GMU BUS 498 Midterm Exam with
Complete Solutions
Hit Me Up is an instant messaging mobile application. Users have access to a basic version with
limited message recipients for free, but they have to pay a fee to have unlimited message
recipients or to use advanced features. Which of the following business models does this best
illustrate? freemium
There exist important trade-offs between value creation and low cost because value creation
and cost tend to be positively correlated
Firms pursuing a cost-leadership strategy seek to deliver products or services at a lower
cost than competitors.
Oberlo Autos competes against the global leaders in the automobile industry by developing and
selling acceptable quality vehicles at a lower price. This has been possible due to the company's
large-scale production that reduces its manufacturing expenses. Which of the following generic
business strategies is Oberlo Autos applying in this scenario? cost-leadership strategy
In a focused differentiation strategy, a firm seeks to deliver products or services with
unique features to a specific, narrow part of the market.
If costs are equal, when a firm has a higher value gap than its competitor, it can be inferred that
the firm can charge a premium price for its products and services.
Fones Inc. and Speed Dial Corp. are two competitors in the mobile phone market. The cost
incurred by each company to manufacture smartphones is $200 per unit. Although both the
companies sell their smartphones at the same price, Speed Dial Corp. has a larger market share
in the smartphone industry. What does this imply? Speed Dial Corp. has been able to
offer more perceived value than Fones Inc.
, Dr. Shetty is able to drive down the cost of complex medical procedures from $100,000 to
$2,000 not by doing one big thing, but rather by doing a thousand small things. This approach
focuses on driving down the cost of health care through process innovation
GiftBasket.com has successfully created a higher perceived value in the e-commerce industry,
though it offers the same products at slightly higher prices than the competitors. This has been
mainly attributed to the company's easy-to-navigate website, simple return procedures, fast
delivery, and cash on delivery option. Thus, the value driver for GiftBasket.com is its
superior customer service.
All of the following are tools primarily used to achieve cost-leadership except offering
products at a premium price
While SMART Tech Inc. incurs $350 to manufacture a laptop, its competitor, Better Electronics
Inc., incurs $300. However, laptops of both the companies have been able to create the same
value among customers. From the given scenario, it can be inferred that Better
Electronics and SMART Tech share a differentiation parity.
There are several cost drivers that can be managed in order to establish a low-cost leadership
advantage. One of the primary cost drivers is combining experience-based learning and
process innovation to move onto a steeper learning curve.
Which of the following statements accurately brings out the difference between economies of
scale and learning effects? Learning effects occur over time, whereas economies of scale
are captured at one point in time when output is increased.
An experience curve attempts to capture both learning effects and process
improvements.
In the ________, firms change the underlying technology while holding cumulative output
constant. experience curve
Complete Solutions
Hit Me Up is an instant messaging mobile application. Users have access to a basic version with
limited message recipients for free, but they have to pay a fee to have unlimited message
recipients or to use advanced features. Which of the following business models does this best
illustrate? freemium
There exist important trade-offs between value creation and low cost because value creation
and cost tend to be positively correlated
Firms pursuing a cost-leadership strategy seek to deliver products or services at a lower
cost than competitors.
Oberlo Autos competes against the global leaders in the automobile industry by developing and
selling acceptable quality vehicles at a lower price. This has been possible due to the company's
large-scale production that reduces its manufacturing expenses. Which of the following generic
business strategies is Oberlo Autos applying in this scenario? cost-leadership strategy
In a focused differentiation strategy, a firm seeks to deliver products or services with
unique features to a specific, narrow part of the market.
If costs are equal, when a firm has a higher value gap than its competitor, it can be inferred that
the firm can charge a premium price for its products and services.
Fones Inc. and Speed Dial Corp. are two competitors in the mobile phone market. The cost
incurred by each company to manufacture smartphones is $200 per unit. Although both the
companies sell their smartphones at the same price, Speed Dial Corp. has a larger market share
in the smartphone industry. What does this imply? Speed Dial Corp. has been able to
offer more perceived value than Fones Inc.
, Dr. Shetty is able to drive down the cost of complex medical procedures from $100,000 to
$2,000 not by doing one big thing, but rather by doing a thousand small things. This approach
focuses on driving down the cost of health care through process innovation
GiftBasket.com has successfully created a higher perceived value in the e-commerce industry,
though it offers the same products at slightly higher prices than the competitors. This has been
mainly attributed to the company's easy-to-navigate website, simple return procedures, fast
delivery, and cash on delivery option. Thus, the value driver for GiftBasket.com is its
superior customer service.
All of the following are tools primarily used to achieve cost-leadership except offering
products at a premium price
While SMART Tech Inc. incurs $350 to manufacture a laptop, its competitor, Better Electronics
Inc., incurs $300. However, laptops of both the companies have been able to create the same
value among customers. From the given scenario, it can be inferred that Better
Electronics and SMART Tech share a differentiation parity.
There are several cost drivers that can be managed in order to establish a low-cost leadership
advantage. One of the primary cost drivers is combining experience-based learning and
process innovation to move onto a steeper learning curve.
Which of the following statements accurately brings out the difference between economies of
scale and learning effects? Learning effects occur over time, whereas economies of scale
are captured at one point in time when output is increased.
An experience curve attempts to capture both learning effects and process
improvements.
In the ________, firms change the underlying technology while holding cumulative output
constant. experience curve
