CHAPTER 5: STRATEGIC MANAGEMENT Multiple Choice Questions 1. The concept of _____ is the ability of a firm to provide value to customers that
exceeds what competitors can provide. a. strategic management b. distinctive competence c. competitive advantage d. comparative advantage
Answer: c (p. 116, easy, recall) 2. Which one of the following is necessary if a firm is to maintain a competitive
advantage? a. winning consistently over the long term in a competitive situation b. charging a lower price than what competitors charge c. reproducing the successful actions of competitors d. providing products and services of a superior quality to those of competitors
Answer: a (p. 116, moderate, integration) 3. Achievement of which of the following will usually give a competitive advantage?
a. rarity, durability, non-substitutability, and tangibility b. responsiveness, rarity, empathy, and durability c. superiority, non-substitutability, inimitability, and rarity d. superiority, assurance, non-substitutability, and durability
Answer: c (p. 116, moderate, recall) 4. Dom Pérignon is only made during the best years and all grapes used to make it are
harvested during the same year. As such, it is a “vintage” champagne, which has
achieved a _____. a. strategic advantage b. competitive advantage c. comparative advantage d. distinctive advantage
5. Which of the following best describes a situation where there is a high potential for substitutes? a. A car manufacturer offers a wide range of vehicles at different prices. b. The trans-Atlantic airline routes are serviced by a great many different carriers. c. Consumers can choose between soda, water, iced tea and many other options to
quench their thirst. d. Windows software is used by a wide variety of customers, from household users
to giant industries. Answer: c (p. 117, moderate, integration) 6. Which one of the following is NOT included in a firm’s mission statement?
a. company philosophy b. customers and markets c. principal products or services d. sources of revenues
Answer: d (p. 118, easy, recall) 7. A _____ provides a view of the firm over the long term and what it should achieve in
the future. a. strategic vision b. mission statement c. differentiated leadership strategy d. multipoint competitive analysis
Answer: a (p. 118, easy, recall) 8. By stating its intention to have “Kellogg’s Products on Every Table in the World,”
Kellogg’s is articulating its _____. a. action plan b. strategic vision c. global forecast d. marketing target
Answer: b (p. 118, easy, application) 9. Which of the following is NOT a step in the strategic management process?
a. determining strategic vision b. securing interim financing c. establishing objectives d. formulating strategy
10. A mission statement articulates the fundamental purpose of the organization and often contains all of the following EXCEPT _____. a. competitive profiles b. company philosophy c. obligations to shareholders d. commitment to employees
Answer: a (p. 118, difficult, recall) 11. In order to determine what strategy to pursue, a company must analyze its _____.
a. internal capabilities b. external environment c. internal resources d. all of the above
Answer: d (p. 119, moderate, recall) 12. Within a global context, _____ include the rules, policies, and enforcement processes
that influence the behavior of individuals and organizations within a country. a. physical forces b. institutional forces c. sociocultural forces d. geopolitical forces
Answer: b (p. 119, easy, integration) 13. _____ consist primarily of the demographics and cultural characteristics of the
societies in which an organization operates. a. Open-market forces b. Sociocultural forces c. Environmental forces d. Technological forces
Answer: b (p. 119, difficult, recall) 14. _____ are NOT considered one of the dimensions of a firm’s general environment.
a. Primary forces b. Economic forces c. Technological forces d. Sociocultural forces
15. Which of the following best illustrates the assertion that “demographics provide
important data about the population, but societal values translate that data into business implications”? a. The longevity of the Japanese when combined with their low birthrate means that
fewer and fewer Japanese workers will have to support more and more retirees. b. Global warming and rising gas prices will increase the demand for hybrid cars. c. Falling birthrates and modestly increasing education standards are expected to
lead to a shortage of qualified technicians in the United States. d. Baby Boomers will be reaching retirement age by 2010; however, society’s idea
of retirement has expanded to include the pursuit of second careers. Therefore, companies will be able to hire experienced workers at open-market prices.
Answer: d (pp. 119 – 120, difficult, integration) 16. In a certain city, the bars and restaurants built outdoor seating areas prior to the city
passing laws banning indoor smoking of tobacco products. To what dimension of the general environment were the bar and restaurant owners reacting? a. political-legal forces b. economic forces c. institutional forces d. sociocultural forces
Answer: a (pp. 121 – 122, moderate, integration) 17. When conducting an environmental analysis in a foreign country, two additional
dimensions of the external environment are typically examined: _____. a. commercial and industrial forces b. military and governmental forces c. institutional and physical forces d. educational and cultural forces
Answer: c (p. 122, difficult, application) 18. Federal spending pushes the federal deficit up, causing an increase in interest rates.
