Preview Extract
Chapter 6 Strategy
1) Many European automobile manufacturers, such as Fiat and Skoda, have taken a keen
interest in the developing Asian markets of India and China, and have begun offering their
best-selling car models in these markets. This is an attempt to ________.
A) target new segment not already dominated by competitors
B) deliver their offerings to customers in a different way
C) add distinctive functionality to make offerings stand out from the rest
D) sell new products and services to existing groups of customers
Answer: A
Rationale:
European automobile manufacturers are entering the Asian markets to tap into new customer
segments that might not already be dominated by existing competitors. By offering their bestselling car models in these markets, they aim to attract customers who may not have been
reached by their competitors yet.
2) A go-to-market approach of a company describes the ________.
A) delivery mechanisms for its product
B) procurement processes for manufacturing its product
C) development strategy for its product
D) marketing strategy which uses no promotions
Answer: A
Rationale:
The go-to-market approach of a company primarily revolves around the methods and
channels used to deliver its products or services to the customers. This includes strategies
related to distribution, sales, and customer engagement.
3) Which of the following is a differentiating functionality used by Dell to sell its laptop
computers?
A) Dell laptop computers are pre-installed with Windows operating system software.
B) Dell uses Intel's latest processors in its laptop computers.
C) Dell allows consumers the option of customizing their laptop computers.
D) Dell uses 17-inch LCD screens in its entertainment laptop computers.
Answer: C
Rationale:
Dell's customization option for laptop computers allows consumers to tailor the specifications
of their laptops according to their specific needs and preferences. This sets Dell apart from
competitors who may offer pre-configured models without customization options.
4) Geekell Mobiles signs an exclusivity agreement with zedNet which allows only their
mobile phones to use zedNet's latest mobile phone operating system. Which of the following
market opportunities is Geekell exploiting?
A) new market segment
B) blue ocean opportunity
C) go-to-market approach
D) differentiating functionality
Answer: D
Rationale:
By signing an exclusivity agreement with zedNet for their latest mobile phone operating
system, Geekell Mobiles is leveraging a differentiating functionality. This allows them to
offer a unique feature that is exclusive to their products, giving them a competitive edge in
the market.
5) RIM, a maker of smart business phones, adds distinctive functionality to make its products
stand out from the rest. Which of the following would be an example of a differentiation
functionality that is used by RIM?
A) smart phone models that can run all the applications that run on rival models
B) tie ups with service providers to make RIM products available on their networks
C) dedicated hot lines for direct to home delivery options for their products
D) unique instant messenger options available for RIM products
Answer: D
Rationale:
RIM's unique instant messenger options differentiate its products from competitors by
offering a proprietary communication platform that is specifically tailored for business users.
This feature adds value to RIM's products and attracts customers who prioritize secure and
efficient communication in their business operations.
6) Which of the following undermines the differentiating functionality of an electronic
product?
A) a slightly higher price over undifferentiated competing products
B) a greater differentiation perceived by customers compared to that intended by the
manufacturer
C) an appeal to greater segments of the market due to the differentiating functionality
D) an improvement in features appreciated by a very small niche segment
Answer: D
Rationale:
Option D, "an improvement in features appreciated by a very small niche segment,"
undermines the differentiating functionality of an electronic product because it implies that
the differentiation is too focused on a small subset of users. While catering to niche segments
can be profitable, if the improvement in features is only appreciated by a very small portion
of the market, it may not provide sufficient differentiation to justify the investment.
7) Which of the following sets of strategies addresses the financial objectives of an
organization?
A) Porter Generic Strategies
B) Ansoff Growth Strategies
C) Aaker Brand Strategies
D) Bowman's Strategy Clock
Answer: A
Rationale:
Porter Generic Strategies, option A, directly address financial objectives by providing
different approaches for achieving competitive advantage and generating superior financial
performance. These strategies include cost leadership, differentiation, and focus, all of which
are aimed at improving profitability and market position.
8) Which of the following outcomes of differentiation makes it a viable strategy for meeting
financial objectives?
A) the requirement to find new sources of raw material needed for differentiated products
B) an increase in efficiency as companies gain experience
C) the willingness of a customer to pay a higher cost for a perceived difference
D) a reduction in market size, as differentiated products appeal only to a niche market
Answer: C
Rationale:
Option C, "the willingness of a customer to pay a higher cost for a perceived difference,"
makes differentiation a viable strategy for meeting financial objectives. When customers are
willing to pay a premium for a product or service due to its perceived uniqueness or added
value, it can lead to increased revenues and profitability, thus supporting the financial
objectives of the organization.
9) Which of the following is an example of the focus generic strategy resulting in
differentiation?
A) Land Rover specializing in the production of off-road cars
B) Lemon Mobiles concentrating on the production of low-priced mobile phones
C) Signet Works manufacturing only disposable plastic cups
D) ArcelorMittal specializing in the production of steel
Answer: A
Rationale:
Option A, "Land Rover specializing in the production of off-road cars," exemplifies the focus
generic strategy resulting in differentiation. Land Rover focuses on a specific market segment
(off-road vehicle enthusiasts) and tailors its products to meet the unique needs and
preferences of that segment, thereby achieving differentiation within a focused market niche.
10) Companies that employ a market penetration growth strategy ________.
A) sell their existing products and services into new markets
B) market existing products and services to existing customers in new ways
C) sell new products and services to existing groups of buyers
D) innovate new products and services targeted at new groups of customers
Answer: B
Rationale:
Option B, "market existing products and services to existing customers in new ways,"
describes the market penetration growth strategy. This strategy involves selling more of the
existing products or services to the current customer base through tactics such as promotions,
advertising, or entering new distribution channels. It aims to increase market share and
revenue by maximizing sales opportunities within the current market.
11) Companies that employ a market development growth strategy ________.
A) sell their existing products and services into new markets
B) market existing products and services to existing customers in new ways
C) sell new products and services to existing groups of buyers
D) innovate new products and services targeted at new groups of customers
Answer: A
Rationale:
Option A, "sell their existing products and services into new markets," describes the market
development growth strategy. This strategy involves identifying and entering new markets
with existing products or services. By expanding into new geographic regions or
demographic segments, companies aim to increase their customer base and revenue streams.
