Question 1

The opportunity to take action that will either maximize the upside of limit the downside of a capital investment is referred to as ________.
A) net present value
B) a real option
C) a learning option
D) a value option

Accepted Answer

A real option refers to the opportunity to take actions that will either maximize the upside of limit the downside of a capital investment. It allows flexibility in decision-making and can lead to greater returns on investment. A, C, and D are not accurate definitions of real options.

Question 2

The process of maximizing the upside or limiting the downside of an investment opportunity by uncovering and quantifying the options and discussion points embedded within it is referred to as ________.
A) value curve analysis
B) new-market analysis
C) chaotic analysis
D) real-options analysis

Accepted Answer

The process described in the question is the definition of real-options analysis. Option A, value curve analysis, refers to a framework for understanding a company's value proposition. Option B, new-market analysis, refers to evaluating the potential of market opportunities. Option C, chaotic analysis, is not a recognized term in investment analysis.

Question 3

With ________ options, an entry investment may create opportunities to pursue valuable follow-up projects.
A) waiting-to-invest
B) growth
C) flexibility
D) learning

Accepted Answer

Growth options refer to the potential for an initial investment to lead to additional opportunities, allowing a company to expand or enhance its operations in the future.

Question 4

All of the following may cause a turbulent environment except ________.
A) short product life cycles
B) long product design cycles
C) new technologies
D) incumbent repositioning

Accepted Answer

Long product design cycles usually result in a stable environment since there is a longer period of time for planning and execution, whereas short product life cycles, new technologies, and incumbent repositioning introduce uncertainty and change, leading to a turbulent environment.

Question 5

Real-option investments are attractive to managers in industries that are characterized by ________ and ________.
A) low capital investments; low degrees of uncertainty
B) large capital investments; high degrees of uncertainty
C) small market share; lots of research and development data
D) large market share; little research and development data

Accepted Answer

Real-option investments involve large capital investments with high degrees of uncertainty. This is because real-options allow managers to invest in projects that have uncertain outcomes, but with the potential for high returns. Industries that have rapidly changing conditions, unexpected events, and high levels of competition are more likely to benefit from real-option investments.

Question 6

Instead of retaliation, incumbent firms may strategically decide that ________ is the best course of action.
A) ignoring new competition
B) waiting for uncertainty to clear
C) cutting off growth possibilities
D) cooperation

Accepted Answer

Incumbent firms may choose to wait for uncertainty to clear to better understand the market dynamics and the potential impact of new competition before deciding on a strategic response.

Question 7

When a firm uses the ________ strategy, it identifies and acquires new entrants or establishes an alliance with them.
A) containment
B) shaping
C) annulment
D) absorption

Accepted Answer

The strategy of identifying and acquiring new entrants or establishing an alliance with them is known as the absorption strategy. This allows the firm to expand their reach and resources by bringing in new businesses to add to their portfolio.

Question 8

Research on strategy in hypercompetitive environments is typically anchored in all of the following except the ________.
A) systems theory
B) chaos theory
C) adaptation theory
D) complexity theory

Accepted Answer

The answer of Research on strategy in hypercompetitive environments is...

Question 9

What are the five types of revolutionary strategies that can introduce dynamic change into an industry?

Accepted Answer

The answer of What are the five types of revolutionary...

Question 10

Define the concepts of reacting to and anticipating change.

Accepted Answer

The answer of Define the concepts of reacting to and...

Question 11

What are the four underlying phases of competitive interaction?

Accepted Answer

The answer of What are the four underlying phases of...

Question 12

The strategist always makes important and reasoned choices about the firm's mix of all except ________.
A) customers/noncustomers
B) products
C) services
D) competitors

Accepted Answer

The strategist always makes important and reasoned choices about the firm's mix of customers/noncustomers, products, and services, but competitors are not a part of the firm's mix. Rather, competitors is an external factor that the strategist must consider when making these choices.

