Deck 9: Strategy: the Quest to Keep Profit From Eroding

Question 1

​Which of the following is the foundation for success for a company facing competition

A)​Create an advantage over the competition
B)Protect the advantage created over the competition
C)Create and protect advantages over the competition
D)​None of the above

Answer 1

C

Question 2

The IO Economics perspective locates the source of competitive advantage for a firm at the​

A)​Individual firm level
B)Industry level
C)Customer Level
D)​None of the above

Answer 2

B

Question 3

​In the IO perspective,it is important to enter an industry with

A)​High barriers to entry
B)High buyer power
C)High supplier power
D)​All of the above

Answer 3

A

Question 4

Firms maintain their completive edge by​

A)​Providing a good at lower costs than their rivals
B)Providing a superior product at the same cost as your rival
C)Being innovative
D)​All the above

Question 5

In the IO perspective,it is important to enter an industry with​

A)​High barriers to entry
B)Low buyer power
C)Low supplier power
D)​All of the above

Question 6

​Strategy is

A)​The art of matching the resources and capabilities of a firm to the opportunities and risks in its environment
B)Developing a resource for the company that is both rare and valuable to create competitive advantage
C)Making sure that the resource developed is non-fungible to create a sustainable advantage
D)​All of the above

Question 7

​Supplier power tends to be low when

A)​The supplier provides critical inputs
B)The supplier provides homogenous inputs
C)Both A&B
D)​None of the above

Question 8

In the IO perspective it is important to enter an industry with​

A)​High barriers to entry
B)Differentiated products
C)Small number of competing firms of different sizes
D)​All of the above

Question 9

​Intense market competition is ________ for consumers,since it_______.

A)​Bad;erodes producer surplus
B)Bad,increases variety in the market
C)Good,increases the price level in the market
D)​Good;decreases the price level in the market

Question 10

​Which of the following could potentially capture the value created in a market

A)​Suppliers
B)Industry rivals
C)Buyers
D)​All of the above

Question 11

​Intense market competition is ________ for producers,since it_______.

A)​Bad;erode consumer surplus
B)Bad,erode producer profits
C)Good,increase the price level in the market
D)​Good;decrease the price level in the market

Question 12

In the IO perspective it is important to enter an industry with​

A)​Low supplier power
B)Low threat from substitutes
C)Low levels of rivalry between firms
D)​All of the above

Question 13

​Supplier power tends to be high when

A)​your firm purchases critical inputs from the supplier
B)your input choices are highly differentiated
C)Both A&B
D)​None of the above

Question 14

​If a customer values good A at $15,and it costs the firm $10 to produce,current profit per unit is

A)​$10
B)$8
C)$5
D)​$1

Question 15

​In the IO perspective it is important to enter an industry with

A)​High supplier power
B)Low threat from substitutes
C)Low levels of rivalry between firms
D)​Only B & C

Question 16

​The RBV perspective locates the source of competitive advantage for a firm at the

A)​Individual firm level
B)Industry level
C)Customer Level
D)​None of the above

Question 17

​Supplier power tends to be lower when

A)​Suppliers are less concentrated
B)There are low costs to switching between suppliers
C)Both A&B
D)​None of the above

Question 18

​Supplier power tends to be low when

A)​The supplier provides non-critical inputs
B)The supplier provides homogenous inputs
C)Both A&B
D)​None of the above

Question 19

​It is more profitable for a firm to be_______ than ________

A)​In perfect competition;monopolists
B)A monopolists;in perfect competition
C)Not in business;in business
D)​All of the above

Question 20

​Supplier power tends to be higher when

A)​Suppliers are concentrated
B)There are high costs to switching between suppliers
C)Both A&B
D)​None of the above

Question 21

​Supplier power is high when

A)​Suppliers are concentrated
B)The inputs provided are critical
C)The inputs provided are unsubstitutable
D)​All of the above

Question 22

​Supplier power tends to be low when

A)​Suppliers are less concentrated
B)Inputs provided by the supplier are not vital
C)Inputs are homogenous
D)​All the above

Question 23

​The industrial organization or (IO)perspective predicts

A)​firm's profitability differs only if they are in different industries
B)firms within an industry are equally profitable
C)firm's profitability within industries varies widely
D)​Only A&B

Question 24

​Which firm in an industry is likely to have higher profits?