What is the LEAST likely result of this occurrence? a. unemployment increases b. it becomes more expensive to borrow money c. businesses expand at a slower rate d. consumer spending rises
19. Which of the following is not one of the five forces in the industry and competitive environment identified by Porter? a. substitutes b. alliances c. new entrants d. the nature of rivalry
Answer: b (p. 123, moderate, recall) 20. Within the context of Porter’s Five Forces, all of the following EXCEPT _____ are
dimensions that will lead to lower profits. a. few suppliers b. price-based competition c. fragmented customers d. low entry barriers
Answer: c (pp. 123 – 125, moderate, integration) 21. The XYZ Company wishes to enter the beer market in Country A by building a new
brewery there. Many companies already have breweries in Country A. Furthermore, a new brewery will be very expensive to build. Which of the following is the obstacle that makes it difficult for The XYZ Company to start this business in Country A? a. low costs of switching b. high costs of switching c. low barriers to entry d. high barriers to entry
Answer: d (p. 125, moderate, integration) 22. A firm’s value chain consists of _____.
a. primary and support activities b. primary and secondary activities c. observable and surreptitious activities d. regional and global activities
Answer: a (p. 126, moderate, recall) 23. According to Michael Porter, primary value chain activities involve _____.
a. planning, finance, accounting, legal activities, and government relations b. acquiring, training, evaluating, compensating, and developing human resources c. expertise and the tools or equipment related to the exercise of that expertise d. creating a product or service and distributing it to customers
24. A local microbrewery is working on its methods of advertising, promoting, and selling its product. This is an example of _____. a. primary activities in the value chain b. support activities in the value chain c. procurement activities in the value chain d. service activities in the value chain
Answer: a (p. 126, moderate, application) 25. The _____ of a product or service is a function of how many customers are willing to
purchase the product or service and how much they are willing to pay for it. a. market value b. relative value c. absolute value d. intrinsic value
Answer: c (p. 126, moderate, recall) 26. In the cut flower industry, fresh flowers must be available to customers as soon as
possible after they have been harvested. This places a premium on which of the primary activities in the value chain? a. operations and service b. procurement and management c. operations and the value chain d. inbound and outbound logistics
Answer: d (pp. 126 – 127, moderate, recall) 27. According to Michael Porter, _____ is NOT a support activity in the value chain.
a. procurement b. marketing and sales c. technology development d. human resource management
Answer: b (p. 128, moderate, integration) 28. Which of the following is NOT a primary activity, according to Porter?
a. operations b. procurement c. inbound logistics d. marketing and sales
29. Activities that transform inputs into the products and services of the firm, as well as maintenance of machines, are part of the _____. a. operations component of the value chain b. procurement component of the value chain c. inbound logistics component of the value chain d. outbound logistics component of the value chain
Answer: a (p. 127, moderate, recall) 30. A _____ is an interrelated set of activities that can deliver competitive advantage not
only in the short term but also into the future. a. core competence b. corporate strategy c. competitive advantage d. strategic vision
Answer: a (p. 129, difficult, recall) 31. SWOT analysis stands for _____.
a. strengths, weaknesses, opportunities, and tools b. strengths, weaknesses, opportunities, and threats c. strengths, weaknesses, organizations, and threats d. strengths, weaknesses, organizations, and tools
Answer: b (p. 129, easy, recall) 32. Petro is the premier provider of oilfield consultancy services in a certain region. Its
consultants are experts in local conditions. Recent discoveries of metal deposits in its region have spawned attractive new markets outside of the oilfield. Global firms with cutting-edge technology that Petro cannot afford have been attracted by the new markets. If Petro did a SWOT analysis, what would be one of its weaknesses? a. access to cutting edge technology b. recent discoveries of metal deposits c. detailed knowledge of local oil markets d. entry of international companies into the market
Answer: a (p. 129, difficult, integration) 33. What part of a SWOT analysis focuses on the external environment?