12) Mitsubishi is promoting its range of all-terrain vehicles as safe, spacious alternatives to
sedans in a bid to capture a greater share of the family vehicle market. Which of the
following strategies best describes Mitsubishi's approach?
A) market development growth strategy
B) diversification growth strategy
C) product/service development growth strategy
D) market penetration growth strategy
Answer: D
Rationale:
Option D, "market penetration growth strategy," best describes Mitsubishi's approach. By
promoting its existing range of vehicles to a new segment (families) as safe and spacious
alternatives to sedans, Mitsubishi is focusing on penetrating deeper into its existing market
with its current products. This strategy aims to increase market share by encouraging existing
customers (families) to choose Mitsubishi's products over competitors' offerings.
13) Which of the following approaches is used by companies implementing a market
development growth strategy?
A) increasing purchase frequency
B) increasing purchase amount
C) expanding to a new class of buyers
D) targeting a competitor's customers
Answer: C
Rationale:
Market development growth strategy involves expanding into new markets or reaching new
customer segments. Option C, expanding to a new class of buyers, aligns directly with this
strategy as it involves seeking out new demographics or customer groups to sell existing
products or services to. This can include entering new geographical regions, appealing to
different age groups, targeting niche markets, or reaching out to previously untapped
segments. The other options focus more on increasing sales within existing markets or
customer bases rather than actively seeking out new opportunities for expansion.
14) McDonald's initial target customers were children. But research proved that adults
consume more burgers than children do, so McDonald's decided to go after two new groups
of target customers: teenagers and adults. They unveiled new ad campaigns that were much
slicker and sophisticated than previous ones, while at the same time promising potential new
customers a burger for adults called an "Arch Deluxe," a burger not much different from
previous ones. The strategy used here by McDonald's is ________.
A) expanding to a new class of buyers
B) increasing purchase frequency
C) increasing purchase amount
D) targeting a competitor's customers
Answer: A
Rationale:
McDonald's initially targeted children but realized that adults consume more burgers. By
shifting their focus to teenagers and adults, they are expanding to a new class of buyers,
broadening their customer base beyond their original target demographic. This strategy
allows them to tap into additional market segments and potentially increase overall sales.
15) Companies employing the diversification growth strategy grow by ________.
A) marketing existing products to new markets
B) marketing existing products to existing markets in new ways
C) marketing new products to existing markets
D) marketing new products to new customers
Answer: D
Rationale:
The diversification growth strategy involves marketing new products to new customers. This
strategy allows companies to enter entirely new markets with new offerings, potentially
expanding their revenue streams and reducing risk by not relying solely on existing products
or markets.
16) In which of the following cases is a company using a diversification growth strategy?
A) Food Specialities Ltd. is including tomato ketchup and sauce in the existing "Maggi"
range of processed food items.
B) Microsoft is offering a bargain bundle, consisting of its gaming console, the Xbox 360,
and the Kinect motion sensor, at bargain prices.
C) Audi is creating a new small car in addition to its other products in order to capture the
Asian market.
D) IBM is creating a new business laptop with advanced features and is promoting it as a
replacement to older models in the same market.
Answer: C
Rationale:
Audi creating a new small car in addition to its existing products represents diversification
because it involves entering a new market segment with a new product. The other options
involve variations of existing products or entering existing markets with existing or related
products, which do not constitute diversification.
17) Reva Electric Car Company (RECC.) manufactures electric cars for the Indian market.
RECC identified a potential market in European countries for an electric car, and introduced
the Reva under a new brand name and with different promotion. Which of the following
market growth strategies is RECC employing in the above case?
A) market penetration
B) market development
C) product development
D) diversification
Answer: B
Rationale:
RECC's strategy of introducing its electric car to a new geographical market (European
countries) represents market development. This involves expanding into new geographic
areas with existing products. The company is not introducing a new product or significantly
altering its existing product, nor is it diversifying into entirely new markets or products.
18) Jenna Fountaina is a famous pop singer who has sold over 10 million copies of her hits
and enjoys a huge fanbase in the U.S. She has recently introduced her own line of fragrances
and clothing, which she has designed herself. She hopes the fragrance and clothing lines will
appeal to her teenage fans. Which of the following market growth strategies is Jenna
employing in this case?
A) market penetration
B) market development
C) product development
D) diversification
Answer: C
Rationale:
Jenna Fountaina's introduction of her own line of fragrances and clothing represents product
development. She is expanding her product offerings by introducing new items (fragrances
and clothing) related to her brand. This strategy aims to leverage her existing fame and
fanbase to generate additional revenue streams from her teenage fans without entering
entirely new markets or significantly altering her core product (her music).
19) Naismith's is a group of 4 pubs based in downtown Chicago. Along with its competitors,
Purple Daze and Lynx, Naismith's generates business mostly by catering to young working
adults and middle-aged family men. It has recently found that university-going students in the
suburban Chicago area constitute a promising portion of the market and wishes to grow its
market share by targeting this market segment. Which of the following strategies will best
help Naismith's to grow its market share?
A) establishing more pubs closer to student dormitories
B) introducing newer varieties of drinks in its downtown pubs
C) increasing the duration of the happy hours at its existing pubs
D) lowering the prices of drinks at its pubs
Answer: A
Rationale:
Establishing more pubs closer to student dormitories directly targets the university-going
student market segment that Naismith's wishes to capture. By positioning its pubs near where
the students live, Naismith's can increase its visibility and accessibility to this demographic,
potentially drawing them in as customers. This strategy aligns with market development by
expanding into a new geographic area to reach a new segment of customers.
20) Which of the following is an example of a company employing the product development
growth strategy to achieve its market-share based objectives?
A) General Motors selling a number of variants such as Buick, Cadillac, Chevrolet, GMC,
Opel, Vauxhall, and Holden for the American market
B) McDonald's opening multiple fast-food outlets in several cities around the world
C) Blackberry capturing market share from competing manufacturers of smart phones by
offering special Blackberry features like instant messaging etc.
