Drill 2 ·
Markets and Competitive Advantage is a practice drill. It contains 5 original questions created by Brian Stewart, a Barron's test prep author with over 20 years of tutoring experience.
A meal-subscription business reads a local competitor-comparison table to identify its competitive advantage and the factors that affect it; uses an invented company and original figures.
Marrowfield Kitchen sells fresh, heat-at-home dinners through a weekly subscription in one metro area. Its operations manager pulls together a snapshot comparing Marrowfield with the three other meal services that compete for the same local customers.
Local meal-service comparison, this quarter
| Service | Price per meal | Local subscribers | Main selling point |
|---|---|---|---|
| Marrowfield Kitchen | $11 | 3,000 | Locally sourced ingredients |
| QuickPlate | $7 | 4,500 | Lowest price in market |
| Harvest Box | $12 | 1,500 | Organic certification |
| CityFork | $10 | 3,000 | Widest menu variety |
Question 1. Which competitor has the largest number of local subscribers?
Explanation: The correct choice is QuickPlate (B). Reading the subscriber column straight from the table, QuickPlate has 4,500, the largest figure shown. Marrowfield Kitchen (A) and CityFork (D) are tied at 3,000 each, and Harvest Box (C) has the fewest at 1,500.
Question 2. Marrowfield charges $11 per meal, above QuickPlate and CityFork, yet keeps 3,000 subscribers by promoting its locally sourced ingredients. Which type of competitive advantage is Marrowfield pursuing?
Explanation: The advantage shown is Differentiation (A). Marrowfield competes on a distinctive attribute (locally sourced ingredients) that lets it charge more than the cheaper rivals, which is the definition of a differentiation advantage. Cost leadership (B) describes competing mainly through lower costs, which often lets a firm offer lower prices, and that is QuickPlate's approach, not Marrowfield's. Economies of scale (C) refers to lower unit costs from high volume, which the table does not show. First-mover advantage (D) refers to benefits from entering a market early, which nothing in the snapshot indicates.
Question 3. Treating the four services as the whole local market, what is Marrowfield Kitchen's share of local subscribers, to the nearest whole percent?
Explanation: The correct choice is 25% (C). The four services total 3,000 + 4,500 + 1,500 + 3,000 = 12,000 subscribers, and Marrowfield has 3,000, so its subscriber share is 3,000 / 12,000 = 25%. 20% (A) would require 2,400 subscribers; 23% (B) does not match any clean figure here; 30% (D) would require 3,600.
Question 4. Why can Marrowfield charge more than QuickPlate while still retaining 3,000 subscribers?
Explanation: The correct choice is that a segment of customers values local sourcing enough to pay more for it (B). A differentiation advantage works when some customers are willing to pay a premium for the distinctive attribute, which is why Marrowfield keeps 3,000 subscribers at $11. The lowest-cost claim (A) describes QuickPlate, not Marrowfield. Marrowfield does not have the most subscribers (C); QuickPlate does, with 4,500. Nothing restricts rivals' pricing (D).
Question 5. Marrowfield's owner is listing factors that could affect the business. Which of the following is an EXTERNAL factor (one arising outside the firm) rather than an internal one?
Explanation: The correct choice is a new competitor entering the local market (C). An external factor originates outside the firm and is largely beyond its direct control, and a rival entering the market is a textbook external (competitive) force. The recipes its own chefs develop (A), the wages it chooses to pay (B), and its own production-volume decision (D) are all internal choices the firm controls.