

31. According to the resource-based view of the firm:

A. Organizational resources include physical resources such as plants
B. The characteristics of resources firms possess influences their financial
performance
C. Organizational resources include knowledge
D. Organizational resources include organizational culture
E. All of these
Answer: E

32. Managing for stakeholders means:

A. More resources are allocated to satisfy stakeholders than would be
necessary merely to retain their participation in the productive activities of the
firm
B. Stakeholders such as customers and suppliers manage portions of the firm
C. Firms that treat their stakeholders well will have higher risk but also
higher returns
D. Firms should treat their stakeholders well because it is the right thing to
do even if it means losing money
E. Both A and C are true
Answer: A

33. The advantages of managing for stakeholders include:

A. Fewer negative responses from stakeholders such as legal suits or boycotts
B. Stakeholders often reciprocate
C. An excellent reputation
D. Increased strategic flexibility
E: All of these
Answer: E

34. Which of the following is not an element of stakeholder analysis?

A. Identifying stakeholders
B. Financially motivating stakeholders
C. Prioritizing stakeholders
D. Assessing stakeholder needs and collecting ideas from stakeholders
E. Integrating knowledge about stakeholders into the strategic management
process
Answer: B
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35. All of the following are associated with the global business environment except:
A. Increasing interdependencies between countries
B. Reduced competition among firms
C. Reduced global stability
D. High levels of technological innovation
E. Increased flow of knowledge, goods and services across international borders
Answer: B

36. Entrepreneurship:
A. Can occur both within firms and independently of them
B. That occurs within firms is sometimes called intrapraneurship
C. Is a process that may lead to the creation of new value
D. Involves recognizing or creating an opportunity, assembling resources
to pursue it, and managing those resources to bring the new venture into being
E. All of the above

37. The characteristics of strategic thinking include all of the following except:
A. A systems perspective
B. Allows the organization to seize unanticipated opportunities
C. It involves hypothesis testing
D. It is based on consideration of the future and does not consider the past at all
E. These are all characteristics of strategic thinking; there is no exception

A company's competitive strategy deals with

A. Management's game plan for competing successfully—the specific efforts to please customers, offensive
and defensive moves to counter the maneuvers of rivals, the reactions and responses to whatever market
conditions prevail at the moment and the initiatives undertaken to improve the company's market position
B. What its strategy will be in such functional areas as R&D, production, sales and marketing, distribution,
finance and accounting and so on
C. Its efforts to change its position on the industry's strategic group map
Answer:a

The objective of competitive strategy is to

A. Contend successfully with the industry's 5 competitive forces
B. Knock the socks off rival companies by doing a better job of satisfying buyer needs and preferences
C. Get the company into the best strategic group and then dominate it
Answer:b

A company achieves competitive advantage whenever

A. It is the acknowledged market share leader
B. It is the industry's acknowledged technology leader
C. It has greater financial resources than its rivals
D. It has a well-known and well-regarded brand name, prefers offensive strategies to defensive strategies and
has a strong balance sheet
E. It has some type of edge over rivals in attracting customers and coping with competitive forces
Answer:e

A company can be said to have competitive advantage if

A. It is the acknowledged leader in product quality
B. It has a different value chain than rivals
C. It has some type of edge over rivals in attracting customers and coping with competitive forces
Answer:c
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While there are many routes to competitive advantage, they all involve
A. Building a brand name image that buyers trust
B. Delivering superior value to buyers and building competencies and resource strengths in performing value
chain activities that rivals cannot readily match
C. Achieving lower costs than rivals and becoming the industry's sales and market share leader
Answer:B

The biggest and most important differences among the competitive strategies of different companies boil
down to
A. How they go about building a brand name image that buyers trust and whether they are a risk-taker or risk-
avoider
B. The different ways that companies try to cope with the five competitive forces
C. Whether a company's market target is broad or narrow and whether the company is pursuing a competitive
advantage linked to low cost or differentiation
Answer:c

Which of the following is not one of the five generic types of competitive strategy?
A. A low-cost provider strategy
B. A broad differentiation strategy
C. A best-cost provider strategy
D. A focused low-cost provider strategy
E. A market share dominator strategy
Answer:e

The generic types of competitive strategies include

A. Build market share, maintain market share and slowly surrender market share
B. Offensive strategies and defensive strategies
C. Low-cost provider, broad differentiation, best-cost provider, focused low-cost and focused differentiation
Answer:c

