Chapter 4 - Cost Leadership

Description

Quiz on Chapter 4 - Cost Leadership, created by Strategy IO on 28/12/2016.
Strategy IO
Quiz by Strategy IO, updated more than 1 year ago
Strategy IO
Created by Strategy IO about 7 years ago
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Resource summary

Question 1

Question
Actions that firms take to gain competitive advantage in a single market or industry are known as
Answer
  • business-level strategies.
  • corporate-level strategies
  • functional-level strategies
  • macro-level strategies

Question 2

Question
Actions firms take to gain competitive advantages by operating in multiple markets or industries simultaneously are known as
Answer
  • business-level strategies
  • corporate-level strategies
  • functional-level strategies
  • macro-level strategies

Question 3

Question
Cost-leadership and product-differentiation strategies are so widely recognized that they are often called
Answer
  • common business strategies
  • generic corporate strategies
  • generic business strategies
  • common corporate strategies

Question 4

Question
A firm that chooses a ________ focuses on gaining advantages by reducing its cost below all of its competitors
Answer
  • diversification strategy
  • product-differentiation business strategy
  • corporate strategy
  • cost-leadership business strategy

Question 5

Question
The best example of a firm following a cost-leadership business strategy is
Answer
  • Mercedes Benz.
  • Macy's.
  • Ryanair.
  • Rolls Royce

Question 6

Question
________ 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).
Answer
  • Sustainable competitive advantages
  • Economies of scale
  • Temporary competitive advantages
  • Economies of scope

Question 7

Question
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
Answer
  • diseconomies of scale.
  • economies of scope.
  • diseconomies of scope.
  • economies of scale.

Question 8

Question
The link between volume of production and the cost of building manufacturing operations is particularly important in industries characterized by
Answer
  • process innovations.
  • product manufacturing.
  • product innovation.
  • process manufacturing.

Question 9

Question
________ levels of production are associated with ________ levels of employee specialization.
Answer
  • High, high
  • High, low
  • Low, high
  • Low, moderate

Question 10

Question
Which of the following is not a potential source of diseconomies of scale?
Answer
  • physical limits to efficient size
  • worker de-motivation
  • distance to markets and suppliers
  • learning-curve economies

Question 11

Question
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
Answer
  • learning-curve economies.
  • diseconomies of scale.
  • economies of scale.
  • competitive advantages.

Question 12

Question
________ 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.
Answer
  • Economies of scale; learning curve
  • Competitive advantage; economies of scale
  • Learning curve; economies of scale
  • Economies of scale; competitive advantage

Question 13

Question
Which of the following statements regarding the learning curve and economies of scale is accurate?
Answer
  • 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.

Question 14

Question
Learning-curve-cost advantages are
Answer
  • restricted only to manufacturing firms.
  • restricted only to firms in services industries.
  • restricted only to firms in extraction industries.
  • not restricted to manufacturing.

Question 15

Question
________ are any supplies used by a firm in conducting its business activities.
Answer
  • Productive assets
  • Productive inputs
  • Productive outputs
  • Productive inventory

Question 16

Question
In order to create a cost advantage, the cost of acquiring low-cost productive inputs must be ________ the cost savings generated by these factors.
Answer
  • greater than
  • equal to
  • less than
  • greater than or equal to

Question 17

Question
Machines and robots are examples of
Answer
  • technological software.
  • economies of scale.
  • learning-curve effects.
  • technological hardware.

Question 18

Question
The quality of relations among labor and management, an organization's culture, and the quality of management controls are all examples of
Answer
  • technological hardware.
  • technological software.
  • productive inputs.
  • economies of scale.

Question 19

Question
Choices which firms make about the kinds of products and services they will sell that impact their relative cost position are known as
Answer
  • technological hardware.
  • policy choices.
  • technological software.
  • corporate level strategies.

Question 20

Question
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
Answer
  • profit takers.
  • price makers.
  • price takers.
  • profit makers.

Question 21

Question
Which of the following statements is accurate?
Answer
  • 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.

Question 22

Question
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
Answer
  • 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.

