Question 1

Which of the following is likely to conduct a strategic analysis?

An analyst for an investment bank.
All of the above.
A consultant at a management consulting firm.
The CEO of a large established corporation.

Question 2
An organizations strategy is embodied in its
Mission, plan, and actions.
Declared sales targets.
Mission statement.
Chief executive officer.

Question 3
The strategists challenge is to
Determine the most effective marketing plan for an organization.
Build bridges between operations and outside investors.
Identify value competitive positions at the intersection of values, capabilities, and opportunities.
Balance workload with other commitments.

Question 4
A firm whose return on equity is higher than its opportunity cost of capital
Definitely earns positive accounting profits, but maybe not positive economic profits.
Definitely earns positive accounting profits and positive economic profits.
Definitely earns positive economic profits, but maybe not positive accounting profits.
Necessarily operates at the bottom of its average cost curve.

Question 5
In a perfectly competitive market, entry

Occurs only in response to an outward shift in the demand curve.

Occurs by the most cost-efficient firms only.
Creates a gap between accounting profits and economic profits.
Leads to increased output at every possible price level.

Question 6
In a perfectly competitive market, economic profits...
Are a byproduct of low cost, efficient production processes.
Will increase as firms learn about customer preferences.
May persist for long periods.
Are competed away as new entrants imitate incumbent firms.

Question 7
As new entrants enter a market, overall supply will increase while...
Prices will be maintained and firm margins will shrink.
Prices will fall and firm margins will shrink.
Prices will fall and firm margins will increase.
Prices will rise and firm margins will increase.

Question 8
Which of the following cases BEST illustrates the generation of economic profits?
A firm has the greatest market share in its industry.
A firm has higher returns than an established, less risky competitor.
A firm's revenues exceed its costs.
A firm has higher returns than an investment of similar risk.

Question 9
A profit-maximizing, price-taking firm will set production levels such that...
Supply equals demand.
Price equals marginal cost.
They produce more than their competitors.

Total revenue equals average cost.

Question 10
In the real world...
Product markets are perfectly competitive.
Average industry returns vary even after controlling for risk.
Profits are consistent over time.
Businesses rarely have a competitive advantage.

Question 1
The barriers to entry in a capital intensive industry will be higher when
Capital investments cannot be recovered if the firm exits the industry.
The market for the good is very large
Financing for capital investment is easily secured
Acquired capital can be easily redeployed for use in other industries

Question 2
Which of the following is a deterrent to entry into an industry?
The absence of learning curves in the industry
A conciliatory reputation of incumbent firms
Low economies of scale in the industry
Excess capacity within the industry

Question 3
Given a product whose demand is relatively elastic to a substitute product, what will happen in
response to rising prices in the substitute product?
A substantial decrease in demand.
A slight decrease in demand.
A slight increase in demand.
A substantial increase in demand.

Question 4
Which of the following provides an explanation for why a large number of small competitors will
reduce industry profits?
Incumbent firms are more likely to benefit from economies of scale
The threat of retaliation against entrants is higher
Customers are more likely to adopt substitute products
Tacit collusion is harder to sustain

Question 5
Firms are less likely to earn rents when which of the following is true?
Firms periodically engage in tit-for-tat price wars
One very large firm dominates the market
Firms adopt best price clauses with respect to their rivals
Firms are unable to segment buyers on their willingness to pay for a good

Question 6
The greater a firms specific assets relative to a supplier, the _____ are the firms switching costs
and the ______ is the threat from the supplier.
Greater, greater
Lower, lower
Greater, lower
Lower, greater

Question 7
A successful cartel will do which of the following to maximize profits?
Increase product differentiation while holding prices constant.
Increase production and raise prices.
Increase production and lower prices.
Reduce production and raise prices.

Question 8
Which of the following is likely to lead to weaker bargaining power for buyers?
Buyers may backward integrate
Buyers face low switching costs
Buyers are unaware of the prices fellow buyers are paying
Buyers are concentrated

Question 9
All else being equal, which of the following is likely to lead to less intense rivalry in an industry?
Many competitors.
High degree of product differentiation.
Heterogeneous yet similarly sized competitors.
High exit barriers.

Question 10
Why is understanding industry structure important for firms?
Firms cannot earn economic rents in industries with one or more strong competitive forces
Industry forces are constantly changing
Firms can position themselves to minimize the threats posed by competitive forces
Industry-level factors explain the bulk of the profit differences among firms in the US economy

Question 1
For a capability to provide a sustained competitive advantage it must be...
Durable over time.
Difficult for competitors to imitate.
All of the above
Aligned with the organizations value proposition.

Question 2
Which of the following best describes why a brand like Coca Colas is competitively valuable?