Which one of the following generic types of competitive strategy is typically the best strategy for a company
to employ?
A. A low-cost leadership strategy
B. A broad differentiation strategy
C. A best-cost provider strategy
D. A focused low-cost provider strategy
E. There is no such thing as a "best" competitive strategy; a company's "best" strategy is always one that is
customized to fit both industry and competitive conditions and the company's own resources and competitive
capabilities
Answer:e

A low-cost leader's basis for competitive advantage is

A. Lower prices than rival firms
B. Using a low cost/low price approach to gain the biggest market share
C. High buyer switching costs
D. Meaningfully lower overall costs than competitors
Answer:d

How valuable a low-cost leader's cost advantage is depends on

A. Whether it is easy or inexpensive for rivals to copy the low-cost leader's methods or otherwise match its low
costs
B. How easy it is for the low-cost leader to gain the biggest market share
C. The aggressiveness with which the low-cost leader pursues converting the cost advantage into the
absolute lowest possible costs
Answer:a

A low-cost leader can translate its low-cost advantage over rivals into superior profit performance by
A. Cutting its price to levels significantly below the prices of rivals
B. Either using its low-cost edge to underprice competitors and attract price sensitive buyers in large enough
numbers to increase total profits or refraining from price-cutting and using the low-cost advantage to earn a
bigger profit margin on each unit sold
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C. Going all out to use its cost advantage to capture a dominant share of the market
Answer:b

The major avenues for achieving a cost advantage over rivals include
A. Revamping the firm's value chain to eliminate or bypass some cost-producing activities and/or out-
managing rivals in the efficiency with which value chain activities are performed
B. Having a management team that is highly skilled in cutting costs
C. Being a first-mover in adopting the latest state-of-the-art technologies, especially those relating to low-cost
manufacture
Answer:a

A competitive strategy of striving to be the low-cost provider is particularly attractive when

A. Buyers are not very brand-conscious
B. Most rivals are trying to be best-cost providers
C. There are many ways to achieve product differentiation that have value to buyers
D. Buyers are large and have significant power to bargain down prices; buyers use the product in much the
same ways; and buyers have low switching costs
Answer:d

Which of the following is not an action that a company can take to do a better job than rivals of performing
value chain activities more cost-effectively?
A. Striving to capture all available economies of scale and learning/experience curve effects
B. Trying to operate facilities at full capacity
C. Adopting labor-saving operating methods
D. Improving supply chain efficiency
E. Outsourcing all production-related activities
Answer:e

Which of the following is not one of the ways that a company can achieve a cost advantage by revamping its
value chain?
A. Cutting out distributors and dealers by selling direct to customers
B. Replacing certain value chain activities with faster and cheaper online technology
C. Increasing production capacity and then striving hard to operate at full capacity
Answer:c

To succeed with a low-cost provider strategy, company managers have to

A. Pursue backward or forward integration to detour suppliers or buyers with considerable bargaining power
and leverage
B. Move the performance of most all value chain activities to low-wage countries
C. Sell direct to users of their product or service and eliminate use of wholesale and retail intermediaries
D. Do two things: (1) do a better job than rivals of pursuing cost savings throughout the value chain and (2) be
proactive in revamping the firm's overall value chain to eliminate low value-added activities and bypass
"nonessential" cost-producing activities
Answer:d

Achieving a cost advantage over rivals entails

A. Concentrating on the primary activities portion of the value chain and outsourcing all support activities
B. Being a first-mover in pursuing backward and forward integration and controlling as much of the industry
value chain as possible
C. Out-managing rivals in performing value chain activities cost-effectively and finding creative ways to cut
cost-producing activities out of the value chain
Answer:c

The best evidence that a company is the industry's low-cost provider is that
A. It sells more of its product/service than its key competitors and is the market share leader
B. It has lower overall per unit costs for its product/service than other competitors in the industry
C. It has lower total operating costs on its income statement than do its competitors
Answer:b

A company pursuing a low-cost leadership strategy must generally

A. Have products with good-to-excellent attributes so that its low prices will provide customers with more
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value for the money

B. Have acceptable quality products that incorporate a good basic design with few frills and offer a limited
number of models/styles to select from
C. Have a wide selection of products that are of average or better quality
Answer:b

Being the overall low-cost provider in an industry has the attractive advantage of
A. Building strong customer loyalty and locking customers into its product (because customers have such high
switching costs)
B. Giving the firm a very appealing brand image
C. Putting a firm in position to compete offensively on the basis of low price, win the business of price
sensitive customers, set the floor on market price and defend against price war conditions should they arise
Answer:c

A competitive strategy to be the low-cost provider in an industry works well when