a. strengths and weaknesses b. weaknesses and threats c. opportunities and threats d. strengths and opportunities
34. _____ translate the strategic intent and mission of the firm into concrete and measurable goals. a. Inbound logistics b. Core competencies c. Strategic objectives d. Differentiated forecasts
Answer: c (p. 130, easy, recall) 35. Setting strategic objectives facilitates the ability of a firm to do all of the following
EXCEPT _____. a. allocate resources appropriately b. clarify yearly objectives or goals c. hold people accountable for results d. reach a shared understanding of priorities
Answer: b (p. 130, moderate, integration) 36. Managers pursuing a _____ seek to make their product or service different from those
of competitors on dimensions valued by customers. a. global strategy b. differentiation strategy c. cost leadership strategy d. multipoint competition strategy
Answer: b (p. 131, moderate, recall) 37. A manufacturer striving to be the lowest-cost producer of a product or service, while
charging slightly less than industry-average prices, is pursuing a/an_____. a. cost leadership strategy b. differentiation strategy c. integrated leadership strategy d. multipoint competition strategy
Answer: a (p. 131, moderate, recall) 38. Cost leadership and differentiation are _____.
a. focused strategies for management processes b. targeted strategies for gaining market share c. generic strategies for obtaining a competitive advantage d. strategic methods for integrating internal and external analyses
39. Which of the following typically does NOT help achieve cost leadership? a. use of special technology b. employing economies of scale c. offering superior products and services d. selling more products through existing sales channels
Answer: c (p. 131, moderate, recall) 40. If a firm has lower costs than its competitors and it can command prices similar to its
competitors, then it can obtain _____. a. average profits b. premium profits c. fair-market profits d. above-average profits
Answer: d (p. 131, moderate, application) 41. Which of the following provides the best explanation of why consumers are willing to
pay a premium price for Starbucks coffee? a. Starbucks coffee is roasted, giving it a distinctive flavor. b. Starbucks is a clearly recognized and respected brand. c. Starbucks employees are trained to be attentive to customers. d. Starbucks differentiates itself through its product, service, and brand reputation.
Answer: d (p. 132, moderate, integration) 42. A customer segment is defined as a group of customers who _____.
a. place similar value on product features b. are the first to purchase innovative products c. are found in the same geographical location d. have homogenous demographic characteristics
Answer: a (p. 133, moderate, recall) 43. A firm that differentiates its product based on style and performance and targets a
narrow segment of customers is pursuing a/an _____. a. multipoint competition strategy b. focused differentiation strategy c. focused cost leadership strategy d. integrated differentiation-cost leadership strategy
44. To succeed when pursuing a _____, there must be significant differences among the firm’s target customers or among geographical segments of its customers. a. focus strategy b. global strategy c. leveraged strategy d. competitive strategy
Answer: a (p. 133, easy, recall) 45. A company seeks to enter the soda market by introducing an unusual line of sodas
that glow in the dark. It intends to sell these sodas at no greater cost than normal sodas. What strategy is the company using in entering the soda market? a. cost leadership strategy b. multipoint differentiation strategy c. focused differentiation strategy d. integrated differentiation-cost leadership strategy
Answer: d (p. 134, moderate, application) 46. A _____ involves competing with firms across markets by using strengths in one
market to overcome weaknesses in another market. a. global strategy b. multicultural strategy c. differentiation strategy d. multipoint competition strategy
Answer: d (p. 134, easy recall) 47. A company decides to enter the commercial education market by purchasing a small
company that prepares paying students to take high-stakes tests. How is the company choosing to enter this new market? a. by acquisition b. by organic growth c. by strategic alliance d. by leveraging core competencies
Answer: a (p. 136, moderate, integration) 48. The “Seven S” approach developed by McKinsey Consulting _____.
a. helps managers develop appropriate strategic alliances b. allows managers to acquire, train, and develop personnel c. provides instant access to and immediate knowledge of new markets d. is perhaps the most widely used strategy implementation framework
49. McKinsey discovered that performance declined when many of their clients implemented new strategic plans because the strategies were _____. a. not developed organically within the company b. executed without sufficient studies of the competitive environment c. implemented within old structures, cultures, skills, styles, and staff d. not designed, recommended, and reviewed by McKinsey consultants
Answer: c (p. 136, easy, recall) 50. Companies perform _____ to reinforce efforts that have contributed to desired results
and to correct those that have not. a. internal audits b. SWOT analyses c. benchmarking exercises d. organizational performance evaluations
Answer: d (p. 138, moderate, recall) True/False 51. A firm that provides superior value for its customers has a comparative advantage. Answer: True (p. 116, easy, recall) 52. One pizzeria in town somehow manages to always deliver an order within 15
minutes. This is an example of a comparative advantage. Answer: True (p. 116, moderate, application) 53. Brand recognition can be durable; a neglected brand may long endure in the minds of
consumers. Answer: True (p. 117, moderate, integration) 54. Statements of strategic intent are typically longer than mission statements. Answer: False (pp. 118 – 119, moderate, integration) 55. Some components of a mission statement are company philosophy, customers and
56. The preference of German consumers for “natural” products with no preservatives is
a sociocultural force that beer manufacturers in Germany must consider. Answer: True (p. 119, easy, application) 57. The general environment’s effects on a business are most often very direct. Answer: False (p. 119, moderate, recall) 58. Managers need to focus on two basic dimensions of the technology environment:
product and process changes. Answer: True (p. 120, moderate, recall) 59. Process technological changes lead to completely new products as well as new
features and capabilities for existing products. Answer: False (p. 120, moderate, recall) 60. Observers monitoring economic activity in the United States would find that
economic cycles in the construction industry move in tandem with the overall national economy.
