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MCQs on Generic strategies
When formulating a strategy, there are several types of strategic choice which organisations have to make, including Competitive strategies are the strategies an organisation will pursue for competitive advantage. They determine how the organisation competes. Here on MCQs.CLUB we have prepared helpful Multiple-Choice Questions (MCQs) on What is Generic Strategies? Definition of Generic Strategies that fully cover practice questions and quzies on cost leadership strategy with examples, porter’s generic strategies, cost focus strategy, generic competitive strategies covering all aspects of michael porter’s strategy, porter’s competitive advantage model. These MCQs on generic marketing strategies are also useful for competitive exams, professional accountancy exams and business management exams.
- When formulating a strategy, there are several types of strategic choice which organisations have to make, including:
- Competitive strategies are the strategies an organisation will pursue for competitive advantage. They determine how the organisation competes.
- Product-market strategies determine where you compete and the direction of growth.
- Institutional strategies determine the method of growth (e.g. organic growth or external growth).
- All of the above
- Which of the following is correct?
- A firm’s horizontal boundaries define the variety of products and services that it produces. The optimum horizontal boundary for a firm depends on economies of scale.
- The vertical boundaries of a firm define which activities the firm performs itself and which it purchases from independent firms.
- Both A&B
- None
- Products may be categorized as:
- Breakthrough products – offer either a radical performance advantage over competition; drastically lower prices, or ideally, may offer both.
- Improved products – are not radically different to their competition but are obviously superior in terms of better performance at a competitive price.
- Competitive products – show no obvious advantage over others, but derive their appeal from a particular compromise of cost and performance.
- All of the above
- By creating a new market segment or entering a growing market segment a company can hope to achieve:
- Increase sales and profits, by meeting customer needs in a number of different ways
- Extend the life cycle of the product
- Capture some of the overall market share from competitors
- Survive in the face of competition
- All of the above
- Porter suggests there are three generic strategies: cost leadership, differentiation and focus. These ideas have subsequently been extended into the idea of the strategy clock.
- The above statement is correct
- The above statement is incorrect
- Which of the following is correct?
- Cost Leadership means being the lowest cost producer in the industry as a whole.
- Differentiation is the exploitation of a product or service which the industry as a whole believes to be unique.
- Both A&B
- None
- Focus involves a restriction of activities to only part of the market (a segment) through:
- Providing goods and/or services at lower cost to that segment (cost-focus)
- Providing a differentiated product or service to that segment (differentiation-focus)
- Both A&B
- None
- Cost leadership and differentiation are industry-wide strategies. Focus involves segmentation but involves pursuing, within the segment only, a strategy of cost leadership or differentiation.
- The above statement is correct
- The above statement is incorrect
- How to achieve overall cost leadership:
- Establishing economies of scale
- Use the latest, most efficient technology to reduce costs and/or enhance productivity
- Minimise overhead costs, reduce direct costs and Relocate to cheaper areas
- All of the above
- Value chain analysis, could be very useful when considering which generic strategy to pursue.
- True
- False
- Which of the following is correct regarding “Differentiation”?
- A differentiation strategy assumes that competitive advantage can be gained through particular characteristics of a firm’s products or processes.
- Differentiation is often used to justify a firm charging a higher price for its products than its rivals do.
- Both A&B
- None
- How to differentiate?
- Build up a brand image
- Give the product special features to make it stand out
- Exploit other activities of the value chain such as marketing and sales or service
- Use IT to create new services or product features
- All of the above
- Which of the following is correct regarding ‘Focus (or niche) strategy’?
- In a focus strategy, a firm concentrates its attention on one or more particular segments or niches of the market, and does not try to serve the entire market with a single product.
- Information technology (IT) can be useful in establishing the exact determining characteristics of the chosen niche, using existing customer records.
- A cost-focus strategy – aim to be a cost leader for a particular segment.
