Deck 4: Further Topics in Industry and Competitive Analysis

Question 1

In hypercompetitive markets,the quest for sustainable competitive advantage is the overwhelmingly important priority for firm strategy.

Answer 1

False

Question 2

In common with the Porter five forces framework,the Schumpeterian approach views competitive behavior as the outcome of industry structure.

Answer 2

False

Question 3

Porter's five forces model offers a rigorous,empirically validated approach to explaining the variation in profitability across industries

Answer 3

False

Question 4

The profitability of making inkjet cartridges depends critically upon their complementary relationship with between inkjet printers.

Question 5

When products A and B are complements,the division of profit between the supplier of A and the supplier of B will depend upon which builds the stronger market position and is better able to reduce the value contributed by the other.

Question 6

While the profitability of supplying a product tends to be reduced by availability of close substitutes,the effect of complements on profitability is less clear: it depends upon how value is shared among the suppliers of the different complements.

Question 7

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.

Question 8

"Deterrence" can be defined as imposing costs on the other players for actions that we deem to be desirable

Question 9

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.

Question 10

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.

Question 11

The value of a product to its consumers tends to be reduced by availability of close substitutes.Similarly,the value if a product to its consumers is reduced by the availability of complements.

Question 12

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

Question 13

The propensity for similar businesses to cluster in the same locality (e.g.IT companies in Silicon Valley,insurance companies in London)is evidence of the intensity of the competitive instincts that drive business owners.

Question 14

In supplying video game systems,the suppliers of consoles are no longer in such a strong position to appropriate the major profits because of increasingly intense competition among the three of them (Sony,Microsoft and Nintendo),and the growing size and power of the suppliers of video games.

Question 15

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

Question 16

Empirical studies on hypercompetition show unanimously that industries are becoming increasingly turbulent and competitive advantage increasingly short-lived

Question 17

In the world of business,competition and cooperation seldom coexist.

Question 18

Game theory seeks to predict the outcome of competitive situations by modeling the interactive decisions by firms,

Question 19

Industry membership is the single most important source of profitability differences between firms.

Question 20

The Schumpeterian view of competition emphasizes the role of innovation and entrepreneurship

Question 21

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.

Question 22

The difference between substitute and complementary products may be summarized as follows:

A)Substitutes reduce the value of a product,whereas complements increase value.
B)Complements reduce the value of a product,whereas substitutes increase value.
C)Substitutes cannot be used together,whereas complements must be used in combination.
D)Complementary relationships increase the profitability of all firms engaged in supplying them; substitute relationships reduce the profitability of all firms supplying them.

Question 23

Video game consoles and video games are complementary products: the availability of one increases the value of the other.In the past the suppliers of consoles were able to appropriate most of the profits generated by video game systems because:

A)Video game consoles cost more to develop than video games.
B)The consoles were more powerful determinant of the consumer experience than the games.
C)The console suppliers controlled technology and distribution giving them more bargaining power than the suppliers of video games.
D)The console makers-Nintendo,Sony and Microsoft-had bigger revenues and greater market capitalization than the suppliers of video games.

Question 24

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.

Question 25

Joseph Schumpeter perceived competition among companies as:

A)Corresponding closely to economists' model of perfect competition where profits are competed away
B)A process of oligopolistic rivalry
C)A process of creative destruction
D)A process of punctuated equilibrium in which periods of stability were interspersed by bouts of intense competition

Question 26

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

A)It looks only at single industries not at relationships between industries
B)Competitors' strategies may shape industry structure,rather than structure shaping competition
C)Industries are more complexity than can be reduced to five competitive forces
D)The different levels of industry analysis that the five forces model can be applied to

Question 27

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

Question 28

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.

Question 29

After arriving in Mexico in 1519,the destruction by Hernan Cortes of his own ships was a signal,in game theory terminology,of "commitment" for his troops to the conquest of the Aztec empire

Question 30

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

Question 31

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

Question 32

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.

Question 33

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

Question 34

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.

Question 35

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.

Question 36

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.

Question 37

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.

Question 38

Industry segmentation is always horizontal-it is based upon the products an industry suppliers 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.

