Strategic Management Practice Test: Common Competitive Strategies | Practice Test / Quiz / MCQs

1. The biggest and most important differences among the competitive strategies of different companies boil down to

how they go about building a brand name image that buyers trust and whether they are a risk-taker or risk-avoider.the different ways that companies try to cope with the five competitive forces.the kinds of actions companies take to improve their competitive assets and reduce their competitive liabilities.the relative emphasis they place on offensive versus defensive strategies. whether a company’s market target is broad or narrow and whether the company is pursuing a competitive advantage linked to low cost or differentiation.

2. Which of the following is not an action that a company can take to do a better job than rivals of performing value chain activities more cost-effectively?

Improving supply chain efficiencyRedesigning products to eliminate features that might have market appeal, but excessively increase production costsStriving to capture all available economies of scale and learning/experience curve effectsTrying to operate facilities at full capacityAdopting labor-saving operating methods

3. Broad differentiation strategies are well-suited for market circumstances where

price competition is especially vigorous.barriers to entry are high and suppliers have a low degree of bargaining power.most buyers have the same needs and use the product in the same ways.buyers are susceptible to clever advertising.there are many ways to differentiate the product or service and many buyers perceive these differences as having value.

4. The marketing emphasis of a company pursuing a broad differentiation strategy usually is to

underprice rival brands with comparable features.emphasize selling direct to end-users and promoting personalized customer service.communicate the product's ability to serve the customer's every need.tout differentiating features and charge a premium price that more than covers the extra costs of differentiating features.out-advertise rivals and make frequent use of discount coupons.

5. Which one of the following does not represent market circumstances that make a focused low-cost or focused differentiation strategy attractive?

When industry leaders do not see that having a presence in the niche is crucial to their own successWhen the target market niche is not overcrowded with a number of other rivals attempting to focus on the same nicheWhen it is costly or difficult for multi-segment competitors to put capabilities in place to meet the specialized needs of the target market niche and at the same time satisfy the expectations of their mainstream customersWhen the industry has many different segments and market niches, thereby allowing a focuser to pick an attractive niche suited to its resource strengths and capabilitiesWhen many rivals are attempting to specialize in the same segment

6. A competitive strategy predicated on low-cost leadership tends to work best when

there are widely varying needs and preferences among the various buyers of the product or service.buyers prefer that the products/services of competing sellers have widely varying attributes and prices.there are many market segments and market niches, such that it is feasible for a low-cost leader to dominate the niche where buyers want a budget-priced product.buyers have high switching costs and there is considerable diversity in how buyers use the product. price competition is especially vigorous and the offerings of rival firms are essentially identical, standardized, commodity-like products.

7. The competitive advantage of a best-cost provider is

a distinctive competence in delivering top-notch quality and customer service.its brand name reputation. its capability to incorporate upscale attributes at lower costs than rivals whose products have similar upscale attributes.having the best value chain in the industry.a distinctive competence in supply chain management.

8. Broad differentiation strategies generally work best in market circumstances where

buyer needs and preferences are too diverse to be fully satisfied by a standardized product.most buyers have similar needs and use the product in the same ways.the products of rivals are weakly differentiated and most competitors are resorting to clever advertising to try to set their product offerings apart.buyers are price sensitive and buying switching costs are quite low.the five competitive forces are strong.

9. A focused low-cost strategy can lead to attractive competitive advantage when

a firm can lower costs significantly by limiting its customer base to a well-defined buyer segment.buyers are looking for the best value at the best price.buyers are looking for a budget-priced product.demand in the target market niche is growing rapidly and a company can achieve a big enough volume to fully capture all the available scale economies.buyers are price sensitive and are attracted to brands with low switching costs.

10. A company achieves best-cost provider status by

doing a better job than rivals of adopting the best operating practices. incorporating attractive or upscale attributes into its product offering at a lower cost than rivals.providing buyers with the best attributes at the best cost.selling a product with the best cost at the best price.having the best cost (as compared to rivals) for each activity in the industry's value chain.

11. A broad differentiation strategy works best in situations where

technological change is fast-paced and competition revolves around rapidly evolving product features.buyers have a low degree of bargaining power and purchase the product frequently.buyers incur low costs in switching their purchases to rival brands.technological change is slow-paced and new or improved products are infrequent.buyer needs and uses of the product are very similar.

12. Easy-to-copy differentiating features

seldom are perceived by buyers as having much value.cannot produce sustainable competitive advantage.lead to vigorous price competition.tend to give buyers a high degree of power in bargaining for a lower price.should never be incorporated in a company’s product offering if its differentiation strategy is to succeed.

13. For a best-cost provider strategy to be successful, a company must have

resource strengths and competitive capabilities that allow it to incorporate upscale attributes at lower costs than rivals whose products have similar upscale attributes.access to greater learning/experience curve effects and scale economies than rivals.excellent marketing and sales skills in convincing buyers to pay a premium price for the attributes/features incorporated in its product.one of the best-known and most respected brand names in the industry.a short, low-cost value chain.

14. Which one of the following generic types of competitive strategy is typically the best strategy for a company to employ?

