Strategic Management Chapter 5

The primary aim of strategic management at the business level is

• maximizing risk to return trade-offs through diversification.

• maximizing differentiation of products and/or services.

• achieving competitive advantage.

• achieving a low-cost position.

Primary value chain activities that involve the effective layout of receiving dock operations (inbound logistics) and support value chain activities that include expertise in process engineering (technology development) characterize which generic strategy?

• differentiation

• differentiation focus

• stuck-in-the-middle

• overall cost leadership

A manufacturing business pursuing cost leadership is likely to

• focus on a narrow market segment.

• use advertising to build brand image.

• put heavy emphasis on product engineering.

• rely on experience effects to raise efficiency.

One aspect of using a cost leadership strategy is that experience effects may lead to lower costs. Experience effects are achieved by

• spreading out a given expense or investment over a greater volume.

• hiring more experienced personnel.

• repeating a process until a task becomes easier.

• competing in an industry for a long time.

With experience, unit costs of production decline as ________ increases in most industries.

• costs

• volume

• output

• price

Research has consistently shown that firms that achieve both cost leadership and differentiation advantages tend to perform

• at about the same level as firms that achieve either cost or differentiation advantages

• about the same as firms that are stuck-in-the-middle.

• higher than firms that achieve either a cost or a differentiation advantage.

• lower than firms that achieve differentiation advantages but higher than firms that achieve cost advantages.

Global logistics firms such as DHL Supply Chain and Global Forwarding or C. H. Robinson Worldwide compete using an overall cost leadership strategy in primary activities such as

• effective layout of receiving dock operations.

• effective use of automated technology to reduce scrappage rates.

• minimize costs associated with employee turnover through effective policies.

• standardized accounting practices to minimize personnel required.

Overhead costs associated with the number of layers of management in a firm are part of the ________ activities of the value chain.

• human resources management

• firm infrastructure

• operations

• marketing and sales

Primark, a fashion retailer, has found a way to keep its cost structure lower than its rivals by leveraging streamlined logistics, a low marketing budget, and negotiating bargain prices from its suppliers. They are using a(n) ________ strategy.

• differentiation

• overall cost leadership

• focus

• broad differentiation

Aldi, a discount supermarket retailer, has grown from its German base to the rest of Europe, Australia, and the United States by replicating a simple business format. Aldi limits the number of products in each category to ensure product turn, to ease stocking shelves, and to increase its power over supplier. This is an example of an overall cost leadership strategy because it

• gives them competitive advantage by decreasing productivity.

• gives them competitive advantage by tight cost and overhead control.

• eliminates the need to compete based on its products.

• requires the customer to recognize its e昀昀orts.