Answer: False (p. 121, moderate, integration) 61. In an industrial company, such as a manufacturer of automobiles, employees are its
primary assets. Answer: False (p. 121, difficult, recall) 62. As dimension of the external business environment in a foreign country, physical
forces include rules, policies, and enforcement processes. Answer: False (p. 122, difficult, recall) 63. The fact that workers in Sweden tend to be highly unionized is an institutional
environmental force that should be considered by firms expanding into Sweden. Answer: True (p. 122, moderate, application) 64. The balance of power between a firm and its customers affects its ability to compete
65. Suppose a firm has relatively few customers. If these customers work together, they can reduce that firm’s profits by demanding lower prices and better service.
Answer: True (p. 125, easy, integration) 66. According to Michael Porter, primary activities facilitate the creation of a product or
service and its transfer to the customer. Answer: False (p. 126, moderate, recall) 67. The supply chain consists of a set of key activities that directly produce (or support
the production of) the products or services that a firm offers to its customers. Answer: False (p. 126, difficult, application) 68. A chocolatier produces candy containing exotic ingredients from the rainforests of
Brazil. The ingredients are provided by a single supplier. The chocolate manufacturer thus has a great deal of power over that supplier.
Answer: False (p. 126, moderate, integration) 69. Most bottled waters are essentially the same. This places a premium on marketing and
sales in the value chain of a bottled water producer in order to distinguish its products from those of others.
Answer: True (p. 127, moderate, application) 70. A firm’s infrastructure has more to do with brick and mortar than with the
administrative functions that support its primary activities. Answer: False (p. 128, easy, recall) 71. The strengths and weaknesses of a company’s business partners throughout the entire
value network affect the competitive position and advantage of the firm. Answer: True (p. 129, difficult, recall) 72. In SWOT analysis, strengths and weaknesses are internal characteristics; whereas,
opportunities and threats are external characteristics. Answer: True (p. 129, moderate, integration) 73. Unless an organization translates its strategic intent and mission into specific goals,
they will remain statements of good intentions and unrealized achievements. Answer: True (p. 130, moderate, recall)
74. Strategic objectives differ from other performance objectives in that they represent
targets the company aims for over the long term. Answer: True (p. 130, easy, recall) 75. Business-level strategy is the most important for achieving a competitive advantage. Answer: True (p. 131, difficult, recall) 76. A firm can limit its strategic scope by focusing on a specific customer segment. Answer: True (p. 133, moderate, recall) 77. Firms that follow a focus strategy are more likely to make drastic improvements to
their products or services over time. Answer: False (p. 133, difficult, recall) 78. A firm can use a multipoint competitive strategy to compete with firms across
markets by using strengths in one market to overcome weaknesses in another market. Answer: True (p. 134, moderate, recall) 79. The key to successful strategy implementation is having an internal organization that
is consistent with and supportive of the strategy. Answer: True (p. 136, difficult, recall) 80. The final step in the strategic management process is implementation. Answer: False (p. 136, moderate, recall) Short Essay Questions 81. What is the meaning of the term “competitive advantage”? (p. 116) The concept of competitive advantage involves the ability of a firm to win consistently over the long term in a competitive situation. 82. Discuss the four required elements for competitive advantage. (pp. 116 – 117) These elements are superiority, rarity, inimitability, and non-substitutability. Superior value is sometimes referred to as either comparative advantage or distinctive competence. The essence of superior value as an aspect of competitive value is embodied
in the following question: Does the firm provide products and services that produce value for customers that is superior to any provided by competitors? When applied to a company, the element of rarity means that no other firms can have the capabilities needed to provide the quality and quantity of services it can produce. If no other firms hold similar capabilities, and the company produces superior value for its customers, then it will hold a competitive advantage. Possessing rare capabilities that enable it to provide superior value for customers will only give a company a temporary advantage. Therefore, companies must create barriers that make it difficult for others to imitate these capabilities. Such barriers can range from the size of the company to its culture and corporate reputation. Finally, a low possibility of substitution is required for a company to maintain its competitive advantage over time. The term “substitution” refers to the ability of
customers to fulfill their needs by alternate means. 83. What is the purpose of a strategic vision? (p. 118) The strategic vision provides a view of the firm over the long term and what it should achieve in the future. It is the heart of the firm’s strategy and strategic plan. 84. What elements are included in a firm’s mission statement? (pp. 118 – 119) A mission statement includes the following: company philosophy, company identity, primary products or services, customers and markets, geographic focus, obligations to shareholders, and commitment to employees. 85. Name the forces in the general environment that can influence the effectiveness
