Question 1

In hypercompetitive markets,the quest for sustainable competitive advantage is the overwhelmingly important priority for firm strategy.

Accepted Answer

False

Question 2

In common with the Porter five forces framework,the Schumpeterian approach views competitive behavior as the outcome of industry structure.

Accepted Answer

The Schumpeterian approach focuses on innovation and creative destruction as the drivers of competition, rather than viewing competitive behavior primarily as an outcome of industry structure, which is the focus of the Porter five forces framework.

Question 3

Porter's five forces model offers a rigorous,empirically validated approach to explaining the variation in profitability across industries

Accepted Answer

Porter's Five Forces model is a conceptual framework for analyzing industry structure and competitive intensity, but it is not empirically validated to explain variations in profitability across industries.

Question 4

The profitability of making inkjet cartridges depends critically upon their complementary relationship with between inkjet printers.

Accepted Answer

The profitability of inkjet cartridges is dependent on the complementary relationship they have with inkjet printers. This is because without the printers, there would be no need for the cartridges, and vice versa. Therefore, the success of inkjet cartridges depends on the success of inkjet printers.

Question 5

When products A and B are complements,the division of profit between the supplier of A and the supplier of B will depend upon which builds the stronger market position and is better able to reduce the value contributed by the other.

Accepted Answer

When products are complements, the success of one product depends on the success of the other. The supplier who is better able to reduce the value contributed by the other and build a stronger market position will have a greater share of the profit.

Question 6

While the profitability of supplying a product tends to be reduced by availability of close substitutes,the effect of complements on profitability is less clear: it depends upon how value is shared among the suppliers of the different complements.

Accepted Answer

This statement is true. The profitability of a product can be impacted by the availability of substitutes, but the effect of complements on profitability depends on how value is shared among the suppliers of those complements.

Question 7

The tendency for both Coca-Cola and Pepsi to compete through large advertising budgets which have little impact on their relative market shares cannot be a true example of a "prisoners' dilemma" because both firms remain highly profitable.

Accepted Answer

The concept of a "prisoner's dilemma" in this context refers to a situation where two parties, despite having the option to cooperate for mutual benefit, end up in a suboptimal outcome due to a lack of trust or communication. The profitability of Coca-Cola and Pepsi does not negate the existence of a prisoner's dilemma; it's about the inefficiency and potential for higher profits or better outcomes that could be achieved through different strategies, not the current level of profit.

Question 8

"Deterrence" can be defined as imposing costs on the other players for actions that we deem to be desirable

Accepted Answer

Deterrence is defined as imposing costs on other players for actions that we deem to be undesirable, in order to discourage those actions.

Question 9

Deterrence is a competitive action that is more attractive to firms that compete in multiple markets than in a single market because the resulting reputation can be transferred from one market to another.

Accepted Answer

Deterrence allows a firm to establish a reputation for being aggressive and willing to defend its market position, which can deter potential competitors from entering other markets where the firm operates. This transferability of reputation makes deterrence more attractive to firms that compete in multiple markets.

Question 10

Industries are the central arenas in which competition takes place.Disaggregating industries into segments and groups of firms add little to our understanding of competition.

Accepted Answer

Disaggregating industries into segments and groups of firms can provide valuable insight into the dynamics of competition within an industry. By examining the characteristics and behavior of different segments and firms, we can better understand how competition is playing out and what strategies are most effective.

Question 11

The value of a product to its consumers tends to be reduced by availability of close substitutes.Similarly,the value if a product to its consumers is reduced by the availability of complements.

Accepted Answer

The value of a product to its consumers tends to be reduced by the availability of close substitutes because substitutes offer alternative options that can fulfill the same need, leading to potential competition on price and features. However, the availability of complements typically increases the value of a product because complements are goods that are used together with the primary product, enhancing its utility and desirability.

Question 12

The "prisoners' dilemma" can be resolved by changing the payoffs in a way that induces cooperative behavior.

Accepted Answer

The payoffs in the prisoners' dilemma can be changed to encourage cooperative behavior, such as by rewarding players for cooperation and punishing them for non-cooperation. This can lead to a more optimal outcome for both players, rather than both choosing the non-cooperative option out of fear of the other player's choice.

Question 13

The propensity for similar businesses to cluster in the same locality (e.g.IT companies in Silicon Valley,insurance companies in London)is evidence of the intensity of the competitive instincts that drive business owners.

Accepted Answer

The clustering of similar businesses is often due to the benefits of agglomeration economies, such as shared resources, talent pools, and infrastructure, rather than purely competitive instincts.

Question 14

In supplying video game systems,the suppliers of consoles are no longer in such a strong position to appropriate the major profits because of increasingly intense competition among the three of them (Sony,Microsoft and Nintendo),and the growing size and power of the suppliers of video games.

Accepted Answer

This statement is true as the competition among the three major console suppliers and the growing size and power of video game suppliers have weakened the position of console suppliers to appropriate major profits.

Question 15

A "prisoners' dilemma" situation in which a failure to cooperate leaves both parties worse off is as likely in a multi-period game as in a single-period game.

Accepted Answer

In a multi-period game, players may cooperate to avoid mutual defection, anticipating future interactions and potential retaliation, unlike in a single-period game where such considerations are absent.

Question 16

Empirical studies on hypercompetition show unanimously that industries are becoming increasingly turbulent and competitive advantage increasingly short-lived

Accepted Answer

While many empirical studies on hypercompetition suggest that industries are becoming more turbulent and that competitive advantages can be short-lived, there is not unanimous agreement on this matter. Some research indicates that certain industries may experience periods of stability and that firms can sustain competitive advantages for longer periods through various strategies.

Question 17

In the world of business,competition and cooperation seldom coexist.

Accepted Answer

In the world of business, competition and cooperation can coexist and often do. For example, companies may compete for customers but cooperate in joint ventures or partnerships. Cooperation can also lead to competitive advantages, such as shared resources or knowledge.

Question 18

Game theory seeks to predict the outcome of competitive situations by modeling the interactive decisions by firms,

Accepted Answer

This is a correct statement. Game theory is a branch of economics that examines strategic interactions between individuals or firms, and seeks to predict the possible outcomes of those interactions. It does this by modeling the decisions of the various players, and analyzing the potential payoffs and strategies that each player might pursue.

Question 19

Industry membership is the single most important source of profitability differences between firms.

Accepted Answer

While industry membership can influence profitability, firm-specific factors such as strategy, operations, and management are more significant in determining the differences in profitability between firms.

Question 20

The Schumpeterian view of competition emphasizes the role of innovation and entrepreneurship

Accepted Answer

The Schumpeterian view of competition emphasizes the importance of innovation and entrepreneurship in driving economic growth and development. Joseph Schumpeter, an influential economist of the 20th century, argued that innovation and creative destruction were the primary drivers of economic progress. In this view, firms that are able to innovate and introduce new products, processes, or business models are more likely to succeed and grow over time, while those that are unable to adapt or innovate are more likely to decline and fail.

Quiz 4: Further Topics in Industry and Competitive Analysis