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MGT498 Week 5 Quiz

1. Firms pursuing a cost-leadership strategy seek to

keep their cost structures at the same or similar levels as that of the competitors.

create higher value for customers and offer premium pricing.

deliver products or services at a lower cost than competitors.

gain competitive advantage by reducing the value gap.

2. There exist important trade-offs between value creation and low cost because value creation and cost tend to be

positively correlated.

independent of each other.

inversely related.

negatively correlated.

3. All of the following are tools primarily used to achieve cost-leadership except

offering products at a premium price.

learning by doing.

leveraging economies of scale.

controlling the cost of inputs.

4. While Influx Electronics Inc. incurs $350 to manufacture a laptop, its competitor, Hearthstone 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

Influx Electronics has a competitive advantage over Hearthstone Electronics.

Hearthstone Electronics can charge a higher price for its laptops.

Influx Electronics is a cost leader when compared to Hearthstone Electronics.

Hearthstone Electronics and Influx Electronics share a differentiation parity.

5. 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.

has achieved a competitive parity in its chosen industry.

can adopt a cost-leadership strategy.

has lost its competitive advantage to its competitor.

6. In a focused differentiation strategy, a firm seeks to

offer low-priced products and services with a narrow focus on a niche market.

create higher customer value than the competitors in different segments of a mass market.

focus on reducing the value gap to differentiate itself from the competitors.

deliver products or services with unique features to a specific, narrow part of the market.

7. Downtown Coffee Roasters is a premium cafe that is reputed for its superior customer service. The coffee shop also serves gourmet food to its customers, which allows it to charge a premium price. Budget Beans, in contrast, is a chain of coffee shops that charges the lowest price in the industry due to its self-service policy. However, Perky’s Coffee Inc. has found a balance between these two strategic groups by using automated ordering to free up its employees to work as master baristas and bakers, thus focusing on creating excellent products. It charges a price slightly above that of Budget Beans. In this scenario, Perky’s Coffee is following a

market penetration strategy.

product diversification strategy.

liquidation strategy.

blue ocean strategy.

8. A blue ocean strategy typically allows a firm to

provide unique product or service features at a premium price.

add product features that raise costs without raising the perceived value.

offer a differentiated product or service at low cost.

reduce the value gap created by their products.

9. 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

economies of scale.

lower value gap.

availability of complements.

superior customer service.

10. Best Mobile and Turbo Tech Inc. 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, Turbo Tech has a larger market share in the laptop industry. What does this imply?

Turbo Tech has a cost advantage over Best Mobile.

Best Mobile has a competitive advantage over Turbo Tech.

Best Mobile has created a higher value gap than Turbo Tech.

Turbo Tech has been able to offer more perceived value than Best Mobile.