of an organization’s strategy. (p. 119) The general environment consists of sociocultural, technological, economic, political-legal, and global forces. 86. Name the five industry and competitor forces that can significantly influence the
performance of organizations within an industry. (p. 123) Michael Porter developed perhaps the most well known model for analyzing a firm’s
industry and competitor environment. The framework focuses on five forces: the nature of rivalry, new entrants, substitutes, customers, and suppliers.
87. What is a value chain? (p. 126) A value chain is a set of key activities that directly produce or support the production of what a firm ultimately offers to customers. The primary activities of a value chain include inbound logistics, operations, outbound logistics, marketing and sales, and after-sale service. The support activities of a value chain include firm infrastructure, human resource management, technology development, and procurement. 88. What happens during a SWOT analysis? (p. 129) During a SWOT analysis, a firm’s internal strengths and weaknesses are weighed, as well
as its external opportunities and threats. First, a company should identify and evaluate its strengths and weaknesses. Next, it should focus on the external environment; that is, the opportunities and threats. Important insights can be obtained after comparing and matching the strengths and weaknesses of the organization and the opportunities and threats of the business environment. 89. What is the importance to a business of setting strategic objectives? (p. 130) Setting strategic objectives is a critical step in the strategic management process because it assists in (1) appropriate allocation of resources, (2) reaching a mutual understanding of priorities, (3) delegating responsibilities, and (4) holding people accountable for results. 90. What did McKinsey Consulting discover about the results of implementing new
strategic plans? (p. 136) McKinsey Consulting discovered that a client’s performance often declined when new strategic plans were implemented. This was because the plans were implemented within old structures and cultures; using old skills, styles, and staff that were not consistent with the new strategy. Successful strategy implementation needs an internal organization that is consistent with and supportive of the strategy. Note: The remaining questions in this section will be based on the following scenario: In a nostalgic setting, The Potter’s Wheel began as a seasonal ice cream parlor in the 1990s. After two seasons, owner Jim Aker expanded his product offerings to include specialty sandwiches and deli-style salads. After another successful season, Aker made the risky decision to operate year round. With an enhanced lunch and dinner menu and a renovated dining room, The Potter’s Wheel attracted a steady crowd during the first winter. During the following summer, Aker added a small, outside dining area with canopied tables in a garden setting. In order to “keep the customers interested,” he
booked amateur bands to provide music on weekends during the autumn. “Profitability
looks good,” Jim Aker said, “but I want to keep our image changing so that no one gets
bored with us, even if that costs us a little.” News began to circulate that Ann’s Antiques,
located in the building next door, was moving out of town. Aker immediately began thinking of the endless business opportunities the vacant building could provide.
91. Does The Potter’s Wheel have a competitive advantage? (p. 116) Jim Aker has introduced numerous changes to The Potter’s Wheel, which have attracted a diverse customer base. Many customers are likely return just to see “what’s next.” That concept, in itself, may be Aker’s competitive advantage. 92. Do the criteria of competitive advantage apply to The Potter’s Wheel? (p. 116) Competitive advantage is the ability of a firm to provide value to customers that exceeds what competitors can provide. The Potter’s Wheel may be offering “superior value” to its
customers because of its diverse menu and ambiance. The offerings of the Potter’s Wheel
may be “rare,” given that competitive restaurants or entertainment venues may not offer similar services of comparable quality and quantity. Aker’s offerings may be “difficult to imitate,” in that competitors may have limited resources and/or a limited vision, which would prevent the types of change that he has implemented. Finding a “substitute” for
The Potter’s Wheel may also be difficult, given its food, entertainment, and atmosphere. 93. In understanding the strategic management process, does Jim Aker have a
strategic vision? (p. 118) After two successful seasons as an ice cream parlor, Jim Aker began changing The Potter’s Wheel by expanding the food it served, the times during which it was open, and the ambiance it offered. He then began to diversify by offering musical entertainment on weekends, because he wanted to “keep the customers interested.” One can suspect that
attracting customer interest was an underlying motive for opening The Potter’s Wheel
and expanding its offerings over time. Near the end of the case, Jim Aker articulates his strategic vision: “I want to keep our image changing so that no one gets bored with us.”
