Question 1

Causal ambiguity is a type of isolating mechanism.

Accepted Answer

Causal ambiguity is a type of isolating mechanism that creates uncertainty about cause-and-effect relationships, making it difficult to determine which factors are contributing to a particular outcome.

Question 2

The fact that a firm's "activity system" comprises closely linked,complementary activities simplifies the task of imitating a competitor's strategy.

Accepted Answer

The statement is false. The closely linked, complementary activities that make up a firm's activity system actually make it more difficult to imitate a competitor's strategy because it requires replicating not just individual activities, but also the entire system of interdependent activities.

Question 3

In order to discover a "blue ocean" of uncontested market space,a firm must use technological innovation to create a new product market

Accepted Answer

A "blue ocean" strategy involves creating a new, uncontested market space that makes competitors irrelevant and does not necessarily require technological innovation; it can also be achieved through differentiating products or services in existing markets in novel ways.

Question 4

If a firm is more profitable than its rivals,this invariably means that it possesses a competitive advantage.

Accepted Answer

Profitability can be influenced by various factors such as market conditions, cost structures, or temporary advantages that may not necessarily equate to a sustainable competitive advantage.

Question 5

A contrarian strategy-doing the opposite to what the majority of other market participants are doing-is likely to generate superior returns in markets subject to systematic behavioral trends.

Accepted Answer

This statement is true. Contrarian strategies involve going against the crowd and buying when others are selling or selling when others are buying. This can be effective in markets where the majority of participants exhibit systematic behavioral biases and can lead to superior returns for contrarian investors.

Question 6

If the prices of securities fully reflect all the information available,then passive investors are best advised to invest in index-based mutual funds (unit trusts)with the lowest administration costs.

Accepted Answer

If prices fully reflect all available information, there would be no advantage to active management, and passive investment in low-cost index-based mutual funds would be the most efficient strategy.

Question 7

The cost reductions that firms derive from moving down their experience curves are mainly the result of learning which increases the productivity of labor.

Accepted Answer

The experience curve is a graphical representation of the relationship between unit costs and cumulative output, and it shows that as cumulative output doubles, unit costs decrease by a certain percentage. This reduction in costs is mainly due to learning, which increases the productivity of labor through improvements in technology, production methods, and organizational efficiency. Therefore, firms that move down their experience curves can derive significant cost reductions from learning.

Question 8

Sustainable competitive advantage can be established in all types of market-including those financial markets deemed to be "efficient."

Accepted Answer

In efficient financial markets, prices reflect all available information, making it difficult for investors to achieve a sustainable competitive advantage through information asymmetry or market timing.

Question 9

Most business model innovation involves novel approaches to creating and/or capturing value within an industry.

Accepted Answer

Business model innovation typically involves finding new ways to create value for customers or capture value for the company within the context of an industry or market. This can involve developing new products or services, implementing different distribution channels, using innovative pricing strategies, and more. By doing so, innovative companies are often able to differentiate themselves from competitors and gain a competitive advantage in their industry.

Question 10

A firm's competitive advantages can only be sustained if it is protected by some form of "isolating mechanisms."

Accepted Answer

Competitive advantages can be replicated or imitated by competitors if there are no isolating mechanisms in place to protect them. Isolating mechanisms can be in the form of patents, copyrights, trade secrets, unique location, or brand reputation, among others.

Question 11

Competitive advantage without purposeful activity by a firm-it may arise through it being favored by an external change.

Accepted Answer

Competitive advantage can sometimes arise from external factors such as market or technological changes. A firm may benefit from these changes without actively pursuing them. However, in most cases, purposeful activity by a firm is required to achieve and sustain competitive advantage.

Question 12

Of the two sources of superior profitability,industry attractiveness and competitive advantage within an industry,the latter is more important.

Accepted Answer

Competitive advantage within an industry allows a company to outperform competitors and achieve higher profitability. While industry attractiveness can provide opportunities for profitability, it does not guarantee a sustainable competitive position or long-term profitability. Therefore, competitive advantage is generally considered more important for superior profitability.

Question 13

Strategic innovation comprises the introduction of novel products or processes that embody new technology

Accepted Answer

The answer of Strategic innovation comprises the introduction of novel...

Question 14

The main challenge of business model innovations is conceiving of novel business models,not implementing them.

Accepted Answer

The main challenge often lies in implementing novel business models effectively within existing organizational structures and market conditions, not just in the conception of new ideas.

Question 15

Causal ambiguity-difficulties over diagnosing the sources of a rival's compeititve advantage-creates uncertain imitability-uncertainty over the ability to replicate that competitive advantage.

Accepted Answer

Causal ambiguity refers to the difficulty of identifying the sources of a rival's competitive advantage. This creates uncertainty over whether the advantage can be replicated, as it is unclear which factors are responsible for the success.

Question 16

11,Between July 2012 and August 2014,Uber launched in 42 countires outside the US.The speed of this global rollout may be viewed as an attempt to pre-empt the market for ride-sharing services.

Accepted Answer

The statement accurately describes the global rollout strategy of Uber between July 2012 and August 2014.

Question 17

Kim and Mauborgne's "strategy canvas" is a tool for identifying novel recombinations of product attributes.

Accepted Answer

The strategy canvas is indeed a tool developed by W. Chan Kim and Renée Mauborgne in their book "Blue Ocean Strategy" for identifying new combinations of product attributes that can create uncontested marketspaces, also known as "blue oceans".

Question 18

Most of the business models deployed in electronic commerce have no historical precedence

Accepted Answer

Many business models used in electronic commerce, such as online retailing, auctions, and subscription services, have historical precedents in traditional commerce, adapted for the digital environment.

Question 19

There are two primary sources of competitive advantage: cost advantage and differentiation advantage.

Accepted Answer

Cost advantage and differentiation advantage are widely accepted as the two primary sources of competitive advantage. Cost advantage is achieved when a company can produce its products or services at a lower cost than its competitors, while differentiation advantage comes from offering unique and valued products or services that are perceived as superior by customers.

Question 20

The main strategy implication of the Boston Consulting Group's analysis of experience curves was that firms should avoid cutting prices in order to expand market share.

Accepted Answer

The main strategy implication of the Boston Consulting Group's analysis of experience curves was actually that firms should cut prices to gain market share. This is because as a firm gains experience and produces more, its costs tend to decrease, allowing it to offer lower prices than its competitors while still making a profit. This lower price can then attract more customers and increase market share, leading to further cost reductions and a stronger competitive position.

Quiz 7: A : The Sources and Dimensions of Competitive Advantage