Competitive Strategy
Final Exam
Course Introduction
Competitive Strategy explores the frameworks and tools organizations use to achieve and sustain a competitive advantage in dynamic markets. The course emphasizes the analysis of industry structure, competitor behavior, and the internal strengths and weaknesses of the firm. Students will critically evaluate case studies and apply strategic concepts such as the five forces, value chain analysis, and game theory to real-world business scenarios. The course aims to develop students' abilities to formulate, implement, and adapt strategies that respond effectively to changing competitive environments.
Recommended Textbook
Economics of Strategy 6th Edition by David Besanko
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14 Chapters
419 Verified Questions
419 Flashcards
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Chapter 1: The Power of Principles: an Historical Perspective
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30 Verified Questions
30 Flashcards
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Sample Questions
Q1) What was the major role of private banks in the early 1800s?
A) Serve as an institution for deposits
B) Issue credit
C) Reduce the risk of price fluctuation
D) Create futures markets
E) Sell stocks
Answer: B
Q2) What caused the market conditions facing the telephone to be uncertain until the 1880's?
A) Patent conflicts
B) Technology problems due to unstable electricity supplies
C) Dissimilar technologies limiting interconnections between cities
D) Different state laws limiting interstate expansion
E) The high cost fo some components needed to manufacture telephones
Answer: A
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Chapter 2: Economies of Scale and Scope
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Sample Questions
Q1) Which of the following benefits of diversification explains the idea that a firm with many business lines can reduce swings in value because it receives only a small percentage of its revenue from any one of those business lines?
A) Use of internal capital markets
B) Economies of scale and scope
C) Economizing on transaction costs
D) Diversifying shareholder portfolios
E) Identifying undervalued firms
Answer: D
Q2) How does umbrella branding aid economies of scale and scope?
A) Increases effectiveness of advertising due to a greater presence
B) Increases effectiveness of advertising due to national advertising
C) Increases effectiveness of advertising due to offering a broad product line under one name
D) Increased cost effectiveness through purchasing as a cooperative
E) Increased cost effectiveness through bulk purchasing
Answer: C
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Chapter 3: The Vertical Boundaries of the Firm
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30 Flashcards
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Sample Questions
Q1) Which of the following is not a method a firm could use to force vertical foreclosure?
A) Downstream monopolist acquires upsteam supplier and refuses to buy from other suppliers
B) Upsteam monopolist acquires downstream firm and refuses to sell to other downstream firms
C) Competitive downstream firm acquires upstream monopolist and refuses to sell to downstream firms
D) Upstream competitor acquires downstream competitor and refuses to buy from other suppliers
E) Competitive upstream firm acquires downstream monopolist and refuses to buy from other suppliers
Answer: D
Q2) Which of the following is not a method to protect intellectual property?
A) Patents that are specific and complete
B) Complete contracts regarding IP with all suppliers
C) Non-disclosure agreements for employees
D) Limiting access to IP to a few key employees
E) Charging higher prices to limit access to IP
Answer: E
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5
Chapter 4: Integration and Its Alternatives
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Sample Questions
Q1) For what critical aspect of drug development has research (Azoulay & Henderson)shown that major drug houses have chosen tapered integration?
A) Clinical Research
B) Drug Development
C) Marketing
D) Sales
E) Manufacturing
Q2) The reduction of co-ordination and hold-up problems depends on:
a) Governance arrangements
b) Manager contracts
c) Required quality of finished product
d) Cost of upstream vertical supplies
e) None of the above
Q3) What term describes when a firm is using the least-cost production process?
A) Agency efficiency
B) Technical efficiency
C) Lean compliant
D) Economizing
E) Six sigma compliant
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Page 6
Chapter 5: Competitors and Competition
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Sample Questions
Q1) What term describes a firm that faces little or no competition in one of its input markets?
A) Monopolist
B) Monopsonist
C) Oligopolist
D) Oligopsonist
E) Cartelist
Q2) The average PCM (percentage contribution margin)in a Cournot equilibrium is given by the formula PCM=H/ ,where H is the Herfindahl index and is the price elasticity of market demand.Given this equation,which of the following statements is true?
A) The more concentrated the industry, the smaller the PCMs in equilibrium
B) The industry concentration only raises the PCMs in equilibrium
C) The industry concentration has no bearing on PCM size in equilibrium
D) The less concentrated the industry, the larger the PCMs in equilibrium
E) The less concentrated the industry, the smaller the PCMs in equilibrium
Q3) Suppose the demand for a product faces by a monopolist firm is given by Q=60-P/2.If the marginal cost of producing the product is $20,what is the profit maximizing price the firm should charge for the product? What are the firm's profits?
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Chapter 6: Entry and Exit
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Sample Questions
Q1) What is the typical "capacity use" ratio as reported by plant managers to the U.S.Census of Manufacturers annually?
A) 40%
B) 50%
C) 60%
D) 70%
E) 80%
Q2) What term is defined as a firm selling goods at a price below their normal price (and generally below cost)usually as an export in international trade?
A) Predatory pricing
B) Cost plus pricing
C) Dumping
D) Marginal cost pricing
E) Price leading
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Chapter 7: The Dynamics Competing Across Time
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Sample Questions
Q1) What process involves using computer simulations to track the likely competitive implications of pricing and investment decisions over many years?
A) Regression testing
B) Virtual reality
C) War gaming
D) Commitment testing
E) Scenario testing
Q2) What term refers to the situation in the used car market where owners are more anxious to sell low-quality cars than high-quality cars?