A. Price competition among rival sellers is especially vigorous
B. There are few ways to achieve product differentiation that have value to buyers
C. Buyers incur low costs in switching their purchases from one seller/brand to another
D. Industry newcomers use low introductory prices to attract buyers and build a customer base
E. All of these
Answer:e

A competitive strategy predicated on low-cost leadership tends to work best when

A. There are widely varying needs and preferences among the various buyers of the product or service
B. There are many market segments and market niches, such that it is feasible for a low-cost leader to
dominate the niche where buyers want a budget-priced product
C. Price competition is especially vigorous and the offerings of rival firms are essentially identical,
standardized, commodity-like products
Answer:c

In which of the following circumstances is a strategy to be the industry's overall low-cost provider not
particularly well matched to the market situation?
A. When the offerings of rival firms are essentially identical, standardized, commodity-like products
B. When there are few ways to achieve differentiation that have value to buyers
C. When price competition is especially vigorous
D. When buyers have widely varying needs and special requirements and the prices of substitute products are
relatively high
Answer:d

A strategy to be the industry's overall low-cost provider tends to be more appealing than a differentiation or
best-cost or focus/market niche strategy when
A. There are many ways to achieve product differentiation that buyers find appealing
B. Buyers use the product in a variety of different ways and have high switching costs in changing from one
seller's product to another
C. The offerings of rival firms are essentially identical, standardized, commodity-like products
Answer:c

In which of the following circumstances is a low-cost leadership strategy not likely to be particularly
successful?
A. When the industry's product is a standardized commodity
B. When buyers are looking for a good-to-excellent product at a bargain price
C. When the industry is composed of more than three strategic groups and the companies in at least one of
the groups are pursuing full vertical integration strategies
Answer:c

Which of the following is not one of the pitfalls of a low-cost provider strategy?
A. Overly aggressive price-cutting
B. Trying to set the industry's price ceiling
C. Not emphasizing avenues of cost advantage that can be kept proprietary or that relegate rivals to playing
catch up
Answer:b
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The essence of a broad differentiation strategy is to

A. Appeal to the high end part of the market and concentrate on providing a top-of-the-line product to
consumers
B. Incorporate a greater number of differentiating features into its product/service than rivals
C. Lower buyer switching costs
D. Outspend rivals on advertising and promotion in order to inform and convince buyers of the value of its
differentiating attributes
E. Be unique in ways that are valuable and appealing to a wide range of buyers
Answer:e

A company attempting to be successful with a broad differentiation strategy has to

A. Study buyer needs and behavior carefully to learn what buyers consider important, what they think has
value and what they are willing to pay for
B. Incorporate more differentiating features into its product/service than rivals
C. Concentrate its differentiating efforts on marketing and advertising (where almost all differentiating
features are created)
Answer:a

Successful differentiation allows a firm to

A. Be the industry's best-cost provider
B. Set the industry ceiling on price
C. Avoid being dragged into a price war with industry rivals and not be overly concerned about whether entry
barriers into the industry are high or low
D. Command a premium price for its product and/or increase unit sales (because additional buyers are won
over by the differentiating features), and/or gain buyer loyalty to its brand (because some buyers prefer the
differentiating features and are thus brand loyal)
Answer:d

A company that succeeds in differentiating its product offering from those of its rivals can usually
A. Avoid having to compete on the basis of simply a low price
B. Charge a price premium for its product (because buyers see its differentiating features as worth something
extra)
C. Increase unit sales (because of the attraction of its differentiating product attributes)
D. Gain buyer loyalty to its brand (because some, maybe many, of its customers will have a strong preference
for the company's differentiating features)
E. All of the above
Answer:e

A broad differentiation strategy improves profitability when

A. It is focused on product innovation
B. Differentiating enhances product performance
C. The differentiating features appeal to sophisticated and prestigious buyers
D. Unit sales increase and the extra price the product commands exceeds the added costs of achieving the
differentiation
Answer:d

Whether a broad differentiation strategy ends up enhancing company profitability depends mainly on whether
A. Many buyers view the product's differentiating features as having value
B. Most buyers have similar needs and use the product in the same ways
C. Unit sales increase and the extra price the product commands exceeds the added costs of achieving the
differentiation
Answer:c

Using a broad differentiation strategy to produce an attractive competitive advantage is least likely to be
based on
A. Developing a superior performing product
B. Offering buyers a product which is superior in quality and reliability as compared to rivals' brands
C. Giving consumers comprehensive support services
D. Providing buyers with a continuing stream of better-designed, better-performing and more stylish products
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E. Undercutting the prices being charged by rivals

