Chapter 06
Business Strategy: Differentiation, Cost Leadership, and Integration
Multiple Choice Questions
1. A _____ primarily details the goal-directed actions managers take in their quest for
competitive advantage when competing in a single product market.
A. business-level
strategy
B. code of ethics
C. mission statement
D. functional-level strategy
2. Which of the following is a firm effect that has an impact on the competitive
advantage of a firm?
A. The exit barriers within the industry in which the firm operates
B. The number of companies operating in the industry in which the firm operates
C. The intensity of rivalry among existing companies in the firm's chosen industry
D. The value and the cost position of the firm relative to its
competitors
,3. A firm's business strategy will lead to a competitive advantage if it allows the firm to:
A. execute the same activities performed by the rivals in a similar manner.
B. reduce the value gap.
C. perform different activities than its rivals.
D. position itself below the productivity frontier.
4. When a firm makes choices between a cost or value position to achieve competitive
advantage, it is primarily involved in _____.
A. collective bargaining
B. strategic trade-
offs
C. arbitration
D. mediation
5. 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. provide products that are a direct imitation of the competitors' products.
D. create higher customer perceived value than the value that competitors
create.
,6. 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. Cost-
leadership
B. Differentiatio
n
C. Market penetration
D. Product diversification
7. 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. Cost-
leadership
B. Differentiation
C. Niche marketing
D. Product diversification
8. Why are differentiation and cost-leadership strategies referred to as generic
business strategies?
A. They can be simultaneously pursued by a firm without any trade-offs.
B. They can be used by any organization independent of industry
context.
C. They require similar strategic positions in order to increase a firm's chances to
gain competitive advantage.
D. They can be applied only by businesses which have a competitive advantage.
, 9. 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. automobile company that sells high-end, premium cars
C. automobile company that manufactures economy
cars
D. pen manufacturing company that follows a differentiation strategy
10. 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. a luxury apparel company that sells designer clothes.
C. an apparel company popular among price-conscious customers.
D. an online company that sells customized pet
clothing.
11. In a focused cost-leadership strategy, a firm:
A. caters to the segment of the market that is least cost-sensitive.
B. provides high-priced products for many different segments of the mass market.
C. delivers low-cost products and services to a specific, narrow part of the
market.
D. focuses on reducing the economic value created to drive down costs.
Business Strategy: Differentiation, Cost Leadership, and Integration
Multiple Choice Questions
1. A _____ primarily details the goal-directed actions managers take in their quest for
competitive advantage when competing in a single product market.
A. business-level
strategy
B. code of ethics
C. mission statement
D. functional-level strategy
2. Which of the following is a firm effect that has an impact on the competitive
advantage of a firm?
A. The exit barriers within the industry in which the firm operates
B. The number of companies operating in the industry in which the firm operates
C. The intensity of rivalry among existing companies in the firm's chosen industry
D. The value and the cost position of the firm relative to its
competitors
,3. A firm's business strategy will lead to a competitive advantage if it allows the firm to:
A. execute the same activities performed by the rivals in a similar manner.
B. reduce the value gap.
C. perform different activities than its rivals.
D. position itself below the productivity frontier.
4. When a firm makes choices between a cost or value position to achieve competitive
advantage, it is primarily involved in _____.
A. collective bargaining
B. strategic trade-
offs
C. arbitration
D. mediation
5. 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. provide products that are a direct imitation of the competitors' products.
D. create higher customer perceived value than the value that competitors
create.
,6. 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. Cost-
leadership
B. Differentiatio
n
C. Market penetration
D. Product diversification
7. 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. Cost-
leadership
B. Differentiation
C. Niche marketing
D. Product diversification
8. Why are differentiation and cost-leadership strategies referred to as generic
business strategies?
A. They can be simultaneously pursued by a firm without any trade-offs.
B. They can be used by any organization independent of industry
context.
C. They require similar strategic positions in order to increase a firm's chances to
gain competitive advantage.
D. They can be applied only by businesses which have a competitive advantage.
, 9. 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. automobile company that sells high-end, premium cars
C. automobile company that manufactures economy
cars
D. pen manufacturing company that follows a differentiation strategy
10. 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. a luxury apparel company that sells designer clothes.
C. an apparel company popular among price-conscious customers.
D. an online company that sells customized pet
clothing.
11. In a focused cost-leadership strategy, a firm:
A. caters to the segment of the market that is least cost-sensitive.
B. provides high-priced products for many different segments of the mass market.
C. delivers low-cost products and services to a specific, narrow part of the
market.
D. focuses on reducing the economic value created to drive down costs.
