BPL 5100 Chapter 5 Test Questions
and Answers
Potential Pitfalls of Focus Strategies - Answer-Cost advantages may erode within the
narrow segment; Even product and service offerings that are highly focused are subject
to competition from new entrants and from imitation; Focusers can become too focused
to satisfy buyer needs
The goal of a combination strategy - Answer-to provide unique value in an efficient
manner
Four approaches to combining overall low cost and differentiation - Answer-adopting
automated and flexible manufacturing systems, using data analytics, exploiting the profit
pool concept for competitive advantage, and unscaling to create a combination strategy
Mass customization - Answer-a firm's ability to manufacture unique products in small
quantities at low cost
Profit pool - Answer-the total profits in an industry at all points along the industry's value
chain
Integrated Overall Low-Cost and Differentiation Strategies: Improving Competitive
Position vis-a-vis the Five Forces - Answer-Creates higher entry barriers due to both
cost leadership and differentiation; Can provide higher margins that enable the firm to
deal with supplier power.; Reduces buyer power because of fewer competitors.; Overall
value proposition reduces threat from substitutes.
Pitfalls of Integrated Overall Cost Leadership and Differentiation Strategies - Answer-
Firms that fail to attain both overall low-cost and differentiation strategies may end up
with neither and become "stuck in the middle."; Firms can also underestimate the
challenges and expenses associated with coordinating value-creating activities in the
extended value chain.; Firms can also miscalculate sources of revenue and profit pools
in the firm's industry.
platform markets - Answer-firms act as intermediaries between two sets of platform
users: buyers and sellers
Industry life cycle - Answer-the stages of introduction, growth, maturity, and decline that
typically occur over the life of an industry
Introduction stage - Answer-the first stage of the industry life cycle, characterized by (1)
new products that are not known to customers, (2) poorly defined market segments, (3)
, unspecified product features, (4) low sales growth, (5) rapid technology change, (6)
operating losses, and (7) a need for financial support
Strategies for introduction stage - Answer-Developing the product and finding a way to
get users to try it; Generating enough exposure so the product emerges as the
"standard" by which all other rivals' products are evaluated
Growth stage - Answer-the second stage of the product life cycle, characterized by (1)
strong increases in sales; (2) growing competition; (3) developing brand recognition;
and (4) a need for financing complementary value-chain activities such as marketing,
sales, customer service, and research and development
selective demand - Answer-when a firm's product offerings are chosen instead of a
rival's
Strategies for growth stage - Answer-Create branded differentiated products; Stimulate
selective demand; Provide financial resources to support value-chain activities
Maturity stage - Answer-the third stage of the product life cycle, characterized by (1)
slowing demand growth, (2) saturated markets, (3) direct competition, (4) price
competition, and (5) strategic emphasis on efficient operations
Reverse positioning - Answer-a break in the industry tendency to continuously augment
products, characteristic of the product life cycle, by offering products with fewer product
attributes and lower prices
Generic strategies - Answer-basic types of business-level strategies based on breadth
of target market (industry wide versus narrow market segment) and type of competitive
advantage (low cost versus uniqueness)
4 types of generic strategies - Answer-overall cost leadership, broad differentiation, cost
focus, and differentiation focus
Overall cost leadership - Answer-a firm's generic strategy based on appeal to the
industry wide market using a competitive advantage based on low cost; creating a low-
cost position relative to a firm's peer; managing relationships throughout the entire value
chain to lower costs (Ex. McDonalds caters to all types of customers (children, teens,
adults) for a low selling price and a low cost of production)
Overall cost leadership requires a tight set of interrelated tactics that include: - Answer-
Aggressive construction of efficient-scale facilities; Vigorous pursuit of cost reductions
from experience; Tight cost and overhead control; Avoidance of marginal customer
accounts; Cost minimization in all activities in the firm's value chain, such as R&D,
service, sales force, and advertising
and Answers
Potential Pitfalls of Focus Strategies - Answer-Cost advantages may erode within the
narrow segment; Even product and service offerings that are highly focused are subject
to competition from new entrants and from imitation; Focusers can become too focused
to satisfy buyer needs
The goal of a combination strategy - Answer-to provide unique value in an efficient
manner
Four approaches to combining overall low cost and differentiation - Answer-adopting
automated and flexible manufacturing systems, using data analytics, exploiting the profit
pool concept for competitive advantage, and unscaling to create a combination strategy
Mass customization - Answer-a firm's ability to manufacture unique products in small
quantities at low cost
Profit pool - Answer-the total profits in an industry at all points along the industry's value
chain
Integrated Overall Low-Cost and Differentiation Strategies: Improving Competitive
Position vis-a-vis the Five Forces - Answer-Creates higher entry barriers due to both
cost leadership and differentiation; Can provide higher margins that enable the firm to
deal with supplier power.; Reduces buyer power because of fewer competitors.; Overall
value proposition reduces threat from substitutes.
Pitfalls of Integrated Overall Cost Leadership and Differentiation Strategies - Answer-
Firms that fail to attain both overall low-cost and differentiation strategies may end up
with neither and become "stuck in the middle."; Firms can also underestimate the
challenges and expenses associated with coordinating value-creating activities in the
extended value chain.; Firms can also miscalculate sources of revenue and profit pools
in the firm's industry.
platform markets - Answer-firms act as intermediaries between two sets of platform
users: buyers and sellers
Industry life cycle - Answer-the stages of introduction, growth, maturity, and decline that
typically occur over the life of an industry
Introduction stage - Answer-the first stage of the industry life cycle, characterized by (1)
new products that are not known to customers, (2) poorly defined market segments, (3)
, unspecified product features, (4) low sales growth, (5) rapid technology change, (6)
operating losses, and (7) a need for financial support
Strategies for introduction stage - Answer-Developing the product and finding a way to
get users to try it; Generating enough exposure so the product emerges as the
"standard" by which all other rivals' products are evaluated
Growth stage - Answer-the second stage of the product life cycle, characterized by (1)
strong increases in sales; (2) growing competition; (3) developing brand recognition;
and (4) a need for financing complementary value-chain activities such as marketing,
sales, customer service, and research and development
selective demand - Answer-when a firm's product offerings are chosen instead of a
rival's
Strategies for growth stage - Answer-Create branded differentiated products; Stimulate
selective demand; Provide financial resources to support value-chain activities
Maturity stage - Answer-the third stage of the product life cycle, characterized by (1)
slowing demand growth, (2) saturated markets, (3) direct competition, (4) price
competition, and (5) strategic emphasis on efficient operations
Reverse positioning - Answer-a break in the industry tendency to continuously augment
products, characteristic of the product life cycle, by offering products with fewer product
attributes and lower prices
Generic strategies - Answer-basic types of business-level strategies based on breadth
of target market (industry wide versus narrow market segment) and type of competitive
advantage (low cost versus uniqueness)
4 types of generic strategies - Answer-overall cost leadership, broad differentiation, cost
focus, and differentiation focus
Overall cost leadership - Answer-a firm's generic strategy based on appeal to the
industry wide market using a competitive advantage based on low cost; creating a low-
cost position relative to a firm's peer; managing relationships throughout the entire value
chain to lower costs (Ex. McDonalds caters to all types of customers (children, teens,
adults) for a low selling price and a low cost of production)
Overall cost leadership requires a tight set of interrelated tactics that include: - Answer-
Aggressive construction of efficient-scale facilities; Vigorous pursuit of cost reductions
from experience; Tight cost and overhead control; Avoidance of marginal customer
accounts; Cost minimization in all activities in the firm's value chain, such as R&D,
service, sales force, and advertising
