BUS 401 Ch. 4 || 100% Detailed Answers.
What are the 2 "generic" strategies for offering unique value to customers? correct answers Cost
advantage or Differentiation advantage
How does a firm that chooses a cost advantage strategy win with customers? correct answers By
reducing its prices below all of its competitors, thereby allowing it to gain market share. OR By
choosing the same price as competitors, which results in greater profits rather than higher market
share
True or False: Adopting a cost advantage strategy means that the company focuses on cost to the
exclusion of everything else. correct answers False
True or False: A company that wins by providing low-cost products or services must focus
MOST of its resources and capabilities on keeping its costs as low as possible correct answers
True
What are the 5 Sources of cost advantage? correct answers Economies of Scale or Scope,
Learning and Experience, Proprietary Knowledge, Input Costs, Different Business Model
Economies of Scale or Scope correct answers A reduction in costs per unit due to increases in
efficiency of production as the number of goods being produced increases.
Learning and Experience correct answers Great cumulative volume drives cost differences due to
greater learning and experience within companies with more cumulative experience in
production
Proprietary Knowledge correct answers Some companies develop proprietary knowledge in the
production of their product or service, which leads to a cost advantage
Input Costs correct answers Some companies may have lower input costs than others due to:
greater bargaining power over suppliers or labor, superior cooperation with suppliers (including
, lower transaction costs), sourcing from low-cost locations (e.g., country comparative advantage),
preferred access to inputs
Different Business Model correct answers Eliminating activities or steps in the value chain or
using a different set of activities altogether may allow a firm to deliver a product or service at
lower cost
____________ is one of the primary reasons large companies dominate many manufacturing and
service industries. correct answers Economies of Scale
Economies of Scale correct answers A reduction in costs per unit due to increases in efficiency of
production as the number of goods being produced increases
Do large or small firms have more of a cost advantage? correct answers Large firms
Economies of scale arise from what 4 principle sources? correct answers (1) Ability to Spread
Fixed Costs of Production, (2) Ability to Spread Nonproduction Costs, (3) Specialization of
Equipment, and (4) Specialization of People
Fixed costs of production correct answers Costs such as plant and equipment, which are
relatively fixed, meaning that they do not increase with an increase in the number of units
produced
What does it mean to have the ability to spread fixed costs of production? correct answers
Companies can spread the costs of their plant and equipment when they have more customers to
share the cost; In many activities, increases in output do not require proportionate increases in
input
What are non production costs? correct answers Costs associated with R&D, advertising, and
general and administrative expenses
What are the 2 "generic" strategies for offering unique value to customers? correct answers Cost
advantage or Differentiation advantage
How does a firm that chooses a cost advantage strategy win with customers? correct answers By
reducing its prices below all of its competitors, thereby allowing it to gain market share. OR By
choosing the same price as competitors, which results in greater profits rather than higher market
share
True or False: Adopting a cost advantage strategy means that the company focuses on cost to the
exclusion of everything else. correct answers False
True or False: A company that wins by providing low-cost products or services must focus
MOST of its resources and capabilities on keeping its costs as low as possible correct answers
True
What are the 5 Sources of cost advantage? correct answers Economies of Scale or Scope,
Learning and Experience, Proprietary Knowledge, Input Costs, Different Business Model
Economies of Scale or Scope correct answers A reduction in costs per unit due to increases in
efficiency of production as the number of goods being produced increases.
Learning and Experience correct answers Great cumulative volume drives cost differences due to
greater learning and experience within companies with more cumulative experience in
production
Proprietary Knowledge correct answers Some companies develop proprietary knowledge in the
production of their product or service, which leads to a cost advantage
Input Costs correct answers Some companies may have lower input costs than others due to:
greater bargaining power over suppliers or labor, superior cooperation with suppliers (including
, lower transaction costs), sourcing from low-cost locations (e.g., country comparative advantage),
preferred access to inputs
Different Business Model correct answers Eliminating activities or steps in the value chain or
using a different set of activities altogether may allow a firm to deliver a product or service at
lower cost
____________ is one of the primary reasons large companies dominate many manufacturing and
service industries. correct answers Economies of Scale
Economies of Scale correct answers A reduction in costs per unit due to increases in efficiency of
production as the number of goods being produced increases
Do large or small firms have more of a cost advantage? correct answers Large firms
Economies of scale arise from what 4 principle sources? correct answers (1) Ability to Spread
Fixed Costs of Production, (2) Ability to Spread Nonproduction Costs, (3) Specialization of
Equipment, and (4) Specialization of People
Fixed costs of production correct answers Costs such as plant and equipment, which are
relatively fixed, meaning that they do not increase with an increase in the number of units
produced
What does it mean to have the ability to spread fixed costs of production? correct answers
Companies can spread the costs of their plant and equipment when they have more customers to
share the cost; In many activities, increases in output do not require proportionate increases in
input
What are non production costs? correct answers Costs associated with R&D, advertising, and
general and administrative expenses