A) Clunker market
B) Quality conundrum
C) Car scrapping market
D) Low-quality market
E) Lemons market
Q3) Suppose Firm #1 dominates a market for widgets priced at $100/unit with a marginal cost of $60/unit.If Firm #2 enters the market and offers comparable widgets at a 3% discount,extending a price umbrella optimal as long as Firm #1 loses no more than what portion of its market share?
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9
Chapter 8: Industry Analysis
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Sample Questions
Q1) Which of the following is not a component of the Value Net?
A) Suppliers
B) Customers
C) Competitors
D) Supplementors
E) Complementors
Q2) Which of the following does not tend to affect the threat of entry?
A) Expectations about pre-entry competition
B) Government protection of incumbents
C) Consumers highly valuable reputation/consumers are brand loyal
D) Experience curve
E) Network externalities
Q3) Which of the following is not a factor that could intensify internal rivalry in the Chicago hospital market?
A) Relatively large number of hospitals
B) Considerable variation in production costs
C) Relatively small number of doctors
D) Excess capacity
E) Aging baby boomers increasing demand for admissions
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Page 10
Chapter 9: Strategic Positioning for Competitive Advantage
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Sample Questions
Q1) What type of curve can be used to describe the set of price-quality combinations that yields the same consumer surplus to an individual?
A) Frontier curve
B) Learning curve
C) Level curve
D) Implicit curve
E) Indifference curve
Q2) What is one way to measure a firm's willingness-to-pay?
A) Marginal profit per unit of production
B) Value added analysis
C) Cost-benefit analysis
D) Input-output analysis
E) Sales-per-cost analysis
Q3) What type of good is one whose quality is relatively easy to evaluate before purchase?
A) Consumer packaged good
B) Search good
C) Experience good
D) Automobile
E) Appliance
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Chapter 10: Information and Value Creation
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Sample Questions
Q1) Which of the following is not a reason for customer survey bias in quality measures?
A) Different customers may use different measurement criteria
B) Customers may have an incentive to inflate ratings to influence the average score
C) Customers often lie in consumer surveys
D) Customers are reluctant to leave negative feedback
E) Consumer feedback is unverifiable.
Q2) When is a signal informative?
A) When it is lightly advertised by the firm
B) When it is more profitable for the high quality firm to offer it
C) When there are many firms advertising substitute products
D) When it is offered by the low quality firm
E) When the first firm that signals is the low quality firm
Q3) Which of the following is a source for horizontal differentiation?
A) Price
B) Quality
C) Advertising
D) Location
E) Availability of substitutes
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12
Chapter 11: Sustaining Competitive Advantage
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Sample Questions
Q1) What term best describes the characteristic of a process if past circumstances could exclude certain evolutions in the future?
A) Path dependence
B) Correlated research strategies
C) Evolutionary economics
D) Dynamic efficiency
E) Dynamic capabilities
Q2) Which of the following is not an impediment to imitation?
A) Legal restrictions
B) Superior access to inputs or customers
C) Scale diseconomies
D) Market size economies
E) Intangible barriers: casual ambiguity, dependence on historical circumstances, and social complexity
Q3) Which of the following products and services depend on standards?
A) Cellular communications
B) Internet
C) Video gaming
D) High-definition television
E) All of the above
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Chapter 12: Performance Measurement and Incentives
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Sample Questions
Q1) How does a centralized organization solve coordination problems?
A) Allows for face to face communication
B) Creates a smaller organization
C) Reduces the costs of business
D) Concentrates decision making authority in a one or a small group of people
E) Information can take more time to trickle down
Q2) Which of the following is not a characteristic of performance based pay?
A) The slope of the relationship between pay and performance for an employee provides incentives for effort, not the level of pay
B) Employees will always prefer performance based pay thus aligning principal/agent objectives
C) The overall value maximizing effort level for an employee occurs when personal marginal benefit equals personal marginal cost
D) Performance based pay can resolve hidden information problems
E) Pay contracts approaching 100% commission and negative salaries can occur
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14
Chapter 13: Strategy and Structure
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Sample Questions
Q1) In departmentalization,which of the following is a required step?
A) Specifying relationships between chosen dimensions
B) Allocating costs across departments
C) Creating agency alignment between departments
D) Identifying principals
E) None of the above
Q2) Which of the following terms involves the location of decision making rights and rule making authority within a hierarchy?
A) Complex hierarchy
B) Coordination
C) Control
D) Hierarchy of authority
E) Departmentalization
Q3) Which of the following terms best describes the division of an organization into formal groupings?
A) Complex hierarchy
B) Coordination
C) Control
D) Hierarchy of authority
E) Departmentalization
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Chapter 14: Environment, power, and Culture
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Sample Questions
Q1) What term best refers to interrelated beliefs,values,material practices,and norms of behavior that exist in an industry at any given time?
A) Institutional elements
B) Institutional standards
C) Institutional influences
D) Institutional logics
E) Institutional ideas
Q2) Which of the following is an example of informal regulations with respect to a firm's social context?
A) Contracting
B) Employment practices
C) Pricing
D) Entry-deterring behaviors
E) Cultural norms
Q3) Which of the following is true about culture?
A) Culture increases agency costs
B) Culture reduces bargaining costs
C) Culture reduces transactions costs
D) Culture increases economic costs
E) culture has no effect on costs
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