Question 1

A key limitation of Porter's five forces framework is that:
A)I looks only at single industries not at relationships between industries
B)Competitive strategies may shape industry structure,rather than structure shaping competition
C)Industries are more complex than can be reduced to five competitive forces
D)It offers qualitative,not quantitative predictions

Accepted Answer

The answer of A key limitation of Porter's five forces...

Question 2

When applied to real business situations,the usefulness of game theory is enhanced by its ability to predict very different outcomes on the basis of small changes in initial conditions.

Accepted Answer

The answer of When applied to real business situations,the usefulness...

Question 3

A company whose primary goal is profitability is likely to be a much more aggressive competitor than one whose primary goal is market share.

Accepted Answer

A company focused on market share is often more aggressive in its strategies (e.g., pricing, marketing, expansion) to increase its portion of the market, even at the expense of short-term profitability.

Question 4

The more similar are key success factors across the different segments of an industry,the more likely it is that the firms within that industry will specialize by segment.

Accepted Answer

When key success factors are similar across different segments of an industry, firms are more likely to compete across multiple segments rather than specialize in one, because the same capabilities allow them to operate effectively in each segment.

Question 5

To analyze the profit potential of different industry segments,we can use the same Porter five forces of competition framework that we use to analyze the profit potential of different industries.

Accepted Answer

The Porter five forces framework can be used to analyze the profit potential of different industry segments as well as different industries. It helps to identify the competitive forces at play in a particular industry segment and assess the potential profitability of that segment.

Question 6

In the automobile industry barriers to firms' mobility between different segments tend to be low,hence profitability differences between segments are not sustained over long periods of time.

Accepted Answer

Barriers to firms' mobility between different segments in the automobile industry are low due to the high degree of competition and technological advancements. This means that profitability differences between segments are not sustained over long periods of time as firms can easily enter or exit segments.

Question 7

A strategic group is a group of firms in an industry that serving the same market segment.

Accepted Answer

A strategic group is a concept used to categorize firms within an industry that have similar business models or strategies, not necessarily serving the same market segment.

Question 8

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 9

The more variables that are deployed to segment a market,the more useful is the resulting segmentation likely to be.

Accepted Answer

While using more variables can provide a more detailed segmentation, it can also lead to over-segmentation, making the resulting segments too small or specific to be practically useful for marketing strategies. The key is to find the right balance that provides actionable insights.

Question 10

The aim of competitive intelligence is to predict competitor behavior on the basis of verifiable facts.Attempts to "get inside the heads of your rivals" are inherently unreliable and should be avoided.

Accepted Answer

Competitive intelligence does aim to predict competitor behavior based on verifiable facts, but it also involves understanding competitors' strategies, strengths, and weaknesses, which can include attempts to "get inside the heads of your rivals." This can be done through legal and ethical means such as analyzing public statements, financial reports, and market research to make informed predictions about competitors' moves.

Question 11

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

Accepted Answer

By changing the payoffs in a way that makes cooperation a more beneficial strategy than defecting, the prisoners' dilemma can be resolved and both parties can achieve mutually beneficial outcomes. This can be accomplished through various means, such as introducing repeated play, communication, or incentives for cooperation.

Question 12

The ability to predict a competitor's behavior is facilitated by the tendency for the managers within an industry to share common beliefs about their industry and about the key success factors within it.

Accepted Answer

Managers in the same industry tend to have shared beliefs about the industry and key success factors, which can help them predict their competitors' behavior.

Question 13

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 actually provide deeper insights into the nature of competition within an industry. It allows for a more nuanced analysis of different competitive forces and can inform strategic decision-making for individual firms.

Question 14

To divide an industry into segments it is always preferable to focus on the characteristics of different customers rather than the characteristics of different products.

Accepted Answer

Dividing an industry into segments can be effectively done by focusing on either the characteristics of different customers (market segmentation) or the characteristics of different products (product segmentation), depending on the specific goals and context of the analysis.

Question 15

The main usefulness of strategic group analysis is in analyzing interfirm profitability
differences within an industry;it is less useful as a tool for describing the strategic positioning of firms within an industry.

Accepted Answer

Strategic group analysis is more useful for describing the strategic positioning of firms within an industry and less focused on analyzing interfirm profitability differences.

Question 16

Industry segmentation is always horizontal-it is based upon the products an industry supplies and the customers to which they are supplied.The notion of vertical segmentation-segmenting an industry along its value chain is attractive in principle but impossible in practice.

Accepted Answer

Vertical segmentation is possible in practice, as it involves segmenting an industry based on the different stages of the value chain, from raw materials to finished products. However, it may be complex and requires a thorough understanding of the industry's value chain and its players. Horizontal segmentation is based on the products and customers of an industry.

Question 17

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 creates a reputation for the firm, which can be transferred to other markets where the firm competes. Therefore, it is more attractive to firms that compete in multiple markets.

Question 18

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

Accepted Answer

In a multi-period game, the possibility of future retaliation or reward can encourage cooperation, reducing the likelihood of a prisoners' dilemma outcome compared to a single-period game where such future interactions are not a factor.

Question 19

Empirical research shows that proportion of inter-firm differences in profitability that industry factors explain is:
A)More than 75%
B)About half
C)Less than 25%
D)The question is unanswerable because "industry" is a meaningless concept.

Accepted Answer

Empirical research, particularly the study by Rumelt (1991), found that industry factors explain less than 20% of the variance in firm profitability, indicating that the majority of the differences in profitability among firms are due to firm-specific factors rather than industry-wide factors.

Question 20

Competitive intelligence involves the systematic collection and analysis of public information about suppliers and customers to aid decision making.

Accepted Answer

The answer of Competitive intelligence involves the systematic collection and...

Quiz 4: Further Topics in Industry and Competitive Analysis

A key limitation of Porter's five forces framework is that: