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Quiz on Chapter 4 - Cost Leadership, created by Strategy IO on 28/12/2016.

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Chapter 4 - Cost Leadership

Question 1 of 49

1

Actions that firms take to gain competitive advantage in a single market or industry are known as

Select one of the following:

  • business-level strategies.

  • corporate-level strategies

  • functional-level strategies

  • macro-level strategies

Explanation

Question 2 of 49

1

Actions firms take to gain competitive advantages by operating in multiple markets or industries simultaneously are known as

Select one of the following:

  • business-level strategies

  • corporate-level strategies

  • functional-level strategies

  • macro-level strategies

Explanation

Question 3 of 49

1

Cost-leadership and product-differentiation strategies are so widely recognized that they are often called

Select one of the following:

  • common business strategies

  • generic corporate strategies

  • generic business strategies

  • common corporate strategies

Explanation

Question 4 of 49

1

A firm that chooses a ________ focuses on gaining advantages by reducing its cost below all of its competitors

Select one of the following:

  • diversification strategy

  • product-differentiation business strategy

  • corporate strategy

  • cost-leadership business strategy

Explanation

Question 5 of 49

1

The best example of a firm following a cost-leadership business strategy is

Select one of the following:

  • Mercedes Benz.

  • Macy's.

  • Ryanair.

  • Rolls Royce

Explanation

Question 6 of 49

1

________ are said to exist when the increase in firm size (measured in terms of volume of production) are associated with lower costs (measured in terms of average costs per unit of production).

Select one of the following:

  • Sustainable competitive advantages

  • Economies of scale

  • Temporary competitive advantages

  • Economies of scope

Explanation

Question 7 of 49

1

As the volume of production in a firm increases, the average cost per unit decreases until some optimal volume of production is reached, after which the average costs of production begin to rise because of

Select one of the following:

  • diseconomies of scale.

  • economies of scope.

  • diseconomies of scope.

  • economies of scale.

Explanation

Question 8 of 49

1

The link between volume of production and the cost of building manufacturing operations is particularly important in industries characterized by

Select one of the following:

  • process innovations.

  • product manufacturing.

  • product innovation.

  • process manufacturing.

Explanation

Question 9 of 49

1

________ levels of production are associated with ________ levels of employee specialization.

Select one of the following:

  • High, high

  • High, low

  • Low, high

  • Low, moderate

Explanation

Question 10 of 49

1

Which of the following is not a potential source of diseconomies of scale?

Select one of the following:

  • physical limits to efficient size

  • worker de-motivation

  • distance to markets and suppliers

  • learning-curve economies

Explanation

Question 11 of 49

1

If Temper Company, a manufacturer of mattresses, was considering moving its production facilities to China but decided against it because the additional costs of shipping the mattresses back to the U.S. would offset the cost savings associated with moving the production facilities, the increased costs associated with shipping would be an example of

Select one of the following:

  • learning-curve economies.

  • diseconomies of scale.

  • economies of scale.

  • competitive advantages.

Explanation

Question 12 of 49

1

________ focus(es) on the relationship between the volume of production at a given point in time and average unit costs, the ________ focus(es) on the relationship between the cumulative volume of production and average unit costs.

Select one of the following:

  • Economies of scale; learning curve

  • Competitive advantage; economies of scale

  • Learning curve; economies of scale

  • Economies of scale; competitive advantage

Explanation

Question 13 of 49

1

Which of the following statements regarding the learning curve and economies of scale is accurate?

Select one of the following:

  • Just as diseconomies of scale are presumed to exist if a firm gets too large, there is a corresponding increase in costs in the learning-curve model as the cumulative volume of production grows.

  • Where diseconomies of scale are presumed to exist if a firm gets too large, there is no corresponding increase in costs in the learning-curve model as the cumulative volume of production grows.

  • Where diseconomies of scale are presumed to exist if a firm gets too small, there is no corresponding increase in costs in the learning-curve model as the cumulative volume of production grows.

  • Just as diseconomies of scale are presumed to exist if a firm gets too small, there is a corresponding increase in costs in the learning-curve model as the cumulative volume of production grows.

Explanation

Question 14 of 49

1

Learning-curve-cost advantages are

Select one of the following:

  • restricted only to manufacturing firms.

  • restricted only to firms in services industries.

  • restricted only to firms in extraction industries.

  • not restricted to manufacturing.

Explanation

Question 15 of 49

1

________ are any supplies used by a firm in conducting its business activities.

Select one of the following:

  • Productive assets

  • Productive inputs

  • Productive outputs

  • Productive inventory

Explanation

Question 16 of 49

1

In order to create a cost advantage, the cost of acquiring low-cost productive inputs must be ________ the cost savings generated by these factors.