He is willing to pursue this vision, even if it “costs us a little” during the process. It is this
vision that compels him to think of the “endless business opportunities” that will be
created when Ann’s Antiques moves out of the building next door. 94. Which aspects of the general environment would most likely affect Jim Aker’s
future strategy? (p. 119) Sociocultural aspects will influence the number of potential customers (local and from out of town) who would value The Potter’s Wheel as a dining and entertainment venue.
He must also consider economic cycles that will determine whether people can afford to travel for pleasure or dine out. These cycles will also affect his cost of doing business (food, supplies, entertainment, staff, utilities, etc.), all of which would affect the prices he must charge to his customers. Political forces could also affect his plans. If government spending increases the federal deficit, interest rates may rise. Then it would be more expensive to borrow the money needed to finance expansions and renovations at The Potter’s Wheel.
95. In your opinion, do the product offerings and image of The Potter’s Wheel
change too rapidly? (pp. 119 – 123) Today’s businesses exist in a changing environment, driven by sociocultural, economic,
technological, political-legal and global forces. As the environment changes, businesses must also change, if they hope to prosper. The “nostalgic setting” of The Potter’s Wheel
may insulate it from some of the effects of such forces. Even though technological and global forces may not have a direct effect on The Potter’s Wheel at this time, it can still
be affected by sociocultural, political-legal, and economic forces. Therefore, change is inevitable. So far, Aker has changed The Potter’s Wheel in a deliberate way, adding elements that
enhance rather than “reengineer” the business. Moreover, he believes that changing The
Potter’s Wheel will keep his customers interested and coming back. His track record of
success shows that the changes he has made, and the pace at which he has made them, have been appropriate. 96. Where in the value chain has Jim Aker chosen to add value? (pp. 126 – 128) Jim Aker appears to have leveraged marketing and sales, by making The Potter’s Wheel
distinct from his rivals by adding value via an innovative menu, a pleasurable dining experience, and musical entertainment. 97. Although information in the case is limited, what assumptions might be made
about the opportunities surrounding The Potter’s Wheel? (pp. 129 – 130) Competition in the area seems to be limited. Moreover, it is unlikely that competitors can match or beat the services offered by The Potter’s Wheel. The customer base appears to
be sufficient to support profitable operations and fund ongoing changes and expansions. Thus, Aker plans to seize the opportunity to expand The Potter’s Wheel into the building
being vacated by Ann’s Antiques. 98. Is Jim Aker pursuing a differentiation strategy? (pp. 131 – 133) Managers pursuing a differentiation strategy seek to command a premium price by making their product or service different from those of competitors on dimensions valued by customers. Although The Potter’s Wheel has differentiated itself by offering a diverse
dining and entertainment experience, there is no evidence to suggest that Aker is able to charge premium prices. 99. Does The Potter’s Wheel attract a specific customer segment? (p. 133) The offerings at The Potter’s Wheel do not target a segment of customers. Instead, a
variety of customers patronize The Potter’s Wheel for various reasons; such as dinner, a quick lunch, a business meeting over a light snack, dessert, amateur music, socializing, a nostalgic setting, etc.
100. Would The Potter’s Wheel benefit from adopting a focused strategy? (p. 133) There must be significant differences among the firm’s targeted customers or among geographical segments of its customers, if a focused strategy is to succeed. So far, The Potter’s Wheel has prospered by attracting a variety of customers. Targeting customers
according to their differences would most likely reduce the total number of patrons at Aker’s establishment, thereby reducing revenues and profits. Furthermore, The Potter’s
Wheel attracts both locals and out-of-towners. Separating customers into geographical segments would probably not increase the number of customers at The Potter’s Wheel. At
this time, Aker does not need to pursue a focused strategy.
