Chapter 4—Business-Level Strategy
TRUE/FALSE
1. The goal of business-level strategy is to earn above-average returns.
ANS: T PTS: 1 DIF: Medium REF: 98
OBJ: 04-01 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Knowledge of general business functions
2. A business-level strategy is an integrated and coordinated set of commitments and actions designed
to exploit core competencies and gain a competitive advantage in specific product markets.
ANS: T PTS: 1 DIF: Medium REF: 98
OBJ: 04-01 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Knowledge of general business functions
3. Every firm uses all levels of strategy: corporate, acquisition and restructuring, international and
cooperative.
ANS: F PTS: 1 DIF: Easy REF: 98-99
OBJ: 04-01 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Knowledge of general business functions
4. Business-level strategy can be thought of as the firm’s core strategy.
ANS: T PTS: 1 DIF: Medium REF: 99
OBJ: 04-01 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Managing strategy & innovation
5. When selecting a business level strategy, the firm determines who will be served, what customer
needs will be satisfied, and how those needs will be satisfied.
ANS: T PTS: 1 DIF: Easy REF: 99
OBJ: 04-01 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Managing strategy & innovation
6. Global competition has increased the options for consumers and has made it more imperative for
firms to identify the needs of customers in order to earn above-average returns.
ANS: T PTS: 1 DIF: Medium REF: 99
OBJ: 04-01 TYPE: knowledge
NOT: AACSB: Multicultural & Diversity | Management: Strategy | Dierdorff & Rubin: Managing
strategy & innovation
, 7. There are three generic business level strategies.
ANS: F PTS: 1 DIF: Easy REF: 99
OBJ: 04-01 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Managing strategy & innovation
8. The two basic ways to segment a market are customer and industrial.
ANS: F PTS: 1 DIF: Easy REF: 101-102 (Table 4.1)
OBJ: 04-02 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Managing strategy & innovation
9. In general, U.S. middle-market consumers place their highest priority on functional products without
many frills.
ANS: F PTS: 1 DIF: Medium REF: 102-103
OBJ: 04-02 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff &
Rubin: Managing strategy & innovation
10. An English professor spends her summers writing low-brow romance novels that sell directly to
paperback. She writes under a fictional name because she is embarrassed to admit to her colleagues
and students how she earns the extra money for foreign vacations. The professor is correct in her
concern that she is serving customer needs that are objectively inferior and bad.
ANS: F PTS: 1 DIF: Hard REF: 102-103
OBJ: 04-02 TYPE: application
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff &
Rubin: Managing strategy & innovation
11. Companies without the core competencies to link primary and support activities are still able to
implement successfully a either a cost leadership or a differentiation strategy, although they cannot
implement an integrated cost leadership/differentiation strategy.
ANS: F PTS: 1 DIF: Hard REF: 103
OBJ: 04-02 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff &
Rubin: Managing strategy & innovation
12. To position itself differently from competitors, a firm must decide to either perform activities
differently or to perform different activities.
ANS: T PTS: 1 DIF: Hard REF: 103-104
OBJ: 04-03 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Knowledge of general business functions
13. An examination of a company’s activity map will reveal its strategic themes.
, ANS: T PTS: 1 DIF: Easy REF: 105
OBJ: 04-03 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff &
Rubin: Managing strategy & innovation
14. The difference between the cost leadership and differentiation business-level strategies, and the
focused cost leadership and focused differentiation strategies, is their competitive reach.
ANS: F PTS: 1 DIF: Hard REF: 105 (Figure 4.2)
OBJ: 04-04 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff &
Rubin: Managing strategy & innovation
15. Essentially, there are only two basic competitive advantages: cost and uniqueness.
ANS: T PTS: 1 DIF: Easy REF: 105 (Figure 4.2)
OBJ: 04-04 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff &
Rubin: Managing strategy & innovation
16. Firms implementing cost leadership strategies often sell no-frills standardized goods or services to
the industry’s most typical customers.
ANS: T PTS: 1 DIF: Medium REF: 105-106
OBJ: 04-04 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Managing strategy & innovation
17. In general, firms can be most effective if they develop business-level strategies that will serve the
needs of the “average customer.”
ANS: F PTS: 1 DIF: Medium REF: 105-106
OBJ: 04-04 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff &
Rubin: Strategic & systems skills
18. The best of the generic business strategies is the integrated cost leadership/differentiation strategy.
ANS: F PTS: 1 DIF: Medium REF: 105-106
OBJ: 04-04 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff &
Rubin: Managing strategy & innovation
19. A low-cost position in the industry is not a valuable defense against rivals when competing on the
basis of price.