Select one of the following:

  • greater than

  • equal to

  • less than

  • greater than or equal to

Explanation

Question 17 of 49

1

Machines and robots are examples of

Select one of the following:

  • technological software.

  • economies of scale.

  • learning-curve effects.

  • technological hardware.

Explanation

Question 18 of 49

1

The quality of relations among labor and management, an organization's culture, and the quality of management controls are all examples of

Select one of the following:

  • technological hardware.

  • technological software.

  • productive inputs.

  • economies of scale.

Explanation

Question 19 of 49

1

Choices which firms make about the kinds of products and services they will sell that impact their relative cost position are known as

Select one of the following:

  • technological hardware.

  • policy choices.

  • technological software.

  • corporate level strategies.

Explanation

Question 20 of 49

1

Firms for whom the price of the products or services they sell is determined by market conditions and not by the individual decision of the firms are known as

Select one of the following:

  • profit takers.

  • price makers.

  • price takers.

  • profit makers.

Explanation

Question 21 of 49

1

Which of the following statements is accurate?

Select one of the following:

  • A cost-leadership competitive strategy increases the threat of new entrants by lowering cost-based barriers to entry.

  • Firms with a low-cost position can reduce the threat of rivalry in an industry.

  • Cost leaders are especially vulnerable to substitute products.

  • Cost leaders are especially vulnerable to the threat of suppliers.

Explanation

Question 22 of 49

1

If the potential responses of competing firms are likely to be very detrimental to the costs advantages of cost leaders, firms pursuing a cost-leadership competitive strategy should

Select one of the following:

  • drop their prices below competitors' prices to increase overall economic performance through increased volumes of profitable sales.

  • raise their prices above competitors, increasing overall economic performance through higher margins.

  • focus on a specific niche market to avoid direct competition with aggressive competitors.

  • set their prices equal to competitors' prices, sacrificing some market share for increased profit margins.

Explanation

Question 23 of 49

1

Which of the following statements about cost leadership and the threat of buyers is accurate?

Select one of the following:

  • If buyers demand increased quality or service, cost leaders can absorb these costs and may still have a cost advantage over the competition.

  • Being a cost leader encourages buyer backward vertical integration.

  • Firms pursuing a cost-leadership strategy are especially vulnerable to powerful buyers who insist on low prices or higher quality and service from their suppliers.

  • Cost leaders are not able to absorb costs associated with buyers' demands for increased quality or service.

Explanation

Question 24 of 49

1

Which of the following is likely to be a rare source of cost advantage?

Select one of the following:

  • technological software

  • if the efficient size of a firm or plant is significantly smaller than the total size of an industry

  • cost disadvantages based on diseconomies of scale

  • technological hardware

Explanation

Question 25 of 49

1

Which of the following is less likely to be a rare source of cost advantage?

Select one of the following:

  • technological software

  • learning-curve economies of scale

  • differential low-cost access to productive inputs

  • policy choices

Explanation

Question 26 of 49

1

Perhaps the only time economies of scale are not subject to low-cost duplication is when the ________ size of operations is a significant percentage of ________ in an industry.

Select one of the following:

  • nimum; marginal demand

  • efficient; total demand

  • maximum; marginal demand

  • efficient; marginal demand

Explanation

Question 27 of 49

1

Which of the following statements is accurate?

Select one of the following:

  • In general, economies of scale are relatively easy-to-duplicate bases of cost leadership, but diseconomies of scale are not.

  • In general, diseconomies of scale are relatively easy-to-duplicate bases of cost leadership, but economies of scale are not..

  • In general, neither economies of scale nor economies are relatively easy-to-duplicate bases of cost leadership.

  • In general, both economies of scale and diseconomies of scale are relatively easy-to-duplicate bases of cost leadership.

Explanation

Question 28 of 49

1

When managers committed to an incorrect course of action increase their commitment to this action even as its limitations become manifest, this is known as

Select one of the following:

  • de-escalation of commitment.

  • diseconomies of scale.

  • escalation of commitment.

  • economies of scale.

Explanation

Question 29 of 49

1

Cost advantages based on learning-curve economies are

Select one of the following:

  • rare, but they usually are not costly to duplicate.

  • costly to duplicate, but they usually are not rare.

  • both rare and usually costly to duplicate.

  • not rare and usually are not costly to duplicate.

Explanation

Question 30 of 49

1

Firms implementing cost-leadership strategies will generally adopt a

Select one of the following:

  • multidivisional structure.

  • product divisional structure.

  • functional organizational structure.

  • matrix structure.

Explanation

Question 31 of 49

1

In a functional structure, each of the major business functions is managed by a

Select one of the following:

  • functional manager.

  • divisional manager.

  • chief executive officer.