Question 39

The producer of a complementary product can maximize its relative bargaining power by means of:

A)Adopting a differentiation strategy that allows it to sell at a premium price.
B)Adopting a cost cutting strategy to provide its product at the lowest possible cost and so exploit economies of scale.
C)Restricting complementors' access to the market.
D)Commoditizing the market for the complementary good.

Question 40

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.

Question 41

While the Porter five forces framework is built upon the structure-conduct-performance model of industrial economics,Schumpeter's view of competition as creative destruction builds upon:

A)Game theory.
B)The Austrian School view of competition as a dynamic.
C)Oligopoly theory.
D)The Chicago School of economic thought.

Question 42

Segmentation is a process through which:

A)One can assess the strengths and weaknesses of any firm in its market
B)Industries are divided into specific markets
C)Industries are divided into groups of similar products
D)Product characteristics are matched with customer preferences

Question 43

To attempt to predict competitive behaviors,Porter suggests a four-step framework,where analysts must identify:

A)The competitor's current strategy,its objectives,its assumptions about the industry and itself,and its available resources and capabilities
B)The competitor's current strategy,its future strategy,its assumptions,and its vulnerabilities
C)The competitor's assumptions about the industry,its available resources and competencies,its objectives,and its competitive advantage
D)The competitor's available resources and competencies,its objectives,then its competitive advantage,and finally its performance

Question 44

Signaling refers to:

A)Communications that announce your strategic intentions or plans to rivals
B)Any deliberate action that is intended to influence other players' perceptions or behavior
C)Deception through misinformation
D)Internal communications that divert strategic orientations and obtain the buy-in of the organization's key stakeholders

Question 45

The prediction that hypercompetition makes competitive advantage temporary:

A)Is confirmed by empirical research shows that the answer is Yes.
B)Is refuted by empirical research shows that the answer is No.
C)Has not been answered by empirical research.
D)Cannot be answered by empirical research because competitive advantage cannot be measured.

Question 46

The relationship between commitment and strategic options may be beast described as:

A)Commitments increase the value of real options
B)By committing to a set of options,a firm can reconcile two sources of value: value from deterring competitors and value from real options
C)Making commitments inevitably involve giving up options
D)The two reside in different realms of analysis: commitments can be analyzed using game theory; real options can be analyzed using financial theory

Question 47

If administering deterrence is costly or unpleasant for the threatening party,then:

A)It may lack credibility
B)It will always lack effectiveness
C)It will need ot be supported by appropriate signaling
D)It reinforces the power of the threatening party

Question 48

The key insight from the "prisoners' dilemma" game is:

A)Competitive behavior can create an outcome that is inferior for all involved in a situation
B)The principle of "honor among thieves" is inapplicable either to thieves or to business executives
C)In every social interaction,the inability to communicate effectively always results in an inferior outcome
D)Trust can play a critical role in creating favorable outcomes form both crime and business

Question 49

Competitive intelligence aims to:

A)Forecast competitors' behavior,predict their reactions,and explore how their behavior may be influenced
B)Forecast competitors' future financial performance and analyze responses to their previous strategic initiatives
C)Explore how rivals' behavior could be positively influenced in the firm's interest,and signal the firm's strategic initiatives
D)Collect information about rivals in other countries and,especially,to forecast their attacks against the focal firm's domestic market

Question 50

The relationship between competition and cooperation can be described as follows:

A)Industries either compete or cooperate; if they cooperate they will be investigated by competition bodies
B)Cooperation and competition may exist in an industry,but not at the same time
C)Both can co-exist simultaneously
D)Both can co-exist at the same time,but not in the same industry segment or strategic group

Question 51

In a market where Firm A and Firm B are leading suppliers,if Firm A initiates a price cut,the likelihood that Firm B responds with an identical price cut will be greater:

A)If Firm B's medium term goal is to maximize profit.
B)If Firm B's medium term goal is to maximize market share.
C)If Firm B is a private rather than a public (listed)company.
D)If the market is growing.