The brand has been built over time through substantial investment
Maintaining the brand involves minimal investment
The brand is not protected by copyright or other forms of intellectual property protection
The brand stands alone without needing complementary assets

Question 3
A capability that is easy to imitate may provide a sustained competitive advantage if which of the
following is true?
It can easily be put to use in a variety of settings
It is more valuable in conjunction with rare complementary assets held by the firm
It can easily be increased in scale
It is more valuable in conjunction with rare complementary assets held by another firm

Question 4
Which of the following assets is the EASIEST to imitate?
A new fleet of airplanes leased by an airline.
A causally ambiguous interaction between human resource practice and production efficiency.
A firm's reputation for superior customer service.
An established brand identity developed over many years.

Question 5
Which of the following is NOT a necessary condition for a capability to be rent producing?
The capability is rare.
The capability is easy to imitate.
The capability t is valuable.
The capability has few substitutes.

Question 6
Under which of the following conditions is a firm UNLIKELY to have acquired a rent-producing
asset?
Firm fortuitously acquires the asset due to some historical contingency.

Firm purchased the asset on competitive factor markets.

Firm has superior information about the value of the asset.
Firm has existing capabilities that make the asset more valuable to that firm.

Question 7
A capability is likely to continue to produce economic profits even when which of the following is
true?
One rival firm can develop a highly effective substitute for the asset.
Many firms can imitate the asset.
Technology shifts so that the asset is no longer relevant in creating value.
The firm chooses to let rivals use the asset for a fee.

Question 8
A value-creating asset can be acquired from a competitor for less than the value of that asset
when
Technology shifts so that the asset is no longer relevant in creating value.
The firm has superior information about the underlying value of the capability.
All of the above.
The firm has an existing complementary capability that makes the asset less valuable to the firm
than the competitor.

Question 9
Under which of the following conditions may a firm be able to deter imitation of a valuable capability?
Value derives from tight combinations between resources and activities.
The firm cannot credibly commit to a course of action.
The capability was developed easily over the last 12 months.
Legal barriers, such as a patent, are absent.

Question 10
Which of the following illustrates how an organization can build a superior capability?
Acquiring a competitor to gain control of their patent portfolio.

Hiring a talented employee away from a rival.

All of the above.
Investing R&D to innovate a new technology.

Question 1
Being a first-mover may provide a competitive advantage in all EXCEPT which of the following?
When there are significant learning curve effects.
When the minimum efficient scale is low.
When you can establish a leading brand.
When you can establish precommitment contracts with your suppliers.

Question 2
Which of the following supports a strategy by a biotech firm to license a drug to a pharmaceutical
company for manufacturing and distribution?
The pharmaceutical company can easily appropriate the innovative drug.
The biotech firm has an extensive distribution network.
The biotech firm has a patent on the drug.
The biotech firm has excess drug making capacity.

Question 3
Which of the following is the BEST option for a firm who may protect their intellectual property from
imitation but who does not possess costly manufacturing capability?
Exit the industry.
Seek to be acquired from a manufacturer.
License the technology to a manufacturer.
Develop the manufacturing capability in house.

Question 4
In which of the following is a firm most likely to appropriate the gains from its own innovation?
Imitation by rivals is relatively trivial.
The innovation is subject to high network externalities.

Diffusion to customers of new products deriving from the innovation is slow.

The innovation is not patentable under current U.S. patent law.

Question 5
In which of the following is a firm with a patented technology LEAST likely to appropriate the gains
from the innovation?
Distributors are highly dependent on the technology.
Necessary distribution networks are characterized by intense rivalry among several players.
Necessary distribution networks are tightly held by a single firm (not the innovator).
The firm may forward integrate into distribution.

Question 6
All else being equal, a first-mover advantage is most likely to exist in which of the following
situations?
Pre-commitment contracts can be established with suppliers.
The industry is characterized by high rivalry.
Supplier power is high.
Minimum efficient scale is low.

Question 7
All else being equal, a firm following a second-mover strategy is least likely to earn economic rents in
which of the following situations?
A dominant design has yet to been established.
The second mover has the necessary complementary assets.
Diffusion of innovations is slow.
The first mover owns well-enforced patents for the established standard but willingly licenses the
technology out.

Question 8
All else being equal, in which of the following situations are patents most likely to result in an
innovators capturing most of the rents from an innovation?

IP protection is strong and complementary assets are widely available and generic.
Product engineers have an open-source community ethos.
The innovation is incremental.
Production is contracted out to firms that utilize a great deal of tacit knowledge.

Question 9
Which of the following is not a reason why incumbents often have difficulty making the transition to a
new technology following a sharp technological disruption?
Mindset.
Organizational architecture.
Sailing ship effect.
Existing commitments.

