Question 1

Competitive advantage:

Accepted Answer

A)  Exists only when an industry is in long term equilibrium
B)  Emerges from external and internal sources
C)  Both a and b
D)  Neither a nor bE) C) and D)
F) A) and C)

Question 2

The theory of limit pricing postulates that a firm in a strong market position sets prices that create profits which just fail to attract entrants

Accepted Answer

A) True 
 B)False

Question 3

To "preempt" an entrant, a firm can occupy existing and potential strategic niches to reduce the range of opportunities open to potential entrants

Accepted Answer

A) True 
 B)False

Question 4

Three different market types lead to different categories of competitive advantage. These three markets are: trading markets, service markets, and production markets

Accepted Answer

A) True 
 B)False

Question 5

The ability to buy capabilities depends on:

Accepted Answer

A)  Their transferability between firms
B)  Their transferability between firms and the size of transaction costs
C)  The time needed to accumulate knowledge about this capability
D)  The cost of capabilities on external factor marketsE) None of the above
F) All of the above

Question 6

Systematic behavioral trends can be defined as the:

Accepted Answer

A)  Bandwagon effect and the week-end effect
B)  Regular patterns in the behavior of people in firms
C)  January effect and the small firm effect
D)  Fact that prices in financial markets follow systematic patterns that are the result of market psychologyE) A) and B)
F) A) and C)

Question 7

Is Differentiation a superior strategy than a Cost strategy because customers prefer to pay a higher price for better quality?

Accepted Answer

The comparison between the five possible...

Question 8

The fundamental choice for capability acquisitions is the decision to either:

Accepted Answer

A)  Buy them or sell them
B)  Develop them or maintain them
C)  Buy them or build them
D)  Buy them or copy themE) None of the above
F) All of the above

Question 9

According to Porter, cost leadership and differentiation are:

Accepted Answer

A)  What leads a firm to "be stuck in the middle"
B)  Two names for the same fundamental strategy
C)  Mutually exclusive
D)  Both possible simultaneouslyE) A) and B)
F) C) and D)

Question 10

The simple trade-off between high-quality and low cost:

Accepted Answer

A)  Is complex in practice
B)  Does not allow for phenomena such as economies of scale funding huge Research & Development programs
C)  Has refuted the fiction of total quality management
D)  Answers a and bE) C) and D)
F) A) and C)

Question 11

Examples of "efficient markets" are:

Accepted Answer

A)  Securities, grain futures, and knowledge-based items
B)  Foreign exchange, securities, and heavy industries' products
C)  Foreign exchanges, utilities, and interned-based firms
D)  Securities, foreign exchange, and grain futuresE) B) and D)
F) All of the above

Question 12

Isolating mechanisms are:

Accepted Answer

A)  Mechanisms that slow or stop the equalization of rents between firms
B)  Mechanisms that speed up the equalization of rents between firms
C)  Barriers that prevent potential entrants from grabbing a significant market share in the industry
D)  Mechanisms that limit or enhance the ex post equilibration of rents among individual firms, depending on their relative bargaining powersE) B) and C)
F) A) and D)

Question 13

To transfer or acquire resources a firm will face transaction costs including patent costs, negotiation costs and contract enforcement cost

Accepted Answer

A) True 
 B)False

Question 14

If a firm's competitive advantage comes from external change, then:

Accepted Answer

A)  The firm responds better to changing prices, technologies or tastes than its rivals
B)  The firm responds faster to changing prices or tastes than its rivals
C)  The firm has better creative capabilities than its rivals
D)  The firm has a lower cost of capital than its rivalsE) B) and C)
F) All of the above

Question 15

A "Blue ocean strategy" refers to the creation of entirely new industries, or the recreation of existing industries

Accepted Answer

A) True 
 B)False

Question 16

Is it easy for Sears Holdings (Kmart)  to understand Wal-Mart's competitive advantages?

Accepted Answer

A)  No, it is not that easy
B)  Yes: just walk into any Wal-Mart store
C)  Any professional retailer could
D)  B and C aboveE) B) and D)
F) A) and B)

Question 17

The tobacco and the toy industries illustrate:

Accepted Answer

A)  Respectively, a relatively stable environment with firms endowed with similar resources and following similar strategies as opposed to an unpredictable environment characterized by multiple and rapid changes
B)  Respectively, an unpredictable environment characterized by multiple and rapid changes as opposed to a relatively stable environment with firms endowed with similar resources and following similar strategies
C)  Respectively, an industry whose ethics appears questionable as opposed to an industry very much focused on specific markets and characterized by seasonality
D)  That both industries have ethics which can be strongly questionedE) All of the above
F) B) and D)

Question 18

A firm with a competitive advantage other than superior profitability may have?

Accepted Answer

A)  A rising market share
B)  Strong and rising customer loyalty, or good executive perks, or both
C)  Invested in technology its rivals do not have
D)  Some or all of the aboveE) None of the above
F) A) and B)

Question 19

An example of "patterns of price movements" is:

Accepted Answer

A)  Head and shoulders
B)  Double tops
C)  Flags
D)  All of the aboveE) C) and D)
F) A) and C)

Question 20

For a competitive advantage to exist:

Accepted Answer

A)  There must be weak and strong players in the industry in terms of capability endowments
B)  There must be some imperfection in the market
C)  There must be the so-called "pure and perfect competition"
D)  Causal ambiguity has occurredE) B) and C)
F) A) and D)

Exam 8: The Nature and Sources of Competitive Advantage

Systematic behavioral trends can be defined as the:

Correct AnswerverifiedShow Answer

The fundamental choice for capability acquisitions is the decision to either:

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To "preempt" an entrant, a firm can occupy existing and potential strategic niches to reduce the range of opportunities open to potential entrants

Correct AnswerverifiedShow Answer

The tobacco and the toy industries illustrate:

Correct AnswerverifiedShow Answer

The simple trade-off between high-quality and low cost:

Correct AnswerverifiedShow Answer

A "Blue ocean strategy" refers to the creation of entirely new industries, or the recreation of existing industries

Correct AnswerverifiedShow Answer

Examples of "efficient markets" are:

Correct AnswerverifiedShow Answer

According to Porter, cost leadership and differentiation are:

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Is Differentiation a superior strategy than a Cost strategy because customers prefer to pay a higher price for better quality?

Correct AnswerverifiedThe comparison between the five possible...View AnswerShow Answer

The ability to buy capabilities depends on:

Correct AnswerverifiedShow Answer

For a competitive advantage to exist:

Correct AnswerverifiedShow Answer

An example of "patterns of price movements" is:

Correct AnswerverifiedShow Answer

The theory of limit pricing postulates that a firm in a strong market position sets prices that create profits which just fail to attract entrants

Correct AnswerverifiedShow Answer

Is it easy for Sears Holdings (Kmart) to understand Wal-Mart's competitive advantages?

Correct AnswerverifiedShow Answer

Competitive advantage:

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To transfer or acquire resources a firm will face transaction costs including patent costs, negotiation costs and contract enforcement cost

Correct AnswerverifiedShow Answer

Isolating mechanisms are:

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If a firm's competitive advantage comes from external change, then:

Correct AnswerverifiedShow Answer

Three different market types lead to different categories of competitive advantage. These three markets are: trading markets, service markets, and production markets

Correct AnswerverifiedShow Answer

A firm with a competitive advantage other than superior profitability may have?

Correct AnswerverifiedShow Answer

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The comparison between the five possible...
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