D) Crompton Greaves expanding its market share by creating new products like domestic
grain grinders for a newly acquired Asian market
Answer: A
Rationale:
The product development growth strategy involves creating new products or variants of
existing products to cater to specific market segments or to meet evolving consumer
preferences. In the case of General Motors (GM), selling a number of variants such as Buick,
Cadillac, Chevrolet, GMC, Opel, Vauxhall, and Holden for the American market exemplifies
this strategy. Each variant is tailored to different customer segments or preferences within the
broader automobile market, allowing GM to expand its product offerings and capture a larger
market share based on diverse consumer needs. This approach aligns with the product
development growth strategy of introducing new products or variants to enhance market
share.
21) Which of the following is a characteristic of an organization that uses innovation
product/service strategy?
A) The organization prefers to be conservative in its approach to new product ideas.
B) The organization emphasizes strong research and development capabilities.
C) The organization believes in cautiously observing its competition before it introduces a
new product into the market.
D) The organization has high standards for success and is not tolerant of failure in developing
products and services.
Answer: B
Rationale:
Organizations that prioritize innovation in their product or service strategies typically place a
strong emphasis on research and development (R&D) capabilities. This is because R&D
activities are essential for generating new ideas, exploring technological advancements, and
creating innovative solutions to meet market demands. By investing in R&D, these
organizations can continuously improve existing products or services and develop new
offerings to stay competitive and adapt to changing customer needs and preferences.
Therefore, emphasizing strong research and development capabilities aligns with an
innovation-driven product/service strategy.
22) Why do companies using responsive service strategy emphasize speed over innovation
for its own sake?
A) They always deal with products which are undifferentiated in nature.
B) They produce products which are in constant development to adapt to a dynamic market.
C) They value failure as much as success in developing cutting-edge services and products.
D) They always rely on low cost production and distribution techniques.
Answer: B
Rationale:
Companies employing a responsive service strategy prioritize speed over innovation for its
own sake because they operate in dynamic markets where consumer preferences and market
conditions frequently change. These companies need to continually adapt their products or
services to meet evolving customer needs and market demands. By focusing on speed, they
can quickly respond to changes, introduce updates or modifications to their offerings, and
stay competitive in rapidly shifting environments. While innovation is important, the primary
emphasis for these companies is on the agility and responsiveness needed to keep pace with
market dynamics, making option B the most suitable choice.
23) Organizations adopting which of the following product/service strategies are most likely
to tolerate failure as an inevitable part of product development?
A) innovation product/service strategy
B) responsive product/service strategy
C) low cost product/service strategy
D) quality attributes product/service strategy
Answer: A
Rationale:
Organizations adopting an innovation product/service strategy are most likely to tolerate
failure as an inevitable part of product development. This is because innovation inherently
involves experimentation, risk-taking, and the pursuit of novel ideas, which may not always
lead to immediate success. In an innovation-driven approach, organizations understand that
failure is a natural part of the process of pushing boundaries and exploring new possibilities.
They recognize that failures provide valuable learning experiences that can ultimately lead to
breakthrough innovations. Therefore, organizations pursuing an innovation product/service
strategy tend to be more tolerant of failure compared to those focusing on other strategies
such as responsiveness, low cost, or quality attributes.
24) Which of the following is a limitation seen in organizations taking a low-cost approach to
product development?
A) Profit margins are very low.
B) Demand for the product is limited to a niche market.
C) Products cannot be differentiated.
D) Time taken for development is very long.
Answer: C
Rationale:
A limitation seen in organizations taking a low-cost approach to product development is that
their products cannot be differentiated. When companies prioritize low-cost strategies, they
often streamline their production processes and minimize expenses to offer products at
competitive prices. However, this can lead to standardized or generic products that lack
unique features or qualities that differentiate them from competitors. Without differentiation,
these products may struggle to stand out in the market and may face challenges in attracting
customers beyond price considerations. Therefore, the inability to differentiate products is a
common limitation associated with the low-cost approach to product development.
25) Which of the following products is most likely to be developed using the quality
attributes approach?
A) bullet proof glass used in government vehicles
B) components used in a hobby kit of a model aeroplane
C) educational laptops marketed to teenaged children
D) sports shoes marketed to amateur sports persons
Answer: A
Rationale:
The product most likely to be developed using the quality attributes approach is bulletproof
glass used in government vehicles. Quality attributes refer to specific characteristics or
features of a product that are designed to meet high standards of performance, durability,
reliability, and safety. Bulletproof glass, particularly when used in government vehicles,
requires meticulous attention to quality attributes such as strength, resistance to impact,
transparency, and ability to withstand ballistic threats while ensuring the safety of occupants.
This aligns with the emphasis on high-quality standards and stringent performance
requirements characteristic of the quality attributes approach.
26) Which of the following product/service development strategies requires adaptive product
capabilities the most?
A) responsive product/service strategy
B) innovation product/service strategy
C) quality attributes product/service strategy
D) custom applications product/service strategy
Answer: D
Rationale:
The product/service development strategy that requires adaptive product capabilities the most
is the custom applications product/service strategy. This strategy involves tailoring products
or services to meet the specific needs and preferences of individual customers or small
segments of the market. Adaptive product capabilities are essential in this approach because
they enable the customization and personalization of products or services to address unique
requirements or specifications provided by customers. Unlike other strategies where products
may have broader appeal or standardized features, custom applications require a high degree
of flexibility and adaptability in product design, production processes, and service delivery to
accommodate diverse customer demands effectively. Therefore, the custom applications
product/service strategy relies heavily on adaptive product capabilities to meet individualized
customer needs.
27) Nintendo's major competitors in the video game console industry are Microsoft and Sony.
As Nintendo pondered how to grow its market share, it realized that Microsoft and Sony's
respective gaming consoles were targeted at hardcore gamers who were teenagers or young
adults for the most part and mostly played action games. With this mind, Nintendo decided to
develop a gaming console targeted at players of all ages and preferences, from school-kids to
their grandparents, with motion-controlled sensors to control gameplay, and with a focus on
games that everyone in the family could play. The result was the Nintendo Wii which leads
the market for family-oriented gaming consoles and is a huge hit with casual gamers as much
for its fun quotient as for its lower price compared to its competitors. In developing and
marketing the Wii, Nintendo targeted the ________ opportunity and used the ________
product development approach.