  • line manager.

Explanation

Question 32 of 49

1

The only person in a functional organization who has to have a multifunctional perspective is the

Select one of the following:

  • CFO

  • CEO

  • COO

  • marketing manager

Explanation

Question 33 of 49

1

Firms pursuing a cost-leadership strategy are typically characterized by

Select one of the following:

  • loose cost control systems.

  • a de-emphasis on quantitative cost goals and costs.

  • infrequent cost control reports.

  • close supervision of labor, raw materials,inventory, and other costs.

Explanation

Question 34 of 49

1

Which of the following compensation policies is most likely to enhance a firm's ability to pursue a low-cost strategy?

Select one of the following:

  • awarding employees bonuses based on the total amount of goods produced

  • awarding employees bonuses based on customer comment cards

  • awarding employees bonuses that are equal to 50% of the total cost savings achieved based on employee suggestions and initiatives

  • awarding employees bonuses based solely on how long they have been employed with the company

Explanation

Question 35 of 49

1

Cost-leadership firms are typically characterized by very ________ cost-control systems.

Select one of the following:

  • tight

  • flexible

  • loose

  • decentralized

Explanation

Question 36 of 49

1

The U in U-form structure stands for

Select one of the following:

  • "uniform."

  • "unitary."

  • "unilateral."

  • "unambiguous."

Explanation

Question 37 of 49

1

In ________ structures, employees report to two or more people.

Select one of the following:

  • unilateral

  • functional

  • divisional

  • matrix

Explanation

Question 38 of 49

1

A marketing manager leading the marketing department is an example of a(n) ________ manager.

Select one of the following:

  • ambidextrous

  • divisional

  • functional

  • unitary

Explanation

Question 39 of 49

1

Firms implementing cost-leadership strategies will have ________ layers in their reporting structure.

Select one of the following:

  • many

  • relatively simple

  • relatively few

  • relatively complex

Explanation

Question 40 of 49

1

Sematech is pursuing which strategy?

Select one of the following:

  • cost-leadership business strategy

  • product-differentiation business strategy

  • cost-leadership corporate strategy

  • product-differentiation corporate strategy

Explanation

Question 41 of 49

1

By increasing production volume in an effort to reduce costs, Sematech is pursuing which sources of cost advantage?

Select one of the following:

  • size differences and diseconomies of scale

  • differential access to productive inputs

  • size differences and economies of scale

  • technological advantages

Explanation

Question 42 of 49

1

If Sematech's efforts to increase its production capacity resulted in increased complexity and an inability of managers to control and operate the firm efficiently, this would be an example of
A) physical limits to efficient size.

Select one of the following:

  • physical limits to efficient size.

  • worker de-motivation.

  • distance to markets and suppliers.

  • managerial diseconomies.

Explanation

Question 43 of 49

1

If Sematech's expansion plans did not produce the desired cost savings but the company decided to continue production expansion in an effort to capture cost reductions, this would be an example of

Select one of the following:

  • economies of scale.

  • escalation of commitment.

  • diseconomies of scale.

  • managerial diseconomies.

Explanation

Question 44 of 49

1

If Sematech were to continue seeking methods to maintain the company's cost-leadership position that would be costly to duplicate, which of the following is most likely to be a basis of cost leadership that may be costly to duplicate?

Select one of the following:

  • establishing economies of scale

  • exploiting learning-curve economies

  • purchasing new technological hardware

  • securing differential access to low-cost productive inputs

Explanation

Question 45 of 49

1

Given Sematech's business level strategy, which organizational structure is the most appropriate?

Select one of the following:

  • matrix structure

  • U-form structure

  • multidivisional structure

  • product-divisional structure

Explanation

Question 46 of 49

1

If Lucy Sullivan were a Sematech manager who oversaw the finance operations in the company's functional structure, Lucy would be considered a

Select one of the following:

  • chief executive officer.

  • divisional manager.

  • chief operating officer.

  • functional manager.

Explanation

Question 47 of 49

1

By employing a low-cost competitive strategy, Sematech has made itself

Select one of the following:

  • less able to withstand industry price wars.

  • more vulnerable to rivals.

  • less vulnerable to the power of suppliers.

  • more vulnerable to the power of buyers.

Explanation

Question 48 of 49

1

If Sematech decided to focus on building its technological hardware, it would focus on elements such as

Select one of the following:

  • robots

  • organizational culture.

  • the quality of organizational controls.

  • the quality of relations among labor and management.

Explanation

Question 49 of 49

1

If Sematech were to choose to narrow its product line in an effort to reduce costs, this would be an example of

Select one of the following:

  • technological software.

  • a policy choice.

  • a competitive advantage.

  • a learning-curve effect.

Explanation

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