ANS: F PTS: 1 DIF: Medium REF: 106-109
OBJ: 04-04 TYPE: comprehension
NOT: AACSB: Reflective Thinking Skills | Management: Creation of Value | Dierdorff & Rubin:
, Managing strategy & innovation
20. Support activities in the value chain are generic across business strategies.
ANS: F PTS: 1 DIF: Hard
REF: 108 (Figure 4.3) | 112 (Figure 4.4) OBJ: 04-04 TYPE: comprehension
NOT: AACSB: Reflective Thinking Skills | Management: Creation of Value | Dierdorff & Rubin:
Managing strategy & innovation
21. Human resources and other support activities are not value-creating activities in the value chain; only
the primary activities create value.
ANS: F PTS: 1 DIF: Hard
REF: 108 (Figure 4.3) | 112 (Figure 4.4) OBJ: 04-04 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: HRM | Dierdorff & Rubin:
Managing human capital
22. A low-cost leader may create entry barriers to potential entrants by continually improving its levels of
efficiency.
ANS: T PTS: 1 DIF: Medium REF: 106-109
OBJ: 04-04 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence |
Dierdorff & Rubin: Managing strategy & innovation
23. In order for a cost leadership strategy to earn the firm above-average returns, the firm must sell large
volumes of the product.
ANS: T PTS: 1 DIF: Medium REF: 106-109
OBJ: 04-04 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Managing strategy & innovation
24. The differentiation strategy is effective for products that are expensive, luxury consumer goods. It is
not effective for common, inexpensive products such as doughnuts.
ANS: F PTS: 1 DIF: Easy REF: 110-113
OBJ: 04-04 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff &
Rubin: Managing strategy & innovation
25. Virtually anything can be a basis for a firm to create a differentiated product or service.
ANS: T PTS: 1 DIF: Medium REF: 110-113
OBJ: 04-04 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff &
Rubin: Managing strategy & innovation
26. A risk of the differentiation strategy is that the firm’s means of differentiation may eventually not
provide value to the customer.
TRUE/FALSE
1. The goal of business-level strategy is to earn above-average returns.
ANS: T PTS: 1 DIF: Medium REF: 98
OBJ: 04-01 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Knowledge of general business functions
2. A business-level strategy is an integrated and coordinated set of commitments and actions designed
to exploit core competencies and gain a competitive advantage in specific product markets.
ANS: T PTS: 1 DIF: Medium REF: 98
OBJ: 04-01 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Knowledge of general business functions
3. Every firm uses all levels of strategy: corporate, acquisition and restructuring, international and
cooperative.
ANS: F PTS: 1 DIF: Easy REF: 98-99
OBJ: 04-01 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Knowledge of general business functions
4. Business-level strategy can be thought of as the firm’s core strategy.
ANS: T PTS: 1 DIF: Medium REF: 99
OBJ: 04-01 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Managing strategy & innovation
5. When selecting a business level strategy, the firm determines who will be served, what customer
needs will be satisfied, and how those needs will be satisfied.
ANS: T PTS: 1 DIF: Easy REF: 99
OBJ: 04-01 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Managing strategy & innovation
6. Global competition has increased the options for consumers and has made it more imperative for
firms to identify the needs of customers in order to earn above-average returns.
ANS: T PTS: 1 DIF: Medium REF: 99
OBJ: 04-01 TYPE: knowledge
NOT: AACSB: Multicultural & Diversity | Management: Strategy | Dierdorff & Rubin: Managing
strategy & innovation
, 7. There are three generic business level strategies.
ANS: F PTS: 1 DIF: Easy REF: 99
OBJ: 04-01 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Managing strategy & innovation
8. The two basic ways to segment a market are customer and industrial.
ANS: F PTS: 1 DIF: Easy REF: 101-102 (Table 4.1)
OBJ: 04-02 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Managing strategy & innovation
9. In general, U.S. middle-market consumers place their highest priority on functional products without
many frills.
ANS: F PTS: 1 DIF: Medium REF: 102-103
OBJ: 04-02 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff &
Rubin: Managing strategy & innovation
10. An English professor spends her summers writing low-brow romance novels that sell directly to
paperback. She writes under a fictional name because she is embarrassed to admit to her colleagues
and students how she earns the extra money for foreign vacations. The professor is correct in her
concern that she is serving customer needs that are objectively inferior and bad.