Question 23

Question
Which of the following statements about cost leadership and the threat of buyers is accurate?
Answer
  • 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.

Question 24

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

Question 25

Question
Which of the following is less likely to be a rare source of cost advantage?
Answer
  • technological software
  • learning-curve economies of scale
  • differential low-cost access to productive inputs
  • policy choices

Question 26

Question
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.
Answer
  • nimum; marginal demand
  • efficient; total demand
  • maximum; marginal demand
  • efficient; marginal demand

Question 27

Question
Which of the following statements is accurate?
Answer
  • 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.

Question 28

Question
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
Answer
  • de-escalation of commitment.
  • diseconomies of scale.
  • escalation of commitment.
  • economies of scale.

Question 29

Question
Cost advantages based on learning-curve economies are
Answer
  • 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.

Question 30

Question
Firms implementing cost-leadership strategies will generally adopt a
Answer
  • multidivisional structure.
  • product divisional structure.
  • functional organizational structure.
  • matrix structure.

Question 31

Question
In a functional structure, each of the major business functions is managed by a
Answer
  • functional manager.
  • divisional manager.
  • chief executive officer.
  • line manager.

Question 32

Question
The only person in a functional organization who has to have a multifunctional perspective is the
Answer
  • CFO
  • CEO
  • COO
  • marketing manager

Question 33

Question
Firms pursuing a cost-leadership strategy are typically characterized by
Answer
  • 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.

Question 34

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

Question 35

Question
Cost-leadership firms are typically characterized by very ________ cost-control systems.
Answer
  • tight
  • flexible
  • loose
  • decentralized

Question 36

Question
The U in U-form structure stands for
Answer
  • "uniform."
  • "unitary."
  • "unilateral."
  • "unambiguous."

Question 37

Question
In ________ structures, employees report to two or more people.
Answer
  • unilateral
  • functional
  • divisional
  • matrix

Question 38

Question
A marketing manager leading the marketing department is an example of a(n) ________ manager.
Answer
  • ambidextrous
  • divisional
  • functional
  • unitary

Question 39

Question
Firms implementing cost-leadership strategies will have ________ layers in their reporting structure.
Answer
  • many
  • relatively simple
  • relatively few
  • relatively complex

Question 40

Question
Sematech is pursuing which strategy?
Answer
  • cost-leadership business strategy
  • product-differentiation business strategy
  • cost-leadership corporate strategy
  • product-differentiation corporate strategy

Question 41

Question
By increasing production volume in an effort to reduce costs, Sematech is pursuing which sources of cost advantage?
Answer
  • size differences and diseconomies of scale
  • differential access to productive inputs
  • size differences and economies of scale
  • technological advantages

Question 42

Question
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.
Answer
  • physical limits to efficient size.
  • worker de-motivation.
  • distance to markets and suppliers.
  • managerial diseconomies.

Question 43

Question
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
Answer
  • economies of scale.
  • escalation of commitment.
  • diseconomies of scale.
  • managerial diseconomies.

Question 44

Question
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?
Answer
  • establishing economies of scale
  • exploiting learning-curve economies
  • purchasing new technological hardware
  • securing differential access to low-cost productive inputs

Question 45

Question
Given Sematech's business level strategy, which organizational structure is the most appropriate?
Answer
  • matrix structure
  • U-form structure
  • multidivisional structure
  • product-divisional structure

Question 46

Question
If Lucy Sullivan were a Sematech manager who oversaw the finance operations in the company's functional structure, Lucy would be considered a
Answer
  • chief executive officer.
  • divisional manager.
  • chief operating officer.
  • functional manager.

Question 47

Question
By employing a low-cost competitive strategy, Sematech has made itself
Answer
  • 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.

Question 48

Question
If Sematech decided to focus on building its technological hardware, it would focus on elements such as
Answer
  • robots
  • organizational culture.
  • the quality of organizational controls.
  • the quality of relations among labor and management.

Question 49

Question
If Sematech were to choose to narrow its product line in an effort to reduce costs, this would be an example of
Answer
  • technological software.
  • a policy choice.
  • a competitive advantage.
  • a learning-curve effect.
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