Section 1: Answer True or False (each answer is worth 10%) 1. Economy of scope helps cut a company's costs, and economy of scale, on the other hand, raises production costs. 2. Pursuing a differentiation strategy, firms that successfully differentiate their product can enjoy a competitive advantage regardless of production costs. 3. Differentiation approach works when customers are willing to pay a premium for a high- quality product. Section 2: Indicate the correct answer: A, B, C or D (each answer is worth 10%) 4. The aluminum producer Alcoa has a competitive advantage through access to: A. foreign mines on multiple continents B. lower-cost bauxite mines in the United States C. key aluminum mines globally D. supply chain privileges. 5. The differentiation approach can increase production costs if: A. R and D is needed B. Innovation is needed C. A and B D. None of the above 6. A cost leader can achieve a competitive advantage as long as its economic value created (V - C) is greater than A. it's previous quarterly performance B. the industry average C. that of its competitors D. all of the above. Section 3 (the answer is worth 40%) 7. Pick a company that you feel has a competitive advantage in its industry, then fill in the following 5 boxes from the diagram. You can write on your answer sheet. A half-page answer is sufficient INDUSTRY EFFECTS INDUSTRY ATTRACTIVENESS . 5 Forces Model Complements WITHIN INDUSTRY Strategic Groups COMPETITIVE ADVANTAGE VALUE POSITION Relative to Competitors FIRM EFFECTS BUSINESS STRATEGY Cost Leadership Differentiation Blue Ocean COST POSITION Relative to Competitors - Industry attractiveness: how attractive is the industry based on the five forces model? - Within Industry, Strategic groups: what companies either rival the company or collaborate with it? - Value position: what is the price point of the company's key products/services? How does this compare to some of the company's competitors? - Cost position: what is the cost of producing the company's key goods/services price point of the company's key products/services? How does this compare to some of the company's competitors? - Business Strategy: indicate if the company's approach is differentiation or cost leadership, and justify your