Question 13

The annulment strategy is less about quashing the competition than about making it ________.
A) irrelevant
B) marginalized
C) complementory
D) a partner

Accepted Answer

The use of the word "irrelevant" suggests that the goal of the annulment strategy is to render the competition meaningless or insignificant, rather than to simply suppress or diminish it (B). "Complementary" or "a partner" (C and D) would be contradictory to the concept of competition.

Question 14

Name the three dimensions that cause dynamic contexts.

Accepted Answer

The answer of Name the three dimensions that cause dynamic...

Question 15

The advantage of a real option investment is that a firm can ________ when the competitive environment shifts.
A) be the industry leader
B) preserve flexibility to be well positioned
C) be stronger financially
D) be positioned to neutralize threats from smaller firms

Accepted Answer

Real options provide firms with the flexibility to adjust their investment decisions based on changing market conditions or competitive environments. This allows them to be better positioned to take advantage of opportunities or mitigate risks. Being able to preserve flexibility is a major advantage of real option investments, making option B the best choice. The other options may be potential outcomes of utilizing real options, but they do not directly address the advantage of flexibility.

Question 16

In the context of a firm's industry evolution, arenas must fit with all but which of the following?
A) resources
B) capabilities
C) customer base
D) dynamic capabilities

Accepted Answer

Arenas must fit with resources, capabilities, and dynamic capabilities, but not necessarily with the existing customer base, as firms may target new customers as they evolve.

Question 17

With ________ options, serving markets on two continents by building two plants instead of one gives a firm the option of switching production from one plant to the other as conditions dictate.
A) waiting-to-invest
B) growth
C) flexibility
D) learning

Accepted Answer

Flexibility options refer to the ability of a firm to adjust production levels or locations in response to changing market conditions. In this case, having two plants on two continents provides a firm with the option of shifting production from one plant to the other as needed, giving them greater flexibility. This is especially valuable when market conditions change rapidly or unexpectedly. Waiting-to-invest options refer to the decision to delay investment until conditions are more favorable, growth options refer to a firm's ability to expand operations, and learning options refer to the value of gaining knowledge or experience. While these other options may be valuable, they do not directly relate to the benefits of having two plants for flexibility.

Question 18

What can firms do to avoid or withstand a technological discontinuity?

Accepted Answer

The answer of What can firms do to avoid or...

Question 19

What are the four ways that competitive action may be initiated in phase 1?

Accepted Answer

The answer of What are the four ways that competitive...

Question 20

All of the following are categories of real options except ________.
A) new-market options
B) growth options
C) flexibility options
D) exit options

Accepted Answer

New-market options are not a standard category of real options. Real options typically include growth, flexibility, and exit options, which relate to strategic business decisions.

Quiz 6: Crafting Business Strategy of Dynamic Contexts

The opportunity to take action that will either maximize the upside of limit the downside of a capital investment is referred to as ________.

The process of maximizing the upside or limiting the downside of an investment opportunity by uncovering and quantifying the options and discussion points embedded within it is referred to as ________.

With ________ options, an entry investment may create opportunities to pursue valuable follow-up projects.

All of the following may cause a turbulent environment except ________.

Real-option investments are attractive to managers in industries that are characterized by and .

Instead of retaliation, incumbent firms may strategically decide that ________ is the best course of action.

When a firm uses the ________ strategy, it identifies and acquires new entrants or establishes an alliance with them.

Research on strategy in hypercompetitive environments is typically anchored in all of the following except the ________.

What are the five types of revolutionary strategies that can introduce dynamic change into an industry?

Define the concepts of reacting to and anticipating change.

What are the four underlying phases of competitive interaction?

The strategist always makes important and reasoned choices about the firm's mix of all except ________.

The annulment strategy is less about quashing the competition than about making it ________.

Name the three dimensions that cause dynamic contexts.

The advantage of a real option investment is that a firm can ________ when the competitive environment shifts.

In the context of a firm's industry evolution, arenas must fit with all but which of the following?

With ________ options, serving markets on two continents by building two plants instead of one gives a firm the option of switching production from one plant to the other as conditions dictate.

What can firms do to avoid or withstand a technological discontinuity?

What are the four ways that competitive action may be initiated in phase 1?

All of the following are categories of real options except ________.