A)​Sellers with higher costs than their competitors
B)Sellers with lower costs than their competitors
C)Sellers with the same costs as their competitors
D)​All of the above

Question 25

​To decrease supplier power,the firm can

A)​Increase rivalry among its suppliers
B)Buy from multiple suppliers
C)Both A&B
D)​None of the above

Question 26

​The RBV perspective predicts

A)​firm's profitability differs only if they are in different industries
B)firms within an industry are equally profitable
C)firm's profitability within industries varies widely
D)​Only A&B

Question 27

​Rivalry among firms would tend to be high if

A)​There is a small number of firms in the market
B)There is a large number of firms in the market
C)There is only one firm in the market
D)​None of the above

Question 28

​Porter's five forces portray

A)​A zero-sum game
B)A game where your profitability comes at the expense of someone else's
C)The ability of market participants to create a larger total pie
D)​Only A&B

Question 29

​Rivalry among firms would tend to be high if

A)​Firms are located further from each other
B)Firms are located close to one another
C)There is only one firm in the market
D)​None of the above

Question 30

​Rivalry among firms would tend to be high if

A)​Customers are locked into the competitors technology
B)Customers can easily switch between competitor's technologies
C)All of the above
D)​None of the above

Question 31

​A software design company wants to pursue a platform strategy.Which of the following strategies is the firm likely to want to adopt?

A)​Focus on softening rivalry
B)Encourage complementary innovation
C)Encourage substitute innovation
D)​All of the above

Question 32

​The RBV perspective is based on

A)​Resource mobility
B)Resource immobility
C)Resource heterogeneity
D)​Only A&C

Question 33

Supplier power tends to be lower when​

A)​Suppliers are concentrated
B)There are high costs to switching between suppliers
C)Both A&B
D)​None of the above

Question 34

You operate a small poultry farm in east Texas.You sell most of your output through a regional distributor of poultry products in the area.In this case,you are subject to​

A)​Low buyer power
B)High buyer power
C)No buyer power
D)​All of the above

Question 35

​Even if there are significant barriers to entry,firms may not be highly profitable

A)​Substitute product offerings among rivals
B)The ability of consumers to switch to substitute products easily
C)All of the above
D)​None of the above

Question 36

​Rivalry among firms would tend to be highest if

A)​the industry is growing quickly
B)the industry is growing slowly
C)the industry is shrinking
D)​None of the above

Question 37

More buyer power means​

A)​Buyers would find it easier to capture the value created
B)Buyers would find it more difficult to capture the value created
C)Buyers would not be able to capture any value created
D)​None of the above

Question 38

​To decrease buyer power,the firm can

A)​Differentiate its product
B)Decrease dependency on a single buyer
C)Sell its products in locations with multiple buyers
D)​All of the above

Question 39

​Which of the following is more likely to be able to command a higher price for its products

A)​A specialty frozen yogurt producer,with high quality product
B)A mall kiosk selling costume jewelry
C)A specialty toy store that allows customers to self-design teddy bears
D)​Both A&C

Question 40

​The resource based perspective indicates that firms exhibit different performances within the same industry because

A)​Some firms have better resources than others
B)Some firms have organizational structures that can be duplicated
C)Some firms sell goods that have a more elastic demand
D)​Some firms sell goods that have a perfectly elastic demand

Question 41

Industries with high barriers to entry​

A)​Pushes profits to normal returns
B)Increases the likelihood of firms entering the industry
C)Help firms sustain long term profits
D)​Increases the number of competitors

Question 42

Which of the following makes a firm's resources hard to imitate?

A)​They flow from the firm's unique history
B)The link between resources and advantage is simple
C)They aren't socially complex
D)​All of the above

Question 43

All of the following are examples of entry barriers,except​

A)​Government protection through patents or licensing requirements
B)Strong brands
C)Low capital requirements for entry
D)​Lower costs driven by economies of scale

Question 44

​The industrial organization economics perspective locates the source of competitive advantage at the

A)​Individual firm level
B)Industry level
C)Both a and b
D)​None of the above

Question 45

​Typical structure characteristics of interest to Industrial Organization researchers include

A)​Barriers to entry
B)Product differentiation among firms
C)The number and size distribution of firms
D)​All of the above

Question 46

​For a resource to be able to generate sustained competitive advantage over rivals,it must be

A)​Valuable
B)Rare
C)Difficult to imitate or substitute away from
D)​All of the above

Question 47

​Attractive industries have all the following attributes,except

A)​High supplier power
B)Low buyer power
C)High entry barriers
D)​Low rivalry

Question 48

​The concept that explains the firm's ability to produce output with differing bundles of resources is called

A)​Resource heterogeneity
B)Resource immobility
C)Barriers to entry
D)​Imitability

Question 49

For a resource to be able to generate temporary competitive advantage over rivals,it must be​

A)​Valuable
B)Rare
C)Valuable and rare
D)​Not valuable but rare

Question 50

If a customer values good A at $15,and it costs the firm $10 to produce,the firm can increase its profits if​

A)​Redesign the product such that it delivers $16 in customer value
B)Redesign the production process so that the costs fall to $9
C)One or both of the above
D)​None of the above

Question 51

​Assumptions that underlie the Resource-based View include

A)​Resource heterogeneity
B)Resource immobility
C)Barriers to entry
D)​Both a and b

Question 52

​Which of the following makes a firm's resources hard to imitate?

