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MGT 449 - EXAM 2 || All Answers Are Correct 100%.
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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 value and the cost position of the firm relative to its competitors B) The exit barriers within the industry in which the firm operates C) The intensity of rivalry among existing companies i...

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  • August 16, 2024
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  • 2024/2025
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MGT 449 - EXAM 2 || All Answers Are Correct 100%.
Which of the following is a firm effect that has an impact on the competitive advantage of a
firm?
A) The value and the cost position of the firm relative to its competitors
B) The exit barriers within the industry in which the firm operates
C) The intensity of rivalry among existing companies in the firm's chosen industry
D) The number of companies operating in the industry in which the firm operates correct
answers A

A firm's business strategy will lead to a competitive advantage if it allows the firm to:
A) reduce the value gap.
B) position itself below the productivity frontier.
C) execute the same activities performed by the rivals in a similar manner.
D) perform different activities than its rivals. correct answers D

When a firm makes choices between a cost or value position to achieve competitive advantage, it
is primarily involved in ________.
A) arbitration
B) collective bargaining
C) strategic trade-offs
D) mediation correct answers C

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) create higher customer perceived value than the value that competitors create.
D) provide products that are a direct imitation of the competitors' products correct answers C

Home Smart Inc. is a chain of supermarkets that sells its products at higher prices than its
competitors. Yet, the supermarket chain has a large customer base due to its wide product
portfolio and superior customer service. Which of the following generic business strategies has
Home Smart adopted in this scenario?
A) Differentiation
B) Product diversification
C) Market penetration
D) Cost-leadership correct answers A

Free Color 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 Free Color applying?
A) Differentiation
B) Product diversification
C) Cost-leadership
D) Niche marketing correct answers C

,In a focused cost-leadership strategy, a firm:
A) delivers low-cost products and services to a specific, narrow part of the market.
B) caters to the segment of the market that is least cost-sensitive.
C) focuses on reducing the economic value created to drive down costs.
D) provides high-priced products for many different segments of the mass market. correct
answers A

Why are differentiation and cost-leadership strategies referred to as generic business strategies?
A) They can be used by any organization independent of industry context.
B) They can be simultaneously pursued by a firm without any trade-offs.
C) They can be applied only by businesses which have a competitive advantage.
D) They require similar strategic positions in order to increase a firm's chances to
gain competitive advantage. correct answers A

True Empire Autos Inc. is an automobile company known for its luxury cars and follows a
differentiation strategy. In this scenario, True Empire Autos should ideally compare its strategic
position with a(n) ________.
A) automobile company that sells pre-owned cars
B) pen manufacturing company that follows a differentiation strategy
C) automobile company that manufactures economy cars
D) automobile company that sells high-end, premium cars correct answers D

Diseconomies of scale refer to:
A) increases in economic value as per-unit cost decreases.
B) decreases in profit when consumer demand decreases.
C) decreases in cost as profit increases.
D) increases in cost as output increases correct answers D

Wear Crush Inc. is an apparel company known for its affordable clothes that follows a cost-
leadership strategy. In this scenario, Wear Crush should ideally compare its strategic position
with:
A) a company that sells wristwatches at affordable prices.
B) an apparel company popular among price-conscious customers.
C) an online company that sells customized pet clothing.
D) a luxury apparel company that sells designer clothes. correct answers B

Green Curry 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, Green Curry is following a ________.
A) product diversification strategy
B) focused differentiation strategy
C) liquidation strategy
D) mass market strategy correct answers B

,A company that uses a differentiation strategy can achieve a competitive advantage as long as
its:
A) products and services create a lower consumer surplus than that of its competitors.
B) strategic position is below the productivity frontier.
C) value gap is lower than that of its competitors.
D) economic value created is greater than that of its competitors correct answers D

Both Viten Electronics Inc. and JL Electronics Inc. incur a cost of $400 to manufacture an LED
television. However, the economic value created by JL Electronics is more than that created by
Viten Electronics. What does this indicate?
A) JL Electronics can charge a premium price on its televisions.
B) Viten Electronics has created a higher value gap than JL Electronics.
C) Viten Electronics has a competitive advantage over JL Electronics.
D) Both Viten Electronics and JL Electronics have achieved competitive parity. correct answers
A

A firm pursuing a differentiation strategy as opposed to a low-cost strategy will:
A) focus its research and development on product technologies to add uniqueness.
B) build an organization structure that relies on strict budget controls.
C) concentrate on leveraging its economies of scale through process technologies.
D) create a lower economic value as compared to its competitors. correct answers A

When a differentiator charges a similar price as its competitors in the same strategic group but
offers more perceived value, it:
A) gains market share from other firms.
B) results in diseconomies of scale.
C) loses its competitive advantage.
D) lowers the economic value created correct answers A

Both Myoco Electronics Inc. and Electra Series Inc. have achieved cost parity in the television
market. To gain and sustain a competitive advantage against Electra Series,
Myoco Electronics should:
A) create greater perceived economic value than Electra Series.
B) increase its cost of production to more than that of Electra Series.
C) keep its value gap lower than that of Electra Series.
D) achieve differentiation parity with Electra Series. correct answers A

Which of the following will hamper a differentiator's ability to achieve a competitive advantage?
A) Lower production costs
B) Lower value gap
C) Customized goods
D) Premium prices correct answers B

Bass Watches Inc. initially spent eight man-hours to assemble a wrist watch. 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) Black-swan event
B) Network effect
C) Learning-curve effect
D) Time compression diseconomies correct answers C

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) availability of complements
C) experience-curve effects
D) learning-curve effects correct answers B

Value drivers contribute to a firm's competitive advantage only if:
A) the decrease in perceived value leads to an increase in costs.
B) the increase in value creation exceeds the increase in costs.
C) they can restrict the firm from claiming a premium price for its products.
D) they can shrink the firm's value gap. correct answers B

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) experience-curve effects
B) learning-curve effects
C) availability of complements
D) economies of scale correct answers C

Whole Foods differentiates itself from competitors by offering top-quality foods obtained
through sustainable agriculture. This business strategy implies that Whole
Foods focuses on:
A) maintaining a less steeper learning curve as compared to its competitors.
B) lowering its costs compared to its competitors', while offering adequate value for its products
and services.
C) increasing the perceived value created for customers, which allows it to charge a premium
price.
D) decreasing the existing value gap by providing luxury goods to customers correct answers C

Which of the following statements accurately brings out the difference between economies of
scale and learning effects?
A) Economies of scale reduce cost per unit, learning effects increase cost per unit.
B) Economies of scale occur over time, whereas learning effects are captured at one point in
time.

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