Answer:e

Opportunities to differentiate a company's product offering

A. Are most reliably found in the R&D portion of the value chain
B. Are typically located in the sales and marketing portion of the value chain
C. Can exist in activities all along an industry's value chain
Answer:c

Easy-to-copy differentiating features

A. Cannot produce sustainable competitive advantage
B. Seldom are perceived by buyers as having much value
C. Tend to give buyers a high degree of power in bargaining for a lower price
Answer:a

The most appealing approaches to differentiation are

A. Those that are also being pursued by other rivals with differentiation strategies
B. Those that are the most costly to incorporate (because expensive attributes are perceived by buyers as
more valuable and worth paying more for)
C. Those that can be made even more attractive to buyers via clever advertising
D. Generally related to flavor and taste or sophisticated use of Internet technology applications
E. Those that are hard or expensive for rivals to duplicate and that also have considerable buyer appeal
Answer:e

Perceived value and signaling value are often an important part of a successful differentiation strategy
because
A. Of the diversity of buyer needs and preferences
B. Buyers seldom will pay for value they don't perceive, no matter how real the value of the differentiating
extras may be
C. Most buyers are heavily influenced by clever ads that signal value
Answer:b

A differentiation-based competitive advantage

A. Nearly always is attached to the quality and service aspects of a company's product offering
B. Most usually is the result of highly effective marketing and advertising
C. Requires developing at least one distinctive competence that buyers consider valuable
D. Hinges on a company's success in developing top-of-the-line product features that will command the
biggest price premium in the industry
E. Often hinges on incorporating features that (1) raise the performance of the product or (2) lower the
buyer's overall costs of using the company's product or (3) enhance buyer satisfaction in intangible or non-
economic ways
Answer:e

Which of the following is not one of the four basic routes to achieving a differentiation-based competitive
advantage?
A. Delivering value to customers via competencies and competitive capabilities that rivals don't have or can't
afford to match
B. Incorporating features that raise product performance
C. Incorporating product attributes and user features that lower the buyer's overall costs of using the
company's product
D. Appealing to buyers who are sophisticated and shop hard for the best, stand-out differentiating attributes
Answer:d

Achieving a differentiation-based competitive advantage can involve

A. Incorporating product attributes and user features that lower a buyer's overall cost of using the product
B. Incorporating features that raise the performance a buyer gets from using the product
C. Incorporating features that enhance buyer satisfaction in non-economic or intangible ways
D. Delivering value to customers via competencies and competitive capabilities that rivals don't have or can't
afford to match
E. All of the above are viable ways of building competitive advantage via differentiation
Answer:e
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Broad differentiation strategies are well-suited for market circumstances where

A. There are many ways to differentiate the product or service and many buyers perceive these differences as
having value
B. Most buyers have the same needs and use the product in the same ways
C. Buyers are susceptible to clever advertising
Answer:a

Broad differentiation strategies generally work best in market circumstances where

A. Buyer needs and preferences are too diverse to be fully satisfied by a standardized product
B. Most buyers have similar needs and use the product in the same ways
C. The products of rivals are weakly differentiated and most competitors are resorting to clever advertising to
try to set their product offerings apart
Answer:a

A broad differentiation strategy works best in situations where

A. Technological change is slow-paced and new or improved products are infrequent
B. Buyer needs and uses of the product are very similar
C. Buyers incur low costs in switching their purchases to rival brands
D. Buyers have a low degree of bargaining power and purchase the product frequently
E. Technological change is fast-paced and competition revolves around rapidly evolving product features
Answer:e

A broad differentiation strategy generally produces the best results in situations where
A. Buyer brand loyalty is low
B. Buyer needs and uses of the product are diverse
C. New and improved products are introduced only infrequently
Answer:b

In which one of the following market circumstances is a broad differentiation strategy generally not well-
suited?
A. When buyer needs and preferences are too diverse to be fully satisfied by a standardized product
B. When few rivals are pursuing a similar differentiation approach
C. When the products of rivals are weakly differentiated and most competitors are resorting to clever
advertising to try to set their product offerings apart
Answer:c

The pitfalls of a differentiation strategy include

A. Trying to differentiate on the basis of attributes or features that are easily copied
B. Choosing to differentiate on the basis of attributes that buyers do not perceive as valuable or worth paying
for
C. Trying to charge too high a price premium for the differentiating features
D. Being timid and not striving to open up meaningful gaps in quality or performance or service or other
attractive differentiating attributes
E. All of these
Answer:e

Which of the following is not one of the pitfalls of pursuing a differentiation strategy?
A. Trying to strongly differentiate the company's product from those of rivals rather than be content with weak
product differentiation
B. Over-differentiating so that the features and attributes incorporated exceed buyer needs and requirements
C. Trying to charge too high a price premium for the differentiating features
Answer:a