A)​They don't flow from the firm's unique history
B)The link between resources and advantages is difficult to discern
C)They aren't socially complex
D)​All of the above

Question 53

​Having a competitive advantage emanates from

A)​Increased price
B)Decreased cost
C)One or both of the above
D)​None of the above

Question 54

​Firms have a competitive advantage when

A)​They can deliver the same product benefits as their competitors but at a lower cost
B)They can deliver superior product at a similar cost
C)Both of the above
D)​None of the above

Question 55

​The five forces model is a framework

A)​For increasing buyer power in the market
B)For improving competition in the industry
C)For analyzing the attractiveness of an industry
D)​For increasing supplier power in the market

Question 56

​The resource based view locates the source of competitive advantage at the

A)​Individual firm level
B)Industry level
C)Both a and b
D)​None of the above

Question 57

​Which of the following makes a firm's resources hard to imitate?

A)​Do not use resources that flow from the firm's unique history
B)Keep the link between resources and advantage simple
C)Resources emanate from a socially complex organizational structure
D)​All of the above

Question 58

​Which of the following is true according to the IO perspective?

A)​Industry structure determines firm conduct which in turn determines firms' performance
B)Industry structure determines firm performance which in turn determines firms' conduct
C)Industry conduct determines firm structure which in turn determines firms' performance
D)​Industry performance determines firm conduct which in turn determines firms' structure

Question 59

​One of the limitation of Five Forces is that they

A)​Reduce producer surplus
B)For one firm to increase profit,the profit of another participant must decrease
C)Does not provide a firm with sustainable competitive advantage
D)​Both b and c

Question 60

​Which of the following makes a firm's resources hard to imitate?

A)​They flow from the firm's unique history
B)The link between resources and advantages is difficult to discern
C)Resources emanate from a socially complex organizational structure
D)​All of the above

Question 61

​One should be wary of consultants peddling best practices or secrets to success because

A)​They have different incentives than you do
B)Such best practices are public knowledge and easily duplicated
C)These best practices can at best only provide temporary profitability
D)​All of the above

Question 62

​Supplier Power
Nora's Nicest Knick Knacks has produces a variety of products sold as souvenirs.She started out printing local sayings on tee-shirts,
e.g. ,FDNY,and purchased plain tee-shirts from a single supplier.Since then,she has added coffee mugs,key chains,souvenirs spoons and many other items.For each of these,she has lined up one or more suppliers.How does the change in the sourcing of her inputs affect how much of the value she creates that she gets to capture?

Question 63

​Low cost strategies are usually found in industries where

A)​Products are not particularly differentiated
B)Price competition tends to be fierce
C)Both a and b
D)​None of the above

Question 64

Buyer Power
Nora's Nicest Knick Knacks has sold a variety of products to hundreds of small retailers.Over time,she has added distributers who have a talent for finding more retailers for Nora.Now,over half of her sales go through just two of these distributers.Rather than making periodic orders as stock gets low,these distributers make only a few large purchases each year.How can these aspects of her buyer relationships affect how much of the value she creates that she gets to capture?

Question 65

​Apple has continued to be innovative to ensure that the demand for its products stays or becomes

A)​More inelastic
B)More elastic
C)Unitary elastic
D)​None of the above

Question 66

​Which of the following can a firm use to reduce competition in the market?

A)​Locking in customers to long term contracts
B)Seek an exclusive government contract
C)Acquire patents
D)​All the above

Question 67

Cost-reduction generates​

A)​Increases in long-run profitability
B)Increases in long-run profitability only if the cost reduction is difficult to imitate
C)Decreases in long run profitability
D)​No change in profitability

Question 68

​If the stock price of a company is higher than the discounted value of its future earnings,

A)​Buy the stock only if the company has a sustained competitive advantage
B)Don't buy the stock,even if the company has a sustained competitive advantage
C)Always buy the stock
D)​None of the above

Question 69

Mutual Fund Products
Amplitude Investments offers a variety of mutual fund products for investors with different preferences.When they develop a new product for an under-served niche,they find out that their competitors will imitate them within a few months.Is investigating and developing new products going to be profitable for Amplitude?

Question 70

​To stay one step ahead of the forces of competition,a firm can adopt any one of these strategies except

A)​Cost reduction
B)Product differentiation
C)Operating where marginal benefits equal marginal costs
D)​Develop non-fungible valuable resources

Question 71

​All of these allow a firm to differentiate its product,except

A)​Product branding
B)Reducing quality
C)Advertising
D)​Limiting availability