BP&S chapter 4 Questions With Complete Solutions
What competitive challenges does Amazon's customer
affiliation create?
It creates competitive challenges for competitors, including
Walmart, as they ramp up efforts to challenge Amazon's
superiority in online sales.
How do companies using the cost leadership strategy reduce
rivalry?
They may form collaborations, such as joint ventures and
strategic alliances.
What type of relationships do cost leaders develop to reduce
rivalry?
They develop strong and mutually supportive relationships with
stakeholders, such as government officials, suppliers, and
customers.
What is Guanxi?
Guanxi is the term used to describe close relationships that
Chinese firms develop with others to reduce rivalry.
Cost Leadership
•To reduce costs, some firms may outsource an entire function,
such as manufacturing to a single or a small number of
suppliers.
•Outsourcing may take place in response to earnings' pressure as
expressed by shareholders, particularly institutional investors.
,•In the face of earnings' pressure, a firm's decision makers may
conclude that outsourcing will be less expensive, allowing it to
reduce its products' prices as a result.
What is the impact of rivalry with existing competitors on cost
leadership?
Firms will often hesitate to compete on a cost leadership basis,
leading to a 'race to the bottom'.
How does the bargaining power of buyers affect a cost
leadership strategy?
It is not a strong force against a Cost Leadership strategy.
What is the effect of the bargaining power of suppliers on cost
leadership?
It is not particularly strong against Cost Leadership, as the cost
leader often has higher margins to absorb supplier price
increases.
How does high volume affect suppliers' pricing power with a
cost leader?
High volume may result in suppliers' inability to command
higher prices with the cost leader.
How does cost leadership act as a barrier to entry for potential
entrants?
Cost leadership represents a significant barrier to entry, as new
entrants often have to endure low returns to match a cost leader's
price efficiency.
, What is an exception to the barrier to entry posed by cost
leadership?
The entrance of emerging market firms.
How does cost leadership deter product substitutes?
Cost leadership is an effective deterrent against substitutes,
assuming the good or service is acceptable to the customer.
What is a risk of a cost leadership strategy?
Too much focus on cost reductions may occur at the expense of
understanding customers' perceptions of competitive
differentiation.
What is a common complaint about Walmart's customer
service?
Walmart often has too few salespeople available to help
customers.
What issue is raised by customers regarding Walmart's checkout
service?
There are often too few individuals at checkout registers.
What discrepancy is suggested by customer complaints at
Walmart?
There might be a discrepancy between how customers define
'minimal acceptable levels of service' and Walmart's cost-cutting
efforts.
differentiation strategy
What competitive challenges does Amazon's customer
affiliation create?
It creates competitive challenges for competitors, including
Walmart, as they ramp up efforts to challenge Amazon's
superiority in online sales.
How do companies using the cost leadership strategy reduce
rivalry?
They may form collaborations, such as joint ventures and
strategic alliances.
What type of relationships do cost leaders develop to reduce
rivalry?
They develop strong and mutually supportive relationships with
stakeholders, such as government officials, suppliers, and
customers.
What is Guanxi?
Guanxi is the term used to describe close relationships that
Chinese firms develop with others to reduce rivalry.
Cost Leadership
•To reduce costs, some firms may outsource an entire function,
such as manufacturing to a single or a small number of
suppliers.
•Outsourcing may take place in response to earnings' pressure as
expressed by shareholders, particularly institutional investors.
,•In the face of earnings' pressure, a firm's decision makers may
conclude that outsourcing will be less expensive, allowing it to
reduce its products' prices as a result.
What is the impact of rivalry with existing competitors on cost
leadership?
Firms will often hesitate to compete on a cost leadership basis,
leading to a 'race to the bottom'.
How does the bargaining power of buyers affect a cost
leadership strategy?
It is not a strong force against a Cost Leadership strategy.
What is the effect of the bargaining power of suppliers on cost
leadership?
It is not particularly strong against Cost Leadership, as the cost
leader often has higher margins to absorb supplier price
increases.
How does high volume affect suppliers' pricing power with a
cost leader?
High volume may result in suppliers' inability to command
higher prices with the cost leader.
How does cost leadership act as a barrier to entry for potential
entrants?
Cost leadership represents a significant barrier to entry, as new
entrants often have to endure low returns to match a cost leader's
price efficiency.
, What is an exception to the barrier to entry posed by cost
leadership?
The entrance of emerging market firms.
How does cost leadership deter product substitutes?
Cost leadership is an effective deterrent against substitutes,
assuming the good or service is acceptable to the customer.
What is a risk of a cost leadership strategy?
Too much focus on cost reductions may occur at the expense of
understanding customers' perceptions of competitive
differentiation.
What is a common complaint about Walmart's customer
service?
Walmart often has too few salespeople available to help
customers.
What issue is raised by customers regarding Walmart's checkout
service?
There are often too few individuals at checkout registers.
What discrepancy is suggested by customer complaints at
Walmart?
There might be a discrepancy between how customers define
'minimal acceptable levels of service' and Walmart's cost-cutting
efforts.
differentiation strategy
