Question 1

Isolating mechanisms are:

Accepted Answer

A) Barriers to the erosion of interfirm profit differentials 
B) Mechanisms that impede the equilibration of rents between industries 
C) The same as "barriers to mobility" 
D) Sources of disequilibrium that cause the profitability of different firms in an industry to diverge over time

Question 2

Business Process Reengineering that starts with a "clean sheet of paper" runs the risk of destroying some valuable organizational capabilities which have taken many years to build

Accepted Answer

A) True 
 B)False

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

Which of the following product categories offers the greatest potential for differentiation?

Accepted Answer

A) Clothes and restaurants 
B) Cement and wheat 
C) Jet fuel for airline jets 
D) Sulfur and ethylene

Question 5

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

A) True 
 B)False

Question 6

Banks spend more money on their head office buildings than most other large corporations because:

Accepted Answer

A) They tend to be located in financial centers where property prices are high 
B) They offer "experience goods", hence they need to signal wealth and stability 
C) Their CEOs are more committed to the display of wealth than other CEOs 
D) Because their products are essentially commodities, they need to find alternative ways of differentiating.

Question 7

Which of the following is not an isolating mechanism?

Accepted Answer

A) Private ownership of a company which means that it is not obliged to publish its financial statements 
B) Competitive advantage which is based upon the interaction of a number of different resources and capabilities 
C) Competitive advantage based upon exploiting pricing anomalies 
D) Competitive advantage based upon resources that are difficult to transfer and slow to replicate.

Question 8

Competitive advantage can be defined as:

Accepted Answer

A) A firm's ability to establish market leadership 
B) A firm's ability to grow faster than its competitors 
C) A firm's potential to earn a rate of profit that is persistently higher than its rivals 
D) A firm's potential for launching innovative new products.

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

Complementarity between a firm's management practices means that:

Accepted Answer

A) None: the concepts are identical in practice 
B) The performance impact of a generic practice is independent of the firm's other practices; the impact of a contextual practice depends upon the firm's other practices 
C) Generic practices relate to basic functions; contextual practices tend to be more idiosyncratic 
D) A generic practices offers incremental performance improvement; a contextual practices leads to a new fitness peak.

Question 11

What is the difference between differentiation and segmentation?

Accepted Answer

A) There is no difference between the two 
B) Differentiation deals with the "how" a firm chooses to compete, while segmentation describes "where" in the entire market a firm chooses to compete 
C) Differentiation is a firm's strategic choice, whereas segmentation is given by its environment 
D) Segmentation is the head of the marketing department's responsibility, whereas the CEO is in charge of differentiation

Question 12

Physical characteristics of a product are of little importance in determining its potential for differentiation

Accepted Answer

A) True 
 B)False

Question 13

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

A) True 
 B)False

Question 14

Firms pursuing differentiation advantages will implement their strategies differently from those pursuing cost advantage.The implementation of differentiation strategy is likely to feature:

Accepted Answer

A) Employee remuneration based upon individual productivity 
B) Frequent performance reporting 
C) High levels of outsourcing 
D) Low levels of job specialization.

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

Designing a differentiation strategy requires understanding every possible interaction between a firm and its customers

Accepted Answer

A) True 
 B)False

Question 17

Compared with simple products like flour or toilet paper, complex products such as cars or hotels:

Accepted Answer

A) Fewer opportunities for differentiation 
B) Greater potential for differentiation○ 
C) Offer similar opportunities for differentiation--it all depends upon the creativity of product designers and marketers 
D) Fewer incentives for differentiation because of their high costs

Question 18

A firm's competitive advantage is not necessarily revealed in higher profitability; it may be reflected in:

Accepted Answer

A) Expanding market share 
B) An aggressive quest for acquisitions 
C) Increasing employee bonuses 
D) Expanding market share and/or increasing employee bonuses ○

Question 19

A basic principle of Business Process Reengineering is that dramatic improvements in cost efficiency are better achieved through incremental improvements rather than fundamental redesign.

Accepted Answer

A) True 
 B)False

Question 20

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

A) True 
 B)False

Exam 7: The Sources and Dimensions of Competitive Advantage

Isolating mechanisms are:

Business Process Reengineering that starts with a "clean sheet of paper" runs the risk of destroying some valuable organizational capabilities which have taken many years to build

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

Which of the following product categories offers the greatest potential for differentiation?

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.

Banks spend more money on their head office buildings than most other large corporations because:

Which of the following is not an isolating mechanism?

Competitive advantage can be defined as:

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

Complementarity between a firm's management practices means that:

What is the difference between differentiation and segmentation?

Physical characteristics of a product are of little importance in determining its potential for differentiation

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.

Firms pursuing differentiation advantages will implement their strategies differently from those pursuing cost advantage.The implementation of differentiation strategy is likely to feature:

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

Designing a differentiation strategy requires understanding every possible interaction between a firm and its customers

Compared with simple products like flour or toilet paper, complex products such as cars or hotels:

A firm's competitive advantage is not necessarily revealed in higher profitability; it may be reflected in:

A basic principle of Business Process Reengineering is that dramatic improvements in cost efficiency are better achieved through incremental improvements rather than fundamental redesign.

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.