ANS: F PTS: 1 DIF: Hard REF: 102-103
OBJ: 04-02 TYPE: application
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff &
Rubin: Managing strategy & innovation
11. Companies without the core competencies to link primary and support activities are still able to
implement successfully a either a cost leadership or a differentiation strategy, although they cannot
implement an integrated cost leadership/differentiation strategy.
ANS: F PTS: 1 DIF: Hard REF: 103
OBJ: 04-02 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff &
Rubin: Managing strategy & innovation
12. To position itself differently from competitors, a firm must decide to either perform activities
differently or to perform different activities.
ANS: T PTS: 1 DIF: Hard REF: 103-104
OBJ: 04-03 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Knowledge of general business functions
13. An examination of a company’s activity map will reveal its strategic themes.
, ANS: T PTS: 1 DIF: Easy REF: 105
OBJ: 04-03 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff &
Rubin: Managing strategy & innovation
14. The difference between the cost leadership and differentiation business-level strategies, and the
focused cost leadership and focused differentiation strategies, is their competitive reach.
ANS: F PTS: 1 DIF: Hard REF: 105 (Figure 4.2)
OBJ: 04-04 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff &
Rubin: Managing strategy & innovation
15. Essentially, there are only two basic competitive advantages: cost and uniqueness.
ANS: T PTS: 1 DIF: Easy REF: 105 (Figure 4.2)
OBJ: 04-04 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff &
Rubin: Managing strategy & innovation
16. Firms implementing cost leadership strategies often sell no-frills standardized goods or services to
the industry’s most typical customers.
ANS: T PTS: 1 DIF: Medium REF: 105-106
OBJ: 04-04 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Managing strategy & innovation
17. In general, firms can be most effective if they develop business-level strategies that will serve the
needs of the “average customer.”
ANS: F PTS: 1 DIF: Medium REF: 105-106
OBJ: 04-04 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff &
Rubin: Strategic & systems skills
18. The best of the generic business strategies is the integrated cost leadership/differentiation strategy.
ANS: F PTS: 1 DIF: Medium REF: 105-106
OBJ: 04-04 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff &
Rubin: Managing strategy & innovation
19. A low-cost position in the industry is not a valuable defense against rivals when competing on the
basis of price.
ANS: F PTS: 1 DIF: Medium REF: 106-109
OBJ: 04-04 TYPE: comprehension
NOT: AACSB: Reflective Thinking Skills | Management: Creation of Value | Dierdorff & Rubin:
, Managing strategy & innovation
20. Support activities in the value chain are generic across business strategies.
ANS: F PTS: 1 DIF: Hard
REF: 108 (Figure 4.3) | 112 (Figure 4.4) OBJ: 04-04 TYPE: comprehension
NOT: AACSB: Reflective Thinking Skills | Management: Creation of Value | Dierdorff & Rubin:
Managing strategy & innovation
21. Human resources and other support activities are not value-creating activities in the value chain; only
the primary activities create value.
ANS: F PTS: 1 DIF: Hard
REF: 108 (Figure 4.3) | 112 (Figure 4.4) OBJ: 04-04 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: HRM | Dierdorff & Rubin:
Managing human capital
22. A low-cost leader may create entry barriers to potential entrants by continually improving its levels of
efficiency.
ANS: T PTS: 1 DIF: Medium REF: 106-109
OBJ: 04-04 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence |
Dierdorff & Rubin: Managing strategy & innovation
23. In order for a cost leadership strategy to earn the firm above-average returns, the firm must sell large
volumes of the product.
ANS: T PTS: 1 DIF: Medium REF: 106-109
OBJ: 04-04 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Managing strategy & innovation
24. The differentiation strategy is effective for products that are expensive, luxury consumer goods. It is
not effective for common, inexpensive products such as doughnuts.
ANS: F PTS: 1 DIF: Easy REF: 110-113
OBJ: 04-04 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff &
Rubin: Managing strategy & innovation
25. Virtually anything can be a basis for a firm to create a differentiated product or service.
ANS: T PTS: 1 DIF: Medium REF: 110-113
OBJ: 04-04 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff &
Rubin: Managing strategy & innovation
26. A risk of the differentiation strategy is that the firm’s means of differentiation may eventually not
provide value to the customer.