- A differentiation-focus strategy – pursue differentiation for a chosen segment.
- All of the above
- Advantages of a focus strategy include:
- A niche is more secure and a firm can insulate itself from competition.
- The firm does not spread itself too thinly and can specialise in one particular area of expertise.
- Because the segment is relatively small, this reduces the investment in marketing operations required, compared to a strategy which involves competing across the whole market.
- All of the above
- Drawbacks of a focus strategy include:
- The segment may not be sufficiently large to enable sufficient returns to be earned in the long run to satisfy investors.
- The needs of the segment may eventually become less distinct from the main market.
- The firm sacrifices economies of scale which could be gained by serving a wider market.
- All of the above
- Porter’s three generic strategies can help managers in their strategic planning in a number of different ways such as:
- Encourage them to analyse competitors’ positions.
- Choose a competitive strategy.
- Analyse the risks of their present strategy.
- All of the above
- The strategy clock – The strategy clock identifies eight different strategies a firm can take in terms of price and adding value.
- True
- False
- Which of the following is correct regarding ‘No frills strategy’?
- A no frills strategy combines a low price with low perceived product/service benefits.
- This type of strategy is appropriate for commodity-like products or for markets where customers are strongly price-conscious.
- A no frills strategy may be used for market entry, to gain experience and build volume.
- All of the above
- A firm pursuing a low-price strategy aims to offer better value than its competitors. It seeks to do this by offering the same perceived product or service benefits as its competitors, but at a lower price.
- True
- False
- A firm pursuing a hybrid strategy seeks both differentiation and a lower price than its competitors. There are circumstances where a hybrid strategy may be more advantageous than differentiation alone such as:
- If a low-price approach is suited to a particular market segment.
- Where it is used as a market entry strategy.
- If it allows a firm to achieve much greater sales volumes than its competitors and, therefore, also better margins as a result of economies of scale which give it a low-cost base.
- All of the above
- Broad differentiation – A broad differentiation strategy seeks to provide products or services that offer benefits which customers value and which are different from competitors’ offerings.
- True
- False
- There are a number of different methodologies an organisation can use when deciding on the selling price for a product or service, such as:
- Cost Plus Pricing – Determination of price by adding a mark-up, which may incorporate a desired return on investment, to a measure of the cost of the product/service.
- Market-Based Pricing – Setting a price based on the value of the product in the perception of the customer. Also known as perceived value pricing.
- Predatory Pricing – Setting a low selling price in order to damage competitors.
- Price Skimming – Setting a high price in order to maximise short-term profitability, often on the introduction of a novel product.
- All of the above
- Selective Pricing – Setting different prices for the same product or service in different markets. Can be broken down as:
- Category pricing
- Customer group pricing
- Time material pricing
- All of the above
- Although pricing can be thought of as fulfilling a number of roles, in overall terms a price aims to produce the desired level of sales in order to meet the objectives of the business strategy. The broad categories of objectives may be specified for pricing decisions include:
- Maximising profits
- Maintaining or increasing market share
- Both A&B
- None
- The elements in the pricing decision for a new product include:
- Getting the product accepted
- Maintaining a market share in the face of competition
- Making a profit from the product
- All of the above
- Market penetration pricing is a policy of low prices when the product is first launched in order to gain sufficient penetration into the market. It is, therefore, a policy of sacrificing short-term profits in the interests of long-term profits.
- The above statement is correct
- The above statement is incorrect
- Marketing management should have the responsibility for estimating the price- demand interrelationship for their organisation’s products. The accountant should become involved in short-term pricing decisions because of cost:
- The sales-revenue maximising price for a product and the profit-maximising price might not be the same.
- Simple CVP analysis can be used to estimate the breakeven point of sales, and the sales volume needed to achieve a target profit figure.
- Many organisations use a cost-plus approach to pricing. Accounting figures are needed for cost in order to establish a floor for making a cost-plus pricing decision.
- All of the above
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