A low-cost leadership strategyA focused low-cost provider strategyThere is no such thing as a “best” competitive strategy; a company’s “best” strategy is always one that is customized to fit both industry and competitive conditions and the company’s own resources and competitive capabilities.A best-cost provider strategyA broad differentiation strategy

15. A company achieves competitive advantage whenever

it is the industry's acknowledged technology leader.it has a well-known and well-regarded brand name, prefers offensive strategies to defensive strategies, and has a strong balance sheet.it has greater financial resources than its rivals.it is the acknowledged market share leader.it has some type of edge over rivals in attracting customers and coping with competitive forces.

16. A differentiation-based competitive advantage

hinges on a company’s success in developing top-of-the-line product features that will command the biggest price premium in the industry.nearly always is attached to the quality and service aspects of a company’s product offering.requires developing at least one distinctive competence that buyers consider valuable.often hinges on incorporating features that (1) raise the performance of the product or (2) lower the buyer’s overall costs of using the company’s product or (3) enhance buyer satisfaction in intangible or non-economic ways or delivering value to customers on by differentiating on the basis of competencies and capabilities that rivals can’t match.most usually is the result of highly effective marketing and advertising.

17. A company’s biggest vulnerability in employing a best-cost provider strategy is

getting squeezed between the strategies of firms employing low-cost provider strategies and high-end differentiation strategies.relying too heavily on outsourcing.getting trapped in a price war with low-cost leaders. not having a sustainable distinctive competence in cost reduction.being timid in cutting its prices far enough below high-end differentiators to win away many of their customers.

18. A broad differentiation strategy improves profitability when

the differentiating features appeal to sophisticated and prestigious buyers.it is focused on product innovation.the differentiator charges a price that is only fractionally higher than the industry’s low-cost provider.the extra price the product commands exceeds the added costs of achieving the differentiation.differentiating enhances product performance.

19. Focused strategies keyed either to low-cost or differentiation are especially appropriate for situations where

the market is composed of distinctly different buyer groups who have different needs or use the product in different ways.most industry participants are also using focused low-cost or focused differentiation strategies.most other rival firms are using a best-cost producer strategy.buyers have strong bargaining power and entry barriers are low.most industry rivals have weakly differentiated products.

20. While there are many routes to competitive advantage, they all involve

getting in the best strategic group and dominating it.achieving lower costs than rivals and becoming the industry’s sales and market share leader. building a brand name image that buyers trust.finding effective and efficient ways to strengthen the company’s competitive assets and to reduce its competitive liabilities.delivering superior value to buyers and building competencies and resource strengths in performing value chain activities that rivals cannot readily match.

21. The objective of a best-cost provider strategy is to

offer buyers the industry’s best-performing product at the best cost and best (lowest) price in the industry.translate its best-cost status into achieving the highest profit margins of any firm in the industry.deliver superior value to buyers by satisfying their expectations on key quality/performance/features/service attributes and beating their expectations on price (given what rivals are charging for much the same attributes).attract buyers on the basis of having the industry’s overall best-performing product at a price that is slightly below the industry-average price.outcompete rivals using low-cost provider strategies.

22. Successful differentiation allows a firm to

take sales and market share away from rivals by undercutting them on price.command a premium price for its product, and/or increase unit sales, and/or gain buyer loyalty to its brand.avoid being dragged into a price war with industry rivals and not be overly concerned about whether entry barriers into the industry are high or low.set the industry ceiling on price.be the industry’s best-cost provider.

23. How valuable a low-cost leader's cost advantage is depends on

how easy it is for the low-cost leader to gain the biggest market share.the low-cost leader's ability to be the industry leader in manufacturing innovation so as to keep lowering its manufacturing costs.whether it is easy or inexpensive for rivals to copy the low-cost leader’s methods or otherwise match its low costs.the leader's ability to combine the cost advantage with a reputation for good quality.the aggressiveness with which the low-cost leader pursues converting the cost advantage into the absolute lowest possible costs.

24. The competitive objective of a best-cost provider strategy is to

outmatch the resource strengths of both low-cost providers and differentiators.deliver superior value to buyers by doing such a good job of cost control that it ends up with the best cost (as compared to rivals) in performing each activity in its value chain.meet or exceed buyer expectations on key quality/performance/features/service attributes and beat their expectations on price (given what rivals are charging for much the same attributes).position the company outside the competitive arena of low-cost producers and differentiators.identify and concentrate on those differentiating features that are inexpensive to incorporate.

25. A focused differentiation strategy aims at securing competitive advantage

by catering to buyers looking for an upscale product at an attractively low price.by convincing a narrow, well-defined group of buyers that the company has a true world class product. with a product offering carefully designed to appeal to the unique preferences and needs of a narrow, well-defined group of buyers.by developing product attributes that no other company in the industry has.by providing niche members with a top-of-the-line product at a premium price.

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25 Questions

❤ If you liked Fatskills, consider supporting us by checking out The Life Manuals You Never Got.

About | Explore | User Guide | Topics | Subjects | Doubt Solver | Career Aptitude Test | Answers | Free Tools | OSHA Basics Quiz | What Should We Know? Privacy | Terms |

Without work one finishes nothing. - Ralph Waldo Emerson© 2026 Fatskills.com

All trademarks, logos and brand names are the property of their respective owners. All company, product and service names used in this website are for identification purposes only. Use of these names, trademarks and brands does not imply endorsement.

About | Explore | User Guide | Topics | Subjects | Doubt Solver | Career Aptitude Test | Answers | Free Tools | OSHA Basics Quiz | What Should We Know?
Privacy | Terms |

Without work one finishes nothing. - Ralph Waldo Emerson
© 2026 Fatskills.com