Which one of the following statements about pursuing a broad differentiation strategy is false?
A. Any differentiating feature that works well is a magnet for imitators
B. The best opportunities for achieving strong product differentiation are in the production technology and
marketing portions of the value chain
C. A low-cost provider strategy can defeat a broad differentiation strategy when buyers are satisfied with a
basic product and don't think "extra" attributes are worth paying a higher price
Answer:b
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A company achieves best-cost provider status by

A. Selling a product with the best cost at the best price
B. Having the best cost (as compared to rivals) for each activity in the industry's value chain
C. Providing buyers with the best attributes at the best cost
D. Incorporating attractive or upscale attributes into its product offering at a lower cost than rivals
Answer:d

A firm pursuing a best-cost provider strategy

A. Seeks to be the low-cost provider in the largest and fastest growing (or best) market segment
B. Tries to have the best cost (as compared to rivals) for each activity in the industry's value chain
C. Tries to outcompete a low-cost provider by attracting buyers on the basis of charging the best price
D. Seeks to deliver superior value to buyers by satisfying their expectations on key
quality/service/features/performance attributes and beating their expectations on price (given what rivals are
charging for much the same attributes)
Answer:d

Best-cost provider strategies

A. Aim at using the best operating practices to achieve lower costs and charge lower prices than companies
pursuing low-cost provider strategies
B. Involve charging a lower price for a product that has more upscale attributes and features than the
products offered by companies pursuing either focused differentiation or broad differentiation strategies
C. Seek to attract buyers on the basis of charging the best price for a mid-quality, average-performing product
D. Aim at giving customers more value for the money
Answer:d

The objective of a best-cost provider strategy is to

A. Deliver superior value to buyers by satisfying their expectations on key
quality/performance/features/service attributes and beating their expectations on price (given what rivals are
charging for much the same attributes)
B. Offer buyers the industry's best-performing product at the best cost and best (lowest) price in the industry
C. Attract buyers on the basis of having the industry's overall best-performing product at a price that is
slightly below the industry-average price
Answer:a

The competitive objective of a best-cost provider strategy is to

A. Outmatch the resource strengths of both low-cost providers and differentiators
B. Position the company outside the competitive arena of low-cost producers and differentiators
C. Meet or exceed buyer expectations on key quality/performance/features/service attributes and beat their
expectations on price (given what rivals are charging for much the same attributes)—thereby achieving a
value-based competitive advantage
Answer:c

For a best-cost provider strategy to be successful, a company must have

A. Excellent marketing and sales skills in convincing buyers to pay a premium price for the attributes/features
incorporated in its product
B. Resource strengths and competitive capabilities that allow it to incorporate upscale attributes at lower
costs than rivals whose products have similar upscale attributes
C. Access to greater learning/experience curve effects and scale economies than rivals
Answer:b

The competitive advantage of a best-cost provider is

A. Having the best value chain in the industry
B. Its brand name reputation
C. Its capability to incorporate upscale attributes at lower costs than rivals whose products have similar
upscale attributes
Answer:c

The target market of a best-cost provider is

A. Value-conscious buyers
B. Brand-conscious buyers
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C. Price-sensitive buyers
Answer:a

Best-cost provider strategies are appealing in those market situations where

A. Diverse buyer preferences make product differentiation the norm and where many buyers are sensitive to
both price and value
B. A company is positioned between competitors who have ultra-low prices and competitors who have top-
notch products in terms of both quality and performance
C. Buyers are more quality-conscious than price-conscious
Answer:a

The big danger or risk of a best-cost provider strategy is

A. That buyers will be highly skeptical about paying a relatively low price for upscale attributes/features
B. Not establishing strong alliances and partnerships with key suppliers
C. That low-cost leaders will be able to steal away some customers on the basis of a lower price and high-end
differentiators will be able to steal away customers with the appeal of better product attributes
Answer:c

A company's biggest vulnerability in employing a best-cost provider strategy is

A. Relying too heavily on outsourcing
B. Getting squeezed between the strategies of firms employing low-cost provider strategies and high-end
differentiation strategies
C. Getting trapped in a price war with low-cost leaders
Answer:b

Focused strategies keyed either to low-cost or differentiation are especially appropriate for situations where
A. The market is composed of distinctly different buyer groups who have different needs or use the product in
different ways
B. Most other rival firms are using a best-cost producer strategy
C. Buyers have strong bargaining power and entry barriers are low
Answer:a