Question 10
Which of the following do we observe during the era of ferment within an industry?
Profits are made through differentiation and niche placement.
All of the above.
Innovation is largely exploratory.
Innovation is often led by small entrepreneurial firms.

Question 1
Under which of the following conditions are multiple profit-making positions in an industry most
likely?
Consumers have different tastes
Ideal product design and delivery varies widely across segments
There are substantial economies of scope available
Customers face high switching costs

Question 2
Firms pursuing a niche strategy tend to do which of the following?
Have prices slightly lower than the average within an industry.

Have no overhead costs.

Offer highly differentiated products.
Capture economies of scale or scope.

Question 3
Which of the following is an example of a narrow competitive scope?
Folgers offers instant, specialty, and decaffeinated brands in addition to regular coffee.
Coca-Cola sells a variety of sodas in nearly every country of the world.
Sea Dog Brewing Company sells beer exclusively in New England.
Barnes & Noble offers a wide variety of book titles in their stores throughout the United States.

Question 4
Which is NOT a strong reason for a firm to occupy a generally unprofitable niche?
Cumulative experience in that niche can be used to compete in more profitable niches.
The firm has a competitive advantage that can only be exploited in that niche.
The firm is pursuing a strategy of differentiation.
The niche is large and resources shared across niches have a high minimum efficient scale.

Question 5
Which of the following is NOT a generic competitive position?
Niche strategy
Cost leadership strategy
Differentiation strategy
Focused market leader strategy

Question 6
Which of the following characterizes the strategic approach of a cost leader?
Build market share to gain economies of scale
All of the above
Engage in cost-cutting
Minimize overhead such as R&D and advertising

Question 7
Which of the following characterizes the strategic approach of a differentiated player?
Uses low-cost inputs
Creates a distinctive brand through advertising
All of the above
Build market share to gain economies of scale

Question 8
Which of the following characterizes the strategic approach of a focused low-cost player?
Creates a distinctive brand through advertising
Deters rivalry by segmenting the market
Invests heavily in human resources and R&D
All of the above

Question 9
Which of the following best characterizes an integrated strategy?
Does not invest heavily in R&D and innovation
Deters rivalry by segmenting the market
Adopts total quality management techniques
All of the above

Question 10
The best competitive position in a market for a firm is determined by:
How contested is that position
Whether the firm can establish that position
Whether the firm can defend that position
All of the above

Question 1
When is expanding a firms scope into new businesses least likely to benefit the firm?

Coordinating across businesses presents substantial cost saving opportunities

The firms operating environment is highly predictable
These businesses supply goods to one another that require firm-specific investments
The firms main competitors also compete in the same broad set of industries

Question 2
What IN PARTICULAR does a firm gain when it vertically integrates with a monopolist?
Licensing rights.
Vertical foreclosure.
Residual rights of control.
Double marginalization.

Question 3
When a firm has made relationship specific investments with a supplier, what IN PARTICULAR does
the firm gain through vertical integration?
Double marginalization.
Residual rights of control.
Vertical foreclosure.
Licensing rights.

Question 4
Which of the following is NOT a transaction cost? text
The cost of advertising a product on television.
The cost of shipping a product from a supplier to a firm.
The cost of opportunism as a result of incomplete contracting.
The cost of writing a contract between two parties.

Question 5
Which of the following is most likely to lead to benefits in expanding firm scope in developed
economies?
Expanding vertically to monopolize highly competitive supplier or buyer industries.

Expanding into businesses that operate with firm-specific complementary assets.

Choosing businesses whose cash flows rise and fall at different times.
Expanding into businesses that share resources which have small minimum efficient scale.

Question 6
Which is least true about firms expanding their scope?
Expansion by acquisition is often favored when firm success relies on a complex combination of
factors.
Firms only benefit if operational cost savings or quality improvements can be realized.
Firms must consider the added costs of diverse operations.
Expanded scope may add new risks to the overall firm.

Question 7
Which of the following is a potential reason to diversify into multiple businesses?
To reduce rivalry through mutual forbearance
To reduce transaction costs
All of the above
To exploit economies of scope

Question 8
Which of the following is an argument AGAINST diversifying to reduce financial risk?
Shareholders can diversify their investment portfolio independently
Little evidence that internal capital allocation is more efficient than capital markets
Combining units can compound risk
All of the above

Question 9
Which of the following is true about the synergies in owning multiple businesses?
Combining businesses always creates broad incentives for cooperation
All of the above
Combining businesses always reduces costs

Synergies are often hard to realize in practice

Question 10
Which of the following is NOT a strategic reason to diversify?
To eliminate a competitor by subsidizing a price war
To raise rivals costs through vertical foreclosure
To capitalize on opportunities in unrelated markets
To reduce rivalry through mutual forbearance