A) go-to-market; custom applications
B) new market segment; innovation focus
C) differentiating functionality; low-cost
D) go-to-market; quality attributes
Answer: B
Rationale:
Nintendo identified a new market segment: While Microsoft and Sony were primarily
targeting hardcore gamers, Nintendo recognized an untapped market segment consisting of
players of all ages and preferences, including casual gamers and families.
Innovation focus in product development: Nintendo's approach with the Wii was innovative,
introducing motion-controlled sensors and focusing on games that appealed to a broader
audience beyond the typical gamer demographic. This innovation in both hardware and
software development was central to the success of the Wii.
28) Which of the following approaches is one of the most common ways for organizations to
achieve their product/service objectives through a go-to-market approach?
A) innovation product/service strategy
B) responsive product/service strategy
C) low-cost product/service strategy
D) quality attributes product/service strategy
Answer: B
Rationale:
Responsive product/service strategy: This approach involves closely aligning products or
services with the needs and preferences of customers. It emphasizes adapting quickly to
changes in the market, customer feedback, and emerging trends. By being responsive to
customer demands, organizations can effectively meet their product/service objectives and
succeed in the market. This approach is commonly employed in go-to-market strategies to
ensure that offerings resonate with target audiences and address their evolving needs.
29) Country X has an automobile import tariff of over 200%, allowing only the extremely
wealthy to own imported vehicles. The most widely sold car in country X is a low-quality,
out-dated model, which is the only indigenously built automobile in the country. The apparent
brand loyalty towards the indigenous model is due to ________.
A) a general lack of satisfaction
B) the presence of high switching costs
C) a lack of trust in imported automobiles
D) the low quality of all imported brands
Answer: B
Rationale:
High switching costs: The presence of a significant tariff on imported vehicles makes it
financially burdensome for consumers to switch to imported brands, leading to high
switching costs. These costs could include the hefty tariff itself, along with potential
additional expenses such as higher prices for imported vehicles, maintenance, and repair
services. As a result, consumers may choose to stick with the domestically produced model
despite its low quality and outdated features, rather than incurring the substantial costs
associated with switching to an imported brand.
30) Which of the following is an advantage of brand loyalty?
A) It reduces the cost of production of goods.
B) It decreases switching costs for its loyal customers.
C) It improves product quality and minimizes channel conflict.
D) It reduces the costs of sales to customers.
Answer: D
Rationale:
Reduces the costs of sales to customers: Brand loyalty can lead to repeat purchases from
existing customers without the need for extensive marketing efforts or incentives. Loyal
customers are more likely to make purchases without requiring significant persuasion or
discounts, thereby reducing the costs associated with sales efforts. This can include expenses
related to advertising, promotional activities, and sales commissions.
31) Retrieving a brand from memory, given the product category or some other cue is called
________.
A) brand recall
B) brand awareness
C) brand recognition
D) brand insistence
Answer: A
Rationale:
Brand recall: This refers to the ability of consumers to retrieve a brand from memory when
prompted with the product category or other relevant cues. It demonstrates the strength of the
association between the brand and the product in the consumer's mind. Brand recall is an
essential aspect of brand awareness and indicates how effectively a brand is remembered by
consumers in relevant situations.
32) Which of the following is an advantage of having a high perceived quality?
A) It reduces the cost of sales.
B) It hardly requires any expenditure toward promotion.
C) It supports higher pricing of the products.
D) It reduces the dependency on intermediaries.
Answer: C
Rationale:
Supports higher pricing of the products: When a brand or product is perceived to have high
quality, consumers are often willing to pay a premium price for it. This perception of quality
can justify higher pricing, leading to increased revenue and potentially higher profit margins
for the company. Additionally, high perceived quality can enhance brand image and
reputation, further supporting premium pricing strategies.
33) Which of the following strategies do organizations leverage the most to achieve their
brand objectives through a differentiating functionality approach?
A) brand loyalty
B) perceived quality
C) brand associations
D) brand awareness
Answer: A
Rationale:
Brand loyalty: Organizations often focus on building brand loyalty when employing a
differentiating functionality approach. By offering unique and innovative features or
functions that set their products apart from competitors, companies aim to cultivate a loyal
customer base. Customers who value and appreciate these distinctive functionalities are more
likely to become repeat purchasers and advocates for the brand, thereby contributing to its
long-term success and achievement of brand objectives.
34) Which of the following strategies do organizations leverage the most to achieve their
brand objectives through a new market segment approach?
A) proprietary brand assets
B) perceived quality
C) brand loyalty
D) brand associations
Answer: B
Rationale:
Perceived quality: When targeting a new market segment, organizations often emphasize the
perceived quality of their products or services to attract and retain customers. By positioning
their brand as offering superior quality compared to competitors, companies can differentiate
themselves in the new market and appeal to the preferences and expectations of the target
audience. High perceived quality can help establish credibility, trust, and satisfaction among
customers, driving brand adoption and success in the new segment.
35) The total profit resulting from the business relationship with a customer over the course
of his/her life is known as the ________.
A) upside potential ratio
B) average propensity to consume
C) customer value proposition
D) customer lifetime value
Answer: D
Rationale:
Customer lifetime value: This metric represents the total profit generated from a customer
throughout their entire relationship with a business. It takes into account the revenue earned
from the customer's purchases, minus the costs associated with acquiring, serving, and
retaining that customer. Customer lifetime value is a crucial metric for businesses to assess
the long-term profitability of their customer relationships and to make strategic decisions
regarding marketing, sales, and customer service efforts.
36) Which of the following strategies is used by an organization to achieve its customerbased objectives through a new market segment approach?
A) expanding into new areas to grow revenue per customer
B) providing top service to top customers to retain them
C) leveraging CRM to capture preferences of top customers
D) adding value-added services to current range of services to grow revenue per customer
Answer: A
Rationale:
Expanding into new areas to grow revenue per customer: When targeting a new market
segment, organizations often aim to increase their revenue per customer by expanding into
new geographic areas or market segments. By tapping into previously untapped customer
groups or regions, companies can broaden their customer base and capture additional revenue
streams. This strategy aligns with the objective of reaching and serving new customer
segments as part of a new market segment approach.