Question 52

From a game theory perspective,President George W.Bush's inauguration of a "war on terror":

A)Represented a commitment by the American people to success since the imagery and language of war implies either victory or defeat
B)Signaled to other democratic countries the America's desire for cooperation in order to contain a common threat
C)Lacked effectiveness as a deterrent since the prospect of a "war" not only fails to deter potential terrorists,it may encourage them
D)Created a prisoners' dilemma in which communication between the US and militant Islamic groups became difficult

Question 53

A firm will choose to compete across multiple segments rather than specialize in a single segment if:

A)It is a publicly-listed company that than a family owned company
B)The same resources and capabilities can be deployed in different segments
C)Segments are defined by distinct socio-economic groups of customers
D)Barriers to mobility are high.

Question 54

Schumpeter's process of "creative destruction" challenges Porter's five forces of competition framework by:

A)Introducing concepts of renewal and rebirth into the analysis of industrial change
B)Recognizing the cooperation is as important in business as competition
C)Proposing that competitive behavior determines industry structure rather than the other way round
D)Viewing competition is essential for the renewal of mature and declining industries

Question 55

The main use of industry segmentation analysis is:

A)Identify the most attractive segments for a firm to locate within
B)Understand better the needs of different customer groups
C)Formulate better marketing strategies
D)Predict the likely evolution of market structure

Question 56

The principal value of game theory to the field of strategic management is in:

A)Generating more accurate predictions from competitive situations
B)Extending the theory of competition behavior to embrace cooperation
C)Extending the analysis of competitive behavior to the realms of politics,diplomacy,and social behavior
D)Permitting a more rigorous framing of competitive situations and strategic decisions

Question 57

The key implication of "hypercompetition" in business is that:

A)Competitive advantage is temporary.
B)Technological change will continue to accelerate.
C)"If it ain't broke,don't fix it" is an obsolete piece of advice.
D)The concept of Schumpeterian competition needs to be updated to realities of the 21st century.

Question 58

Competitive intelligence,the systematic collection and analysis of information about rival firms,is:

A)A practice which,though legal in most countries,is unethical.
B)Likely to distract firms from their efforts to establish positions of competitive advantage based upon their distinctive strengths.
C)An important component of a firm's environmental scanning and strategic analysis.
D)A useful activity because it can help firms imitate the strategies of their more successful competitors.

Question 59

Barriers to mobility are:

A)Barriers that protect a segment from firms established in other segments of the same industry
B)Barriers that protect incumbents from established firms in other industries rather than from new start-up companies
C)Obstacles that a firm faces in changing its strategy
D)Barriers that prevent globalization and developing a firm's business abroad

Question 60

The distinction between legitimate competitive intelligence and industrial espionage:

A)Is clearly defined by legislation and case law relating to trade secrets
B)Is not always clear
C)Is non-existent - they overlap to a great extent
D)Is easily resolved by hiring a good lawyer

Question 61

"Profit pool mapping" describes a technique for:

A)Analyzing profitability across different stages of the value chain in an industry
B)Analyzing expenditures across different stages of the value chain in an industry
C)Analyzing market shares in the different stages of the value chain in an industry
D)Analyzing different horizontal and vertical activities and the assessment of their strengths and weaknesses

Question 62

The difference between barriers to entry and barriers to mobility is:

A)The sources of barriers to mobility are different than the sources of barriers ot mobility
B)There is no real difference
C)Barriers to mobility are less effective than barriers to entry
D)Barriers to entry protect the industry as a whole whereas barriers to mobility protect segments within the industry

Question 63

In European airline industry,EasyJet,Baltic Air,WizzAir,and Ryanair:

A)Have different route networks; therefore belong to different strategic groups
B)Have similar strategies,hence belong to the same strategic group*
C)Belong to the same strategic group and can therefore be expected to have similar financial performance
D)Have little in common

Question 64

Strategic group analysis is primarily useful for:

A)Identifying "blue ocean" opportunities
B)Describing and understanding the strategic positioning of firms within an industry
C)Identifying the strategies that are most conducive ot profitability within an industry
D)Identifying which strategic niches in an industry are least saturated and therefore have the greatest profit potential

Question 65

Strategic groups consist of:

A)Firms that follow similar generic strategies (e.g.focus or differentiation)
B)Firms within an industry that have similar strategies
C)Firms that occupy the same industry segment
D)Firms that target the same customer groups