Deck 1: Competitive Advantage

Question 1

What determines the value of a product?

A) its technology
B) its market price
C) the price the customer would be willing to pay for it in the absence of competing products and given budget constraints
D) the market prices of competing products

Answer 1

the price the customer would be willing to pay for it in the absence of competing products and given budget constraints

Question 2

Which of the following are isolating mechanisms?

A) causal ambiguity
B) property rights
C) search costs
D) all of the above

Answer 2

all of the above

Question 3

Which of the following are value drivers: 1. the product's technology, 2. the firm's risk assumption, 3. economies of scale, 4. network externalities?

A) 1 and 2
B) 1, 2 and 3
C) 1, 2 and 4
D) all

Answer 3

1, 2 and 4

Question 4

Which of the following are cost drivers: 1. the learning curve, 2. complementary products, 3. breadth of product line, 4. economies of scope?

A) 1 and 2
B) 3 and 4
C) 1 and 4
D) 1, 3 and 4

Question 5

A firm creates a network externality when:

A) customers using the product speak to each other
B) the benefit customers receive from using the firm's product increases as new customers are added
C) the products are produced using network technologies
D) all its products are connected

Question 6

Time compression diseconomies are larger when:

A) the contribution of firm's capability to its V-C position is path dependent
B) a firm's capability resides within an individual employee
C) the knowledge underlying a firm's capability is organization specific
D) the contribution of firm's capability to its V-C position is path dependent and the knowledge underlying . a firm's capability is organization specific

Question 7

Which of the following value drivers is less likely to contribute to customer retention?

A) customization
B) product line breadth
C) network externalities
D) geographical scope

Question 8

If a firm is neither a cost leader nor a differentiator, it is called:

A) competitively disadvantaged
B) poorly positioned
C) stuck in the middle
D) lost in competitive space

Question 9

What determines a superior market position compared to rivals?

A) the difference between value and cost
B) superior technology
C) economies of scope
D) cost leadership

Question 10

The buyer's surplus is:

A) a source of customer sensitivity
B) the difference between a product's value and its market price
C) the difference between the cost to produce the product and its market price
D) a firm's total economic contribution

Question 11

A generic strategy always represents a superior market position.

Question 12

A superior market position compared to rivals is sufficient to achieve a sustainable competitive advantage.

Question 13

Reducing costs provides a greater return than increasing value when the marginal customer is value, not price, sensitive.

Question 14

The price customers pay always represents the full value of the product.

Question 15

Sunk costs in imitating a capability increase when it is tied to complementary practices.

Question 16

A key assumption regarding the disadvantage of being stuck in the middle is that demand is insufficient to allow the firm to improve its position.

Question 17

Investing in cost drivers can improve the firm's performance by allowing it to lower prices.

Question 18

Cost reduction, compared to increasing value, is more attractive when the firms in an industry have access to the same process innovations.

Question 19

The benefit of customer one-stop shopping pertains to the value driver of complements.

Question 20

Competitive advantage depends on being at one end of the high value - low cost continuum.

Question 21

How can a firm achieve a superior market position without having the lowest cost or offering the highest value, relative to rivals?

Question 22

Assume you are opening up a mobile app store (with applications for smartphones and tablets). Describe how you will measure a customer's willingness to pay for your product offerings.

Question 23

What mechanisms help to isolate or protect Southwest Airlines' superior market position relative to rivals?

Question 24

What is the relationship between a firm's resources and capabilities and its Value and Cost Drivers?

Question 25

How can a firm use switching costs to increase customer retention? Give one example.