MQM 385 Formulation Exam | Questions with Verified Answers

MQM 385 Formulation Exam | Questions with Verified Answers (T/F) Applying the five forces model to business-level strategy allows for managers to asses the benefits and risks of both cost-leadership and differentiation strategies True (T/F) Differentiation and cost-leadership strategies are only effective in manufacturing industries False (T/F) A cost-leader is the firm most likely to survive a price war True Business Level Strategy Questions 1. Who are the customer segments we will serve? 2. What customer needs, wishes and desires will we satisfy? 3. Why do we want to satisfy them? 4. How will we satisfy them? (T/F) When a firm operates at the minimum efficient scale, there is still opportunity for it to further reduce its cost per unit through economies of scale. False Value drivers contribute to a firm's competitive advantage only if the increase in value creation exceeds the increase in costs. Pete's Bikes enjoys a competitive advantage as a cost-leader because high demand for its products has allowed it to operate at the minimum efficient scale. Which of the following scenarios would be most concerning to the managers of Pete's Bikes? A major winter storm shuts down Pete's production for several days. Which of the following is primarily a value driver? complements The goal of a strategic position is to create the largest gap possible between the ________ that a firm creates through its offerings and the ________ required to create these offerings. value; cost Mohawk is a leader in sustainable and innovative carpeting and floorings, as evidenced by its signature product, the world's first organic cotton carpet. Its product is unique and has appealing customer attributes. If Mohawk's raw material costs increased by 12 percent this year, what would be the likely outcome? Mohawk would pass a major portion of this increase along as a price increase to its customers. The fact that both Whole Foods (a high-end grocery store) and Aldi (an inexpensive grocery store) have a competitive advantage in the grocery store industry is an indication that following a different generic business strategy within the same industry can lead to a competitive advantage for more than one organization. When examining all the generic strategies, which of the following below is inherently superior in every industry? There is no single superior business-level strategy. Power Juice is the owner of a firm that produces sports drinks. Since there are a number of firms in the industry competing on cost, Power Juice has decided to pursue a differentiation strategy. In this case, she should focus on adding unique features to her product that customers will value. One of the reasons that big box retailers like Home Depot are able to achieve economies of scale is that they are able to take advantage of physical properties and maximize their scale efficiencies by stocking more merchandise and handling inventory more efficiently Both Tom's Car Repair and Fast Engines. incur a cost of $9,000 to manufacture a vehicle. However, the economic value created by Fast Engines. is more than that created by Tom's Car Repair. What does this indicate? Fast Engines can charge a premium price on its automobiles. Which of the following examples uses a focused differentiation strategy? a cosmetics brand that offers superior skin lotion for sensitive skin priced at 100 dollars per bottle Bath & Chill is a spa that caters to the needs of a small percentage of highly health-conscious consumers. It offers state-of-the-art treatments in a luxurious setting. Since there are very few spas that offer the same unique services, customers are willing to pay a premium price for its products and services. In this scenario, Bath & Chill is following a focused differentiation strategy. Food Tiger Inc. is a large chain of hypermarkets. It has cost benefits due to its extensive operation. The company's marketing and sales, logistics, administrative, and other such related costs get divided between a large number of product units stocked in its stores. This makes it difficult for smaller retail stores and supermarkets to compete against Food Tiger's low prices. Thus, Food Tiger has a competitive advantage due to its economies of scale. Gr8t Food is a chain of "fast casual" restaurants that sells its menu items at higher prices than its competitors. The restaurant has a large customer base due to its wide product portfolio and superior customer service. Which of the following generic business strategies has Gr8t Food adopted in this scenario? Differentiation Whole Foods focuses on a small market segment, affluent consumers who want to buy high-end, organic groceries. What is the appropriate name for Whole Foods's scope of competition? Focused InGen Pharmaceuticals Inc., Desktop Pharma Inc., and WEN Pharma Inc. are three rival firms who have set up an alliance to conduct research and find a cure for cancer. They have made almost equal contributions to the research, and they also share their expertise with one another. However, the three firms will continue to behave as competitors in markets for other drugs and vaccines. What is this arrangement best referred to as? co-opetition Which of the following is a common drawback of a nonequity alliance? lack of trust between partners Which of the following best illustrates a merger between the two companies Scotfind Inc. and Inity Inc.? Scotfind Inc. and Inity Inc. join together to form a single new company called ScotfindInity Inc Which of the following is a result of horizontal integration in terms of Porter's five forces model? There is a reduction of excess capacity in the market. Bill's Hockey Pucks Inc. wishes to pursue international markets like China and Russia. In order to do this, they may wish to consider a possible strategic alliance with another firm already established in those markets. Even if a merger may not increase shareholder value as planned, it is often a wise idea to champion it so that managers will have the greater opportunities of working at an expanding company. False Codehow Inc. is a large firm involved in the highly competitive market of high-tech medical equipment. In this market, smaller firms that focus on research are constantly making new technological developments. Which of the following approaches would best serve the needs of Codehow? serial acquisitions