37) Teleband is a company offering broadband Internet services near Seattle. A new college
has been approved to be set up in the community. Teleband expects a rise in demand for
broadband connections with the establishment of the college, both from the college itself as
well as the students. However, six months after it started providing Internet services in and
around the campus area, a clutch of its competitors also introduced similar services and have
been eating into Teleband's share of the market. Which of the following differentiating
functionality-based strategies would best help Teleband retain its customers?
A) Teleband should expand into other areas around the college campus by providing Internet
connections at lower rates than its competitors.
B) Teleband should introduce an incentive plan for its top customers, promising better speeds
for those who download more from the Internet.
C) Teleband should raise the rates for its broadband services to identify itself as the premier
service provider in the area.
D) Teleband should provide uniform services to all its customers with features such as similar
download speeds and usage rates for all.
Answer: B
Rationale:
Introducing an incentive plan for top customers: This strategy aligns with a differentiating
functionality-based approach by offering unique features that set Teleband apart from its
competitors. By providing better speeds as an incentive for heavy internet users, Teleband can
differentiate itself based on functionality and cater to the needs of its top customers. This
approach can help retain customers who value high-speed internet access and are willing to
engage more with the service. Additionally, it promotes customer loyalty by rewarding those
who contribute more to Teleband's business.
38) Market opportunities are defined as market segments that offer potential profit
opportunities.
Answer: True
Rationale:
Market opportunities refer to specific segments of the market where a company can
potentially generate profit by meeting the needs and demands of customers within those
segments. Identifying and capitalizing on market opportunities is a key aspect of strategic
planning and business development, as it allows companies to focus their resources on areas
where there is the greatest potential for success and growth.
39) A company's go-to-market approach refers to the features that distinguish its product or
service from similar ones in the market.
Answer: False
Rationale:
A company's go-to-market approach refers to the strategy it uses to bring its product or
service to market, including factors such as distribution channels, marketing tactics, pricing
strategies, and sales processes. It is not solely focused on the features of the product or
service, but rather encompasses the overall plan for how the company will reach and serve its
target customers.
40) Using a go-to-market approach identical to a market leader provides an advantage in the
market.
Answer: False
Rationale:
Simply replicating the go-to-market approach of a market leader does not guarantee success
or provide a competitive advantage. While it's essential to learn from successful companies,
blindly copying their strategies may not be effective due to differences in resources, target
markets, and competitive landscapes. It's crucial for companies to develop their own unique
go-to-market strategies tailored to their specific circumstances and objectives.
41) In the go-to-market approach, a company often delivers products or services which are
similar to those of competitors, only changing the way it delivers them.
Answer: True
Rationale:
This statement is true. In many cases, companies in competitive markets offer products or
services that are similar to their competitors' offerings. What sets them apart is often their goto-market strategy, which involves how they position, market, distribute, and deliver those
products or services to customers. Companies may differentiate themselves through factors
such as pricing, distribution channels, customer service, branding, or marketing strategies,
even if the core products or services themselves are similar.
42) Porter's Generic Strategies address the issue of achieving the brand-based objectives of a
company.
Answer: False
Rationale:
Porter's Generic Strategies, developed by Michael Porter, focus on how a company can gain a
competitive advantage within its industry. These strategies include cost leadership,
differentiation, and focus. While branding may be a component within these strategies, the
primary focus is on how the company can achieve a competitive advantage either through
offering products/services at a lower cost, differentiating their offerings from competitors, or
focusing on a niche market segment. Brand-based objectives, although important, encompass
a broader spectrum of marketing and corporate objectives beyond those addressed
specifically by Porter's Generic Strategies.
43) For a differentiation generic strategy to work, customers should be able to acknowledge
the difference between the competing products and pay a premium for the superior product.
Answer: True
Rationale:
This statement is true. In a differentiation strategy, a company aims to distinguish its products
or services from competitors' offerings in ways that are valued by customers. This could be
through unique features, superior quality, exceptional customer service, branding, or other
factors. For this strategy to be effective, customers must perceive and acknowledge the
differences between the products or services and be willing to pay a premium for the
perceived superiority.
44) Companies use the cost leadership generic strategy to drive profits through the
differentiating functionality approach.
Answer: False
Rationale:
This statement is false. The cost leadership generic strategy focuses on becoming the lowestcost producer in the industry. It involves minimizing production and operating costs to offer
products or services at lower prices than competitors. This approach aims to attract a broad
customer base by offering competitive prices. On the other hand, the "differentiating
functionality approach" mentioned in the statement seems to be describing a differentiation
strategy, not a cost leadership strategy. In a differentiation strategy, companies seek to provide
unique features or attributes that distinguish their products or services from competitors',
potentially allowing them to charge premium prices. These two strategies—cost leadership
and differentiation—are distinct and are pursued for different reasons and through different
means.
45) A company's market share-based objectives primarily target increased profits.
Answer: False
Rationale:
This statement is false. While increasing market share can be a component of a company's
strategic objectives, it is not the sole objective, nor does it directly correlate with increased
profits. Market share is a measure of the company's sales revenue compared to the total
market sales revenue. Increasing market share can be a strategy to achieve economies of
scale, enhance bargaining power, or gain a competitive advantage. However, the direct
relationship between market share and profits depends on various factors such as pricing
strategy, cost structure, and market dynamics. Ultimately, a company's goal is typically to
maximize profits rather than solely focusing on increasing market share.
46) A company applying a market penetration strategy grows market share by marketing
innovative products and services to new sets of customers.
Answer: False
Rationale:
This statement is false. Market penetration strategy involves selling existing products or
services into existing markets. It aims to increase market share by attracting more customers
or convincing existing customers to use more of the product/service. Market penetration
strategies typically focus on activities such as aggressive pricing, advertising, sales
promotions, and distribution expansion within current markets. While innovation may be a
part of a company's growth strategy, marketing innovative products and services to new sets
of customers would be more aligned with a market development or product development
strategy, not a market penetration strategy. Market penetration is about penetrating existing
markets deeper rather than venturing into new customer segments with innovative offerings.
