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

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

buyers are looking for a budget-priced product.buyers are looking for the best value at the best price.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.a firm can lower costs significantly by limiting its customer base to a well-defined buyer segment.buyers are price sensitive and are attracted to brands with low switching costs.

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

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

3. Being the overall low-cost provider in an industry has the attractive advantage of

putting a firm in position to win the business of price sensitive customers, set the floor on market price, and still earn a profit.giving the firm a very appealing brand image.putting the company in strong position to be more profitable than companies pursuing a differentiation strategy.greatly reducing the strong bargaining power of key suppliers. building strong customer loyalty and locking customers into its product (because customers have such high switching costs).

4. Achieving a differentiation-based competitive advantage can involve

incorporating features that raise the performance a buyer gets from using the product.All of the above are viable ways of building competitive advantage via differentiation.incorporating product attributes and user features that lower a buyer's overall cost of using the product.delivering value to customers via competencies and competitive capabilities that rivals don't have or can't afford to match.incorporating features that enhance buyer satisfaction in non-economic or intangible ways.

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

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

6. The marketing emphasis of a company pursuing a focused low-cost provider strategy usually is to

out-advertise rivals and make frequent use of discount coupons.tout the company’s lower prices.communicate the attractive features of a budget-priced product offering that fits niche members’ expectations.communicate the product's ability to serve the customer's every need.tout the lack of frills and extras.

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

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.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. how they go about building a brand name image that buyers trust and whether they are a risk-taker or risk-avoider.the relative emphasis they place on offensive versus defensive strategies.

8. In which one of the following market circumstances is a broad differentiation strategy generally not well-suited?

When the products of rivals are weakly differentiated and most competitors are resorting to clever advertising to try to set their product offerings apartWhen buyer needs and preferences are too diverse to be fully satisfied by a standardized productWhen there are many ways to differentiate the product or service and many buyers perceive these differences as having valueWhen technological change is fast-paced and competition revolves around rapidly evolving product featuresWhen few rivals are pursuing a similar differentiation approach

9. The risks of a focused strategy based on either low-cost or differentiation include

All of these.the potential for the segment to be highly vulnerable to economic cycles.the potential for segment growth to race beyond the production or service capabilities of incumbent firms.the chance that niche customers will bargain more aggressively for good deals than customers in the overall marketplace.the potential for the preferences and needs of niche members to shift over time towards many of the same product attributes and capabilities desired by buyers in the mainstream portion of the market.

10. The pitfalls of a differentiation strategy include

being timid and not striving to open up meaningful gaps in quality or performance or service or other attractive differentiating attributes.choosing to differentiate on the basis of attributes that buyers do not perceive as valuable or worth paying for.trying to charge too high a price premium for the differentiating features.trying to differentiate on the basis of attributes or features that are easily copied.All of these.

11. A company attempting to be successful with a broad differentiation strategy has to

concentrate its differentiating efforts on marketing and advertising (where almost all differentiating features are created).study buyer needs and behavior carefully to learn what buyers consider important, what they think has value, and what they are willing to pay for.incorporate more differentiating features into its product/service than rivals.provide a top-of-the-line product and sell it at premium prices.have a widely known and highly respected brand name image.

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

translate its best-cost status into achieving the highest profit margins of any firm in the industry.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.offer buyers the industry’s best-performing product at the best cost and best (lowest) price 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).

13. Which of the following is not one of the five generic types of competitive strategy?

A broad differentiation strategyA focused low-cost provider strategyA best-cost provider strategyA low-cost provider strategyA market share dominator strategy

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

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).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.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.

15. Successful differentiation allows a firm to

set the industry ceiling on price.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.be the industry’s best-cost provider.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.

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

There 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 broad differentiation strategyA focused low-cost provider strategyA best-cost provider strategyA low-cost leadership strategy

17. One of the big dangers in crafting a competitive strategy is that managers, torn between the pros and cons of the various generic strategies, will opt for

a broad differentiation strategy because it is frequently the most profitable competitive strategy.a “stuck-in-the-middle” strategy.a low-cost provider strategy because it is usually the safest, least risky competitive strategy.a best-cost provider because it has the biggest potential for generating the largest market share.a focused low-cost or focused differentiation strategy because they are more insulated from competitive pressures.

18. A broad differentiation strategy improves profitability when

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

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

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.how easy it is for the low-cost leader to gain the biggest market share.

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

When 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 industry leaders do not see that having a presence in the niche is crucial to their own successWhen many rivals are attempting to specialize in the same segmentWhen the target market niche is not overcrowded with a number of other rivals attempting to focus on the same nicheWhen the industry has many different segments and market niches, thereby allowing a focuser to pick an attractive niche suited to its resource strengths and capabilities

21. Achieving a cost advantage over rivals entails

producing a standard product, redesigning the product infrequently, and having minimal advertising. minimizing R&D expenses and paying below-average wages and salaries to conserve on labor costs.being a first-mover in pursuing backward and forward integration and controlling as much of the industry value chain as possible.concentrating on the primary activities portion of the value chain and outsourcing all support activities.performing value chain activities more cost-effectively than rivals and finding ways to eliminate or bypass some cost-producing activities altogether.

22. A low-cost leader's basis for competitive advantage is

lower prices than rival firms.using a low cost/low price approach to gain the biggest market share.high buyer switching costs.higher unit sales than rivals.meaningfully lower overall costs than competitors.

23. A company achieves best-cost provider status by

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

24. The target market of a best-cost provider is

price-sensitive buyers.brand-conscious buyers. value-conscious buyers.middle-income buyers.young adults (in the 18-35 age group).

25. Whether a broad differentiation strategy ends up enhancing company profitability depends mainly on whether

buyers are prone to shop the market for sellers having the best price. buyer switching costs are low and customer loyalty to any one brand is low.the extra price the product commands exceeds the added costs of achieving the differentiation.many buyers view the product’s differentiating features as having value.most buyers have similar needs and use the product in the same ways.

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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 |

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