Question Details

The typical risks of a differentiation strategy



1.	A manufacturer of jewelry imitates the style of a popular and expensive brand using manufactured stones rather than real gemstones and lesser grade metals rather than silver and gold. The manufacturer packages the jewelry in boxes of the same color imprinted with an almost identical logo. About 85 percent of the company- sales are through Internet sales. This example illustrates the competitive risk of ____ that threatens companies that use the differentiation strategy.
a.	customer sensitive to price differentials
b.	threat by the cost leader
c.	customer experience
d.	counterfeiting



	2.	The typical risks of a differentiation strategy do NOT include which of the following?
a.	Customers may find the price differential between the low-cost product and the differentiated product too large.
b.	Customers’ experience with other products may narrow customers’ perception of the value of a product- differentiated features.
c.	Counterfeit goods are widely available and acceptable to customers.
d.	Suppliers of raw materials erode the firm- profit margin with price increases.



	3.	Caribou Coffee, with 430 stores, is the nation- second largest chain of coffee shops behind Starbucks. Both chains seek to provide the highest quality product and service. Which of the following statements is accurate?
a.	Because Caribou has fewer outlets, it is using a focused strategy.
b.	Because Starbucks was first in the market, it is the differentiated firm. 
c.	Both Caribou and Starbucks are using the cost leadership strategy based on economies of scale.
d.	Caribou is trying to out differentiate Starbucks based on store atmosphere, being environmentally friendly, and free WiFi.



4.	When implementing a focus strategy, the firm seeks to
a.	offer products that are both differentiated and low cost.
b.	move into the global market.
c.	target the typical customer in an industry.
d.	serve the specialized needs of a market segment.



	5.	Ikea offers young customers a limited selection of standardized home furnishings featuring good design, function, and acceptable quality at low prices. Ikea is using which business level strategy?
a.	Cost leadership
b.	Focused cost
c.	Differentiation
d.	Focused differentiation




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