47) In the market development growth strategy, companies grow by selling their existing
products and services into new markets.
Answer: True
Rationale:
This statement is true. Market development involves expanding into new markets with
existing products or services. Instead of creating new products, the company seeks to find
new customer segments or geographical regions where its current offerings are not yet
available. This strategy could involve identifying untapped markets, demographics, or
geographical areas and then adapting marketing, distribution, and sales efforts to reach these
new markets. By leveraging existing products or services in new markets, companies can
achieve growth without the need for significant product development or innovation.
48) An organization which adopts the innovation product/service strategy is often "first to
market" with its innovations, gaining a head start over its competitors.
Answer: True
Rationale:
This statement is true. The innovation product/service strategy involves introducing new and
innovative products or services to the market. Being "first to market" with such innovations
can indeed provide a significant advantage, often allowing the organization to establish itself
as a leader in that particular product or service category. Being the pioneer in a new market
segment or with a groundbreaking product can help the organization capture market share,
build brand recognition, and establish customer loyalty before competitors have a chance to
enter the market with similar offerings. However, being first to market also comes with risks
and challenges, such as the need to educate consumers about the new product or service,
overcoming potential skepticism or resistance, and managing the uncertainties associated
with untested markets or technologies.
49) Organizations which use a responsive strategy of product/service development emphasize
speed over innovation.
Answer: True
Rationale:
This statement is true. A responsive strategy in product/service development prioritizes
quickly adapting to changes in customer needs, market trends, or competitive pressures.
While innovation may still play a role in this strategy, the primary emphasis is on delivering
products or services rapidly to meet immediate market demands. Responsive organizations
aim to shorten development cycles, streamline processes, and accelerate time-to-market for
their offerings, often prioritizing incremental improvements or modifications over
groundbreaking innovations. Speed and agility in responding to market changes are
prioritized over long-term, disruptive innovation efforts.
50) The most popular approaches to achieving product/service objectives while entering new
markets are through innovation focus and low cost.
Answer: True
Rationale:
This statement is true. When entering new markets, companies typically pursue strategies that
either focus on innovation or emphasize low cost. An innovation-focused approach involves
introducing new and unique products or services that differentiate the company from
competitors and attract customers. On the other hand, a low-cost strategy involves offering
products or services at competitive prices to appeal to price-sensitive customers in the new
market. These two approaches—innovation focus and low cost—represent common strategies
for achieving product/service objectives when entering new markets, as they address different
aspects of customer needs and market dynamics. Depending on the company's resources,
capabilities, and market conditions, it may choose to prioritize one of these approaches or
employ a combination of both to gain a competitive advantage in new markets.
51) Employing an approach using quality attributes is unsuitable for achieving
product/service objectives through a differentiating functionality.
Answer: False
Rationale:
This statement is false. Employing an approach using quality attributes can indeed be suitable
for achieving product/service objectives through differentiating functionality. Quality
attributes such as superior performance, reliability, durability, aesthetics, or user experience
can serve as key points of differentiation for products or services in the market. By
emphasizing high quality in these attributes, a company can distinguish its offerings from
competitors and attract customers who value superior functionality. Therefore, quality
attributes can play a crucial role in supporting a differentiation strategy aimed at offering
unique and superior functionality compared to rival products or services.
52) A low-cost product strategy maximizes profits by spending minimal amounts on research
and development.
Answer: True
Rationale:
This statement is true. A low-cost product strategy aims to maximize profits by minimizing
production and operating costs, including expenditures on research and development (R&D).
By focusing on cost efficiency and optimization throughout the value chain, companies
pursuing a low-cost strategy can offer products or services at competitive prices while still
achieving acceptable profit margins. Minimizing R&D expenses is one way to reduce overall
costs, especially for products or services where innovation may not be a primary driver of
competitive advantage. Instead, companies may prioritize efficiency, standardization, and
economies of scale to keep costs low and profitability high.
53) Brand loyalty reduces the cost of sales because the cost of acquiring new customers is
higher than that of keeping existing ones.
Answer: True
Rationale:
This statement is true. Brand loyalty refers to customers' commitment and preference for a
particular brand over others in the market. When customers are loyal to a brand, they are
more likely to make repeat purchases and continue their patronage over time. Acquiring new
customers typically requires significant investment in marketing, advertising, and sales
efforts, as well as resources for activities such as lead generation, prospecting, and
conversion. In contrast, retaining existing customers, especially loyal ones, tends to be more
cost-effective because the relationship has already been established, and there is a higher
likelihood of continued sales without the need for extensive marketing spend. Therefore,
brand loyalty can reduce the overall cost of sales by lowering the reliance on expensive
customer acquisition activities.
54) Brand awareness is the customers' opinion of the brand's ability to fulfill their
expectations.
Answer: False
Rationale:
This statement is false. Brand awareness refers to the level of familiarity and recognition that
customers have with a particular brand. It reflects the extent to which consumers are aware of
the existence and identity of a brand within the marketplace. Brand awareness can be
measured by indicators such as brand recall (ability to remember the brand when prompted)
and brand recognition (ability to identify the brand among a set of alternatives). It does not
directly relate to customers' opinions of the brand's ability to fulfill their expectations.
Instead, brand awareness serves as a foundational element in building brand equity and
influencing consumer perceptions and behaviors. Customers' opinions of a brand's ability to
meet their expectations are more closely tied to factors such as brand image, brand reputation,
product/service quality, and overall customer experience.
55) Brand awareness is important because many people associate familiarity with reliability.
Answer: True
Rationale:
This statement is true. Brand awareness plays a crucial role in consumer decision-making
processes because familiarity with a brand often leads to perceptions of reliability and
trustworthiness. When consumers are familiar with a brand and recognize it among
alternatives, they may perceive it as more reliable, credible, and trustworthy compared to
unfamiliar brands. This association between familiarity and reliability can influence
consumer preferences, purchase intentions, and loyalty. Strong brand awareness helps
companies establish a positive reputation and build relationships with customers, ultimately
contributing to brand equity and long-term success in the marketplace.
56) Two common ways for organizations to achieve their brand objectives through a go-tomarket approach are through brand awareness and perceived quality.
