Question 1:

The objective of a best-cost provider strategy is to

A. outcompete rivals using low-cost provider strategies.
B. deliver superior value to buyers by satisfying their expectations on key
quality/performance/features/service attributes and beating their expectations on price.
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.
D. translate its best-cost status into achieving the highest profit margins of any firm in the industry.
E. offer buyers the industry’s best-performing product at the best cost and best (lowest) price in the
industry.
Question 2:
A strategy to be the industry’s overall low-cost provider tends to be more appealing than a
differentiation or focus strategy when
A. buyers use the product in a variety of different ways.
B. there are many ways to achieve product differentiation that buyers find appealing.
C. the market is composed of many buyer types, all with varying needs and expectations.
D. buyers have high switching costs in changing from one seller’s product to another.
E. the offerings of rival firms are essentially identical, standardized, commodity-like products.
Question 3:
Successful differentiation allows a firm to
A. set the industry ceiling on price.
B. take sales and market share away from rivals by undercutting them on price.
C. avoid being overly concerned about whether entry barriers into the industry are high or low.
D. command the largest market share in the industry.
E. command a premium price for its product and/or increase unit sales and/or gain buyer
loyalty to its brand.
Question 4:
A low-cost leader’s basis for competitive advantage is
A. high buyer switching costs.
B. lower prices than rival firms.
C. higher unit sales than rivals.
D. lower overall costs than competitors.
E. using a low-cost/low-price approach to gain the biggest market share.
Question 5:
For a best-cost provider strategy to be successful, a company must have
A. a short, low-cost value chain.

B. access to greater learning/experience curve effects and scale economies than rivals.

C. the capability to incorporate upscale attributes at lower costs than rivals whose products
have similar upscale attributes.

D. one of the best-known and most respected brand names in the industry.

E. excellent marketing and sales skills in convincing buyers to pay a premium price for the
attributes/features incorporated in its product.
Question 6:
What sets focused (or market niche) strategies apart from low-cost leadership and broad
differentiation strategies is
A. their objective of delivering more value for the money.
B. greater opportunity for competitive advantage.
C. their suitability for market situations where most industry rivals have weakly differentiated
products.
D. the extra attention paid to top-notch product performance and product quality.
E. their concentrated attention on a narrow piece of the overall market.
Question 7:
A low-cost leader can translate its low-cost advantage over rivals into superior profit performance by
A. spending heavily on advertising to promote the fact that it charges the lowest prices in the
industry.
B. cutting its price to levels significantly below the prices of rivals.
C. going all out to use its cost advantage to capture a dominant share of the market.
D. outproducing rivals and thus having more units available to sell.
E. 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 higher profit margin on each unit sold.
Question 8:
Perceived value and signaling value are often an important part of a successful differentiation strategy
when
A. the nature of differentiation is hard to quantify.
B. buyers are making a first-time purchase.
C. repurchase of the product or service is infrequent.
D. buyers are unsophisticated and unfamiliar with the capabilities of competing brands.
E. All of these.
Question 9:
The risks of a focused strategy based on either low-cost or differentiation include

A. the potential for the segment to be highly vulnerable to economic cycles.

B. the chance that niche customers will bargain more aggressively for good deals than customers in
the overall marketplace.

C. the potential for segment growth to race beyond the production or service capabilities of
incumbent firms.

D. the potential for the preferences and needs of niche members to shift over time toward many
of the same product attributes and capabilities desired by buyers in the mainstream portion of
the market.

E. All of these.
Question 10:
A company’s competitive strategy should

A. ensure it is designed to concentrate on a small range of products so it can react quickly to

competitive moves.

B. be aligned toward being at least an average performer within the industry.

C. be well matched to its internal situation and predicated on leveraging its collection of
competitively valuable resources and competencies.

D. have the resources and capabilities to incorporate standard attributes into its product offering.

E. be well attuned to doing an outstanding job of satisfying the needs and expectations of niche
buyers.
Question 11:
A broad differentiation strategy generally produces the best results in situations where

A. buyer brand loyalty is low.

B. few rivals are following a similar differentiation approach.

C. new and improved products are introduced only infrequently.

D. most rivals are seeking to differentiate their products on most of the same features and attributes.

E. price competition is vigorous.

Question 12:
A firm pursuing a best-cost provider strategy
A. seeks to achieve the best costs by using the best operating practices and incorporating the best
features and attributes.

B. tries to outcompete a low-cost provider by attracting buyers on the basis of charging the best price.

C. tries to have the best cost (as compared to rivals) for each activity in the industry’s value chain.

D. seeks to be the low-cost provider in the largest and fastest-growing (or best) market segment.

E. 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).
Question 13:
The target market of a best-cost provider is

A. value-conscious buyers.

B. brand-conscious buyers.

C. price-sensitive buyers.

D. middle-income buyers.

E. young adults (in the 18-35 age group).

Question 14:
The big danger or risk of an unsound best-cost provider strategy is

A. 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.

B. that it will be unable to achieve top-notch quality at a rock-bottom cost.

C. that buyers will be highly skeptical about paying a relatively low price for upscale
attributes/features.

D. not establishing strong alliances and partnerships with key suppliers.

E. becoming too highly integrated and not relying enough on outsourcing.

Question 15:
The most appealing approaches to differentiation are

A. those that are the most costly to incorporate.

B. those that are hard or expensive for rivals to duplicate and that also have considerable buyer
appeal.

C. those that can be made even more attractive to buyers via clever advertising.

D. those that appeal to the most affluent consumers.

E. those that match the differentiating features offered by rivals in the industry.
Question 16:
The major avenues for achieving a cost advantage over rivals include

A. being a first mover in adopting the latest state-of-the-art technologies, especially those relating to
lowcost manufacture.

B. eliminating or curbing nonessential cost-producing activities and performing essential value

chain activities more cost-effectively that rivals.

C. having a management team that accepts below-market salaries.

D. paying lower wages to hourly workers than what rivals are paying workers.

E. outsourcing high-cost activities to offshore vendors.

Question 17:
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 buyers have widely varying needs and special requirements and when the cost of
switching purchases from one seller to another are relatively high
B. When industry newcomers use introductory prices to build a customer base
C. When there are few ways to achieve differentiation that have value to buyers
D. When the offerings of rival firms are essentially identical, standardized, commodity-like products
E. When price competition is especially vigorous
Question 18:
The chief difference between a low-cost leader strategy and a focused low-cost strategy is
A. the degree of bargaining power that buyers have.
B. the size of the buyer group that a company is trying to appeal to.
C. whether the product is strongly differentiated or weakly differentiated from rivals.
D. the number of upscale attributes incorporated into the product offering.
E. the production methods being used to achieve a low-cost competitive advantage.
Question 19:
A company that succeeds in differentiating its product offering from those of its rivals can usually
A. charge a price premium for its product (because buyers see its differentiating features as worth
something extra).

B. gain buyer loyalty to its brand (because some customers will have a strong preference for the
company’s differentiating features).

C. avoid having to compete on the basis of simply a low price.

D. increase unit sales (because of the attraction of its differentiating product attributes).

E. All of these
Question 20:
A company’s biggest vulnerability in employing a best-cost provider strategy is

A. getting trapped in a price war with low-cost leaders.

B. not having a sustainable distinctive competence in cost reduction.

C. getting squeezed between the strategies of firms employing low-cost provider strategies and
high-end differentiation strategies.

D. relying too heavily on outsourcing.

E. being timid in cutting its prices far enough below high-end differentiators to win away many of
their customers.