Question 1

When tacit cooperation has the effect of reducing supply and increasing prices, it is known as tacit collusion.

Accepted Answer

Tacit collusion refers to a situation where firms in an industry coordinate their behavior without explicit communication or agreement. This often leads to a reduction in supply and an increase in prices, as each firm acts in a way that benefits the group as a whole.

Question 2

One reason a firm may not respond to another firm's competitive advantage is because it does not have the resources or capabilities to do so.

Accepted Answer

If a firm lacks the necessary resources or capabilities, it may not be able to respond to another firm's competitive advantage. This is because responding would require investments in those resources and capabilities, which may not be feasible or cost-effective for the firm.

Question 3

When firms without a resource or capability face a cost disadvantage in obtaining or developing it compared to firms that already possess it, this resource or capability is described as perfectly imitable.

Accepted Answer

When firms without a resource or capability face a cost disadvantage in obtaining or developing it compared to firms that already possess it, this resource or capability is described as imperfectly imitable, not perfectly imitable. Perfectly imitable resources or capabilities can be easily duplicated or imitated by competitors, resulting in a lack of competitive advantage.

Question 4

A firm's formal reporting structure is a description of who in an organization reports to whom and is often embedded in a firm's organizational chart.

Accepted Answer

A firm's formal reporting structure is indeed a description of who reports to whom and is typically depicted in an organizational chart.

Question 5

To the extent that a firm's resources and capabilities are continuously evolving, its organizational structure, control systems, and compensation policies must also evolve.

Accepted Answer

As a firm's resources and capabilities evolve, the organizational structure, control systems, and compensation policies must also evolve to effectively utilize and align with these changing resources and capabilities. Failure to evolve these aspects of the firm can result in inefficiencies, decreased competitiveness, and unaligned goals and incentives.

Question 6

Most technological developments in an industry are diffused throughout firms in a relatively brief period of time, but only if the technology in question has not been patented.

Accepted Answer

Technological developments that are patented may not be diffused as easily or quickly because other firms would have to pay licensing fees or royalties to the patent holder in order to use the technology. This can create a barrier to adoption for smaller or less well-funded firms.

Question 7

The ability of firms to acquire, develop, and use resources often depends upon their place in time and space, and firms that do not have space-and-time-dependent resources face a significant cost disadvantage in obtaining and developing them.

Accepted Answer

This statement is true. The availability and accessibility of resources vary depending on the location and period, and firms without such resources may face difficulties in obtaining and developing them, leading to a cost disadvantage.

Question 8

Decisions made by other firms given the strategic choices of a particular firm define the nature of the competitive dynamics that exist in an industry.

Accepted Answer

The decisions made by other firms in response to the strategic choices of a particular firm will have an impact on the competitive dynamics within an industry.

Question 9

In general, imitation can occur in one of two ways: direct duplication or substitution.

Accepted Answer

This statement is true. Imitation can occur through direct duplication where an individual tries to copy exactly what another individual is doing, and through substitution where an individual may modify the action of the model to fit their own capabilities or situation.

Question 10

If there is a conflict between the resources a firm controls and the firm's organization, the resources should be changed.

Accepted Answer

In this situation, it would be more appropriate for the firm's organization to change in order to better utilize and effectively manage the resources. It may be necessary to restructure the organization or implement new processes and guidelines to better align with the available resources. Simply changing the resources without addressing the underlying organizational issues may not lead to long-term success.

Question 11

A firm's patents may decrease, rather than increase, the costs of imitation.

Accepted Answer

A firm's patents may decrease the costs of imitation because competitors can examine the publicly available patent and develop a slightly different product that achieves the same functionality, but does not infringe on the original patent. This creates competition, which can lead to lower prices and reduced profit margins for the original firm.

Question 12

A sustained competitive advantage can be competed away by strategic imitation.

Accepted Answer

The answer of A sustained competitive advantage can be competed...

Question 13

Tacit cooperation is only a viable strategy when an industry is perfectly competitive.

Accepted Answer

Tacit cooperation involves firms in an industry subtly colluding with each other to maintain stable profits. It can occur in any type of market structure, including monopolistic competition, oligopoly, and monopoly. However, in non-perfectly competitive markets, tacit cooperation is more likely to be detected by antitrust authorities and is illegal due to its negative impact on consumer welfare. In perfectly competitive markets, there is no need for tacit cooperation as firms cannot influence the market price or output.

Question 14

The interpersonal relations among managers in a firm, a firm's culture, and a firm's reputation among suppliers and customers can all act to make a firm's resources and capabilities socially complex.

Accepted Answer

The relationships between managers, the company culture, and the company's reputation can all contribute to the complexity of a company's resources and capabilities.

Question 15

Any actions that a firm takes that have the effect of reducing the level of rivalry in an industry that also do not require firms in an industry to negotiate with each other can be thought of as explicit cooperation.

Accepted Answer

The answer of Any actions that a firm takes that...

Question 16

Formal management controls include a firm's culture and the willingness of employees to monitor each other's behavior.

Accepted Answer

The answer of Formal management controls include a firm's culture...

Question 17

A process is said to be path dependent when imitating firms are not able to understand the relationship between the resources and capabilities controlled by a firm and that firm's competitive advantage.

Accepted Answer

The answer of A process is said to be path...

Question 18

Compensation policies are the ways that firms pay employees, and such policies create incentives for employees to behave in certain ways.

Accepted Answer

Compensation policies, such as salary, bonuses, and other benefits, can influence employee behavior by providing incentives to work harder or achieve certain goals.

Question 19

If a resource or capability is valuable and rare but not costly to imitate, exploiting this resource will generate a sustainable competitive advantage for a firm.

Accepted Answer

If a resource or capability is not costly to imitate, then competitors can quickly replicate it, making it not sustainable in the long term. Thus, it cannot generate a sustainable competitive advantage.

Question 20

In the end, competitive advantage is so important to a firm's success, it must remain the sole property of senior management.

Accepted Answer

Competitive advantage is the result of a collective effort of all employees and stakeholders, and it should be shared and communicated throughout the organization to achieve the best outcomes. Senior management plays a crucial role in developing and implementing strategies, but they cannot single-handedly create or sustain competitive advantage. It requires collaboration, innovation, and continuous improvement across all functions and levels of the organization.

Quiz 3: Evaluating a Firms Internal Capabilities