Answer: False
Rationale:
This statement is false. While both brand awareness and perceived quality are important
components of a company's overall brand strategy, they are not the only ways to achieve
brand objectives through a go-to-market approach. A go-to-market strategy encompasses
various activities and tactics aimed at bringing products or services to market and reaching
target customers effectively. Achieving brand objectives through a go-to-market approach
may involve a combination of strategies such as market segmentation, product positioning,
pricing strategies, distribution channels, promotional activities, and customer engagement
initiatives. While brand awareness and perceived quality are indeed crucial aspects of a
brand's success, they represent specific dimensions of brand management rather than
comprehensive strategies for achieving brand objectives through the go-to-market approach.
57) Company assets associated with the brand, like patents, trademarks, and distribution
channel relationships, can help protect brand equity.
Answer: True
Rationale:
This statement is true. Brand equity represents the intangible value and strength of a brand in
the marketplace, including factors such as brand recognition, reputation, customer loyalty,
and perceived value. Company assets such as patents, trademarks, and distribution channel
relationships play a crucial role in protecting and enhancing brand equity. Patents and
trademarks provide legal protection for brand-related intellectual property, preventing
competitors from using similar brand elements or imitating products or services. Distribution
channel relationships ensure that the brand's products or services are available to customers
through trusted channels, helping maintain accessibility and convenience, which are
important aspects of brand equity. By leveraging these assets effectively, companies can
safeguard their brand equity and reinforce the competitive advantage associated with their
brand in the market.
58) Explain the three broad categories of market opportunities.
Answer:
• New Market Segments: Discover a portion of the market not targeted by competitors
• Go-to-Market Approach: Establish a mechanism to reach a new class of customers
• Differentiating Functionality: Develop unique products and services to attract niche markets
59) Explain the importance of having a competitive advantage while capturing a new market.
Answer: Companies must check to see if they have the competitive advantages required to
maintain leadership in their newly chosen market segment. Similarly, marketers should
ensure that other companies do not possess a competitive advantage that might jeopardize the
business's leadership in the market.
60) How can a go-to-market approach be leveraged to provide a competitive advantage?
Answer: A company's go-to-market approach is the mechanism the company uses to deliver
its products and services to customers. To use this approach to create new market
opportunities, we develop a different way to deliver our products and services. Often, the
products or services the company delivers are similar (or identical!) to those of competitors;
we are only changing the way we deliver them. The competitive comparison framework data
enables us to assess competitor go-to-market strategies and determine if a different type of
go-to-market approach would give us an advantage in the market.
61) Explain the use of differentiating functionality as an approach to finding new market
opportunities.
Answer: A product/service's differentiating functionality are its features which distinguish the
product or service from similar ones in the market. The new functionality is intended to
attract a new class of users that value the specific new functionality. For the differentiating
functionality approach to be successful, customers must recognize the difference, value the
difference, and constitute a large enough market to justify the difference.
62) Explain differentiation, as proposed by Michael Porter as a generic strategy, to provide a
starting point for a company's overall strategic approach to the market.
Answer: In the differentiation generic strategy, companies with competitive advantages in
design can create products or services clearly superior and different to those of competitors to
differentiate their firm from others. Customers must be able to acknowledge the difference
and pay a premium for it.
63) Explain market development growth strategy as an approach for targeting growth.
Answer: In the market development growth strategy, companies grow by selling their existing
products and services into new markets. Two typical approaches include expanding
geographically into new areas (such as selling internationally) and expanding to a new class
of buyers (such as targeting different demographic segments).
64) Explain the responsiveness strategy as an approach to product or service development.
Answer: Organizations use a responsive product/service strategy, which leverages strong
research and development capabilities, but emphasizes speed over innovation for its own
sake. Here, products and services are constantly in development to adapt to dynamic market
demands.
65) Explain how approaches to product and service development can be applied to a go-tomarket approach, with an example.
Answer: Two common ways for organizations to achieve their product and service objectives
through a go-to-market approach are responsiveness and custom applications. For example,
knowing that social gamers crave interactivity, Zynga delivers its FarmVille game using
social media sites like Facebook, rather than sending the gamer a traditional CD-ROM in a
box. The BMW MINI allows customers to "build" their cars on its configurator-equipped
website (selecting from 10 million option and accessory combinations).
66) Why is brand loyalty important for a company?
Answer: Brand loyalty is important for three reasons. First, it reduces the cost of sales
because the cost of acquiring new customers is higher than that of keeping existing ones.
Second, existing customers can create brand awareness and give assurance to potential new
customers. Third, brand loyalty reduces vulnerability to competitors.
67) Explain customer acquisition as a customer-based basic strategy.
Answer: Different types of companies adopt different types of customer acquisition strategies
to adapt to the needs of their particular market. Whether the company acquires new customers
using market penetration methods (like capturing competitors' customers) or market
development methods (like selling existing services to a new group of customers), companies
must ensure that customers value their offering, or they will not be successful.
68) Explain Porter's generic strategies for financially based objectives?
Answer: Michael Porter proposed three generic strategies that provide a good starting point
for a company's overall strategic approach to the market: overall cost leadership,
differentiation, and focus.
• Cost leadership: In the cost leadership generic strategy, companies leverage their
competitive advantages in low-cost production or lean supply chains (or low-cost service
delivery) to price their products lower than those of their competitors, in an effort to boost
volume and increase profit. Companies can take advantage of economies of scale (companies
reduce their per-unit cost through large-scale operations, like enormous automotive assembly
plants) and experience curve effects (companies become more efficient at building products
and delivering services as they gain experience) to reduce manufacturing and service delivery
costs.
• Differentiation: In the differentiation generic strategy, companies with competitive
advantages in design can create products or services clearly superior and different to those of
competitors to differentiate their firm from others. Customers must be able to acknowledge
the difference and pay a premium for it.
•Focus: In the focus generic strategy, organizations target a particular market segment or
niche using either the cost or differentiation method.
69) Explain the four different approaches to market growth as proposed by Ansoff.
Answer:
• Market Penetration: In the market penetration growth strategy, companies grow market
share by marketing existing products and services to existing customers in new ways. Three
typical ways include targeting competitor's customers, increasing purchase frequency, and
increasing purchase amount.
