Question 1

Entrepreneurship can be defined as the ability to identify and rapidly respond to opportunities in the environment.

Accepted Answer

Entrepreneurship involves identifying and seizing opportunities in the environment and responding to them quickly and effectively.

Question 2

A "Blue ocean strategy" refers to the creation of entirely new markets.

Accepted Answer

A blue ocean strategy is a business concept that involves creating a new market with little to no competition, rather than competing in existing markets with numerous competitors (red ocean strategy). It aims to identify and serve untapped customer needs and take advantage of unexplored or undiscovered market opportunities, resulting in higher growth prospects and profits.

Question 3

Starting a price war immediately a firm enters your industry is an entry-deterrent tactic that may dissuade other potential entrants for years to come.

Accepted Answer

This is true as intentionally lowering prices to unsustainable levels can prevent new firms from entering the market as they may not be able to compete with such low prices, leading to a potential loss of revenue and bankruptcy. The existing firm can then gradually raise their prices back up once the potential competition has been deterred. This strategy is often used as an entry barrier to protect market share.

Question 4

"Causal ambiguity" is the failure to clearly understand the source of a rival's competitive advantages - in particular which of the rival's distinctive features are causes and which are effects of another feature.

Accepted Answer

Causal ambiguity can lead to difficulty in imitating or countering a rival's advantages, as the root cause of their success is not easily discernible.

Question 5

Porter's value chain is mostly used to analyse the success or otherwise of cost leadership strategies.

Accepted Answer

While Porter's value chain is often associated with cost leadership strategies, it is a tool that can be used for analyzing overall organizational activities and identifying areas where value can be added, regardless of the strategy being pursued. It can also be used to analyze differentiation and focused differentiation strategies.

Question 6

Because some resources are valuable and not perfectly uniform (they are unique, not homogenous), acquiring or developing these can take years before a firm achieves and sustains higher profitability.

Accepted Answer

This statement is true. Unique and valuable resources, such as patents, brand reputation, or skilled employees, can provide a competitive advantage that is hard for competitors to replicate. However, developing or acquiring these resources requires significant investment and time, which can delay the achievement of higher profitability. Once a firm has established these resources, the sustained competitive advantage can lead to long-term profitability.

Question 7

For a firm to imitate the strategy of another firm, it must do four things: identify the target firm, incentivize the rival, diagnose the sources of competitive advantage, and acquire the resources needed.

Accepted Answer

The correct steps for a firm to imitate another's strategy are: identify the successful firm, diagnose the sources of competitive advantage, obtain the necessary resources, and implement the strategy. Incentivizing the rival is not a required step in this process.

Question 8

Walmart has a competitive advantage in discount retailing in the United States.

Accepted Answer

Walmart is known for its low prices and large selection of products, giving it a competitive advantage in the discount retail industry in the United States.

Question 9

To "pre-empt" an entrant, a firm can occupy existing and potential strategic niches to reduce the range of opportunities open to potential entrants.

Accepted Answer

This statement is true as pre-emptive strategies aim to limit the opportunities available to new entrants by occupying existing and potential strategic niches. This can include actions such as acquiring patents, establishing exclusive partnerships, and investing heavily in research and development to stay ahead of competitors. By doing so, firms can make it more difficult and costly for new competitors to enter the market.

Question 10

Isolating mechanisms are forces tending to equalize profit rates among firms, i.e., phenomena that erode a firm's competitive advantages.

Accepted Answer

Isolating mechanisms are forces or factors that protect a firm's competitive advantages from being eroded by competitors, thereby preventing the equalization of profit rates among firms.

Question 11

In the U.S., Target appears to have competitive advantages from
A)lower costs than any of its rivals.
B)limiting its selection of goods to exclusive labels.
C)better service levels than many of its rivals.
D)fashionable designs/brands at good value.

Accepted Answer

Target's competitive advantage lies in offering fashionable designs and brands at affordable prices, and this sets it apart from its rivals. Its exclusive partnerships with designers and brands such as Victoria Beckham and Hunter further help it to differentiate itself and creates an appeal among shoppers looking for style and value. While Target may not necessarily have lower costs than some of its rivals, it has been able to build its brand image as a retailer that offers quality, fashionable merchandise at reasonable prices, and this has helped it to remain competitive in the retail industry.

Question 12

Innovation can be narrowly interpreted as bringing new products or processes to market, but also more broadly as introducing new ways of doing business into an industry or market (new business models).

Accepted Answer

Innovation can be both narrowly and broadly interpreted.

Question 13

Differentiation means offering many product features that distinguish your product from everyone else's.

Accepted Answer

The answer of Differentiation means offering many product features that...

Question 14

In the long run competition eliminates differences in profitability between firms.

Accepted Answer

Competition creates pressure for firms to improve efficiency and reduce costs, which can lead to the elimination of profitability differences between them. Firms that are less efficient or have higher costs will struggle to compete and may eventually be forced out of the market. Over time, the remaining firms will become more similar in terms of profitability levels. However, it's important to note that this process may not happen quickly or evenly across all industries, and there may still be some variation in profitability levels as a result of factors such as product differentiation, innovation, and market power.

Question 15

Competitive advantage can be defined as
A)the difference between a firm's return on assets and its return on sales.
B)a firm's ability to earn a persistently higher profit margin than its rivals.
C)a firm's ability to earn a persistently higher profit rate than its rivals.
D)a firm's ability to outwit its competitors.

Accepted Answer

Competitive advantage refers to a firm's ability to sustain higher profit rates compared to its competitors, indicating its superior position or performance in the market.

Question 16

A firm can create competitive advantage by responding better than rivals to changes in its environment or by maintaining strategic differences from its rivals that customers accept.

Accepted Answer

This is a correct statement about creating competitive advantage.

Question 17

In industries like finance where genuinely unique resources or capabilities are hard to find, imitation is fast and sustainable competitive advantage is hard to achieve.

Accepted Answer

It is true that in industries like finance, where it is difficult to have truly unique resources or capabilities, imitation can be fast and sustainable competitive advantage is hard to achieve. This is because competitors can quickly replicate successful strategies and offerings, making it challenging to maintain a long-term advantage.

Question 18

The Boston Consulting Group developed the concept of time-based competition.

Accepted Answer

The Boston Consulting Group is credited with developing the concept of time-based competition, which emphasizes speed and efficiency in order to gain a competitive advantage in the market.

Question 19

Firms can achieve competitive advantage by supplying a product at lower cost than competitors or by effectively differentiating their product so that the customer is willing to pay a higher price.

Accepted Answer

This statement is true. Firms can either strive to achieve a cost advantage by producing their product at a lower cost than competitors, or they can differentiate their product in a way that makes the customer willing to pay a higher price. Achieving either of these strategies can result in a competitive advantage for the firm.

Question 20

The two main sources of competitive advantage are cost leadership and differentiation.

Accepted Answer

Cost leadership and differentiation are two widely recognized sources of competitive advantage in business. Cost leadership is achieved by offering products or services at lower costs than competitors, while differentiation is achieved through offering unique features or benefits that set a company's offerings apart from rivals.

Quiz 4: The Nature and Sources of Competitive