Competitive Strategy
Midterm Exam
Course Introduction
Competitive Strategy explores the frameworks, tools, and analytical approaches firms use to achieve and sustain competitive advantage in diverse industries. This course examines industry structure analysis, competitive dynamics, resource-based views, and the formulation and implementation of strategic positioning. Through case studies and real-world examples, students learn to assess competitors, predict strategic moves, and make decisions that drive superior performance. The course aims to develop a deep understanding of how organizations create value and respond to evolving markets, preparing students to contribute to long-term business success.
Recommended Textbook
Economics of Strategy 7th Edition by David Dranove
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15 Chapters
505 Verified Questions
505 Flashcards
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Page 2
Chapter 1: The Power of Principles: A Historical Perspective
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35 Verified Questions
35 Flashcards
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Sample Questions
Q1) Relaxing of government regulation of economic activities occurred during the second half of the 20 century for all of the following except:
A)Airline industry
B)Workplace safety
C)Banking industry
D)Trucking
E)Healthcare industry
Answer: B
Q2) What is the gaizhi process?
A)Valuing assets according to their earnings
B)A state-owned enterprise and private enterprise entering a joint venture
C)An increase of profitability prior to sale
D)Acquisition of large firms by private organizations
E)Restructuring whereby small firms are leased or sold
Answer: E
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Chapter 2: The Horizontal Boundaries of the Firm
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34 Verified Questions
34 Flashcards
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Sample Questions
Q1) Which of the following is not a product specific fixed cost?
A)The cost to manufacture a special die to make an aircraft fuselage
B)The cost of developing graphics software to facilitate video game development
C)The cost of a one-week training program preceding the implementation of a specific management initiative
D)The time and expense required to set up a textbook before printing it
E)The cost of administrative expenses
Answer: E
Q2) Which of the following is not