• Market Development: In the market development growth strategy, companies grow by
selling their existing products and services into new markets. Two typical approaches include
expanding geographically into new areas (such as selling internationally) and expanding to a
new class of buyers (such as targeting different demographic segments).
• Product/Service Development: In the new product/service development growth strategy,
companies grow market share by marketing new products and services to existing groups of
buyers.
• Diversification: In the diversification growth strategy, companies grow by marketing new
products and services to new groups of customers.
70) Describe the five approaches to product development.
Answer: Innovation Focus: Organizations can use an innovation product/service strategy,
emphasizing strong research and development capabilities, fostered in a culture of
innovation. The organization is often "first to market" with its innovations, gaining a head
start over its competitors, which are forced to imitate the first-mover to stay competitive.
Organizations with innovation focus encourage risk-taking by rewarding employees for new
ideas, and understanding that failure is an inevitable part of developing cutting-edge services
and products.
• Responsiveness: Alternatively, organizations can use a responsive product/service strategy,
which still leverages strong research and development capabilities, but emphasizes speed
over innovation for its own sake. Here, products and services are constantly in development
to adapt to dynamic market demands.
• Low Cost: Companies using a low-cost product/service strategy specialize in delivering
products and services at low cost. Such an approach emphasizes competitive advantages in
low-cost production and distribution techniques to achieve profitability. The approach
requires little in the way of research and development (and its costs), resulting in potentially
higher profits. Such companies are limited to fairly generic products, however.
• Quality Attributes: Reliability, Durability, and Safety: Organizations specializing in selling
to demanding customers often use a quality attributes product/service strategy. Needs can
include demand for extremely high reliability (or risk a failed mission, as in the aerospace
industry), extremely high quality (or face severe injuries to patients, as in the medical device
industry), extreme durability (or face expensive downtime, as in the heavy construction
equipment industry), or be extremely focused on safety (or risk death, as in the hazardous
materials safety equipment industry).
• Custom Applications: Some organizations use a custom applications product/service
strategy, targeting customers needing unique applications. In consumer markets, Dell
provides an online configurator (Web-based application assisting the user in specifying parts
of a system) for customers to build their own custom personal computer, enabling them to
select the processor speed, memory size, and so on. In business markets, Grainger and other
industrial parts suppliers have applications engineers on staff to modify existing components
for customer applications, such as modifications and adjustments to basic electric motors to
meet specific requirements. Sometimes this type of operation is called BTO (build to order).
Such organizations excel in low-cost and rapid development work (although here,
"development" often involves minor modifications to existing platforms). Organizations must
also have adaptive production capabilities.
71) Explain the Aaker brand equity model of five effective strategies to address brand
objectives.
Answer: Brand Loyalty: Aaker defines brand loyalty as the degree to which customers are
satisfied, have some degree of switching costs (time and money required to change brands,
which can discourage some customers from changing brands), like the brand, and are
committed to it. Brand loyalty is important for three reasons. First, it reduces the cost of sales
because the cost of acquiring new customers is higher than that of keeping existing ones.
Second, existing customers can create brand awareness and give assurance to potential new
customers. Third, brand loyalty reduces vulnerability to competitors.
• Brand Awareness: Brand awareness consists of brand recognition (confirming prior
exposure to a brand, like seeing it before in a TV ad) and brand recall (retrieving the brand
from memory, given the product category or some other cue). Recognized and recalled
brands are often selected over unknown brands, because many people assume that familiar
brands are likely to be more reliable, have solid financial strength, and are of reasonable
quality.
• Perceived Quality: Perceived quality is the customers' opinion of the brand's ability to fulfill
their expectations. High perceived quality of a brand is important for three reasons. First, it
can directly influence purchase decisions and brand loyalty, especially when buyers are not
motivated or able to conduct a detailed analysis (such as consumer packaged goods like
toothpaste and breakfast cereal). Second, it can support a premium price ("expensive but
worth it"). Third, it can support a brand extension because it is assumed that the quality will
carry over to the new extension.
•Brand Associations: According to Aaker, brand associations (anything mentally linked to
brands) can affect the processing and recall of information, provide points of differentiation,
provide a reason to buy, create positive attitudes and feelings, and aid brand extensions.
• Other Proprietary Brand Assets: Proprietary brand assets, company assets associated with
the brand, like patents, trademarks, and distribution channel relationships, can help protect
brand equity. Patents related to the brand help to prevent competitors from stealing the
intellectual property (ideas, inventions, and other "creations of the mind") that support the
brand. Brand trademarks give a legal recourse to prevent competitors from seeking to confuse
consumers by using a similar name. Distribution channels controlled by the brand can be
lucrative assets because of historical brand performance.
72) Explain the three basic strategies for customer-based objectives.
Answer:
• Customer Acquisition (Getting Customers): Different types of companies adopt different
types of customer acquisition strategies to adapt to the needs of their particular market.
Whether the company acquires new customers using market penetration methods (like
capturing competitors ' customers) or market development methods (like selling existing
services to a new group of customers), companies must ensure that customers value their
offering, or they will not be successful.
• Customer Retention (Keeping Customers): Having acquired the customer, companies use
customer retention strategies to keep them. Retention is not just a question of keeping
customers; it is of keeping the right customers. Spending large amounts to keep unprofitable
customers rarely makes sense. To increase customer focus while still maintaining
profitability, companies must realize that different customers have different customer lifetime
values (the total profit resulting from the business relationship with the customer over their
lifetime). As a result, many companies employ customer tiering to rank their customers
according to their customer lifetime value.
• Customer Revenue Growth (Growing Customers): Retaining customers helps keep
customer lifetime value; growing customers increases it. Customer revenue growth strategies
typically involve increasing their lifetime (introducing them to the product or service earlier
to extend the relationship), increasing the amount of revenue generated from every customer
interaction (like super-sizing), or extending the company's value proposition to provide an
array of products and services that customers appreciate. Customer relationship management
(CRM) software helps grow customer value by capturing customer preferences so companies
can tailor value-added products and services to them.
Test Bank for Marketing Planning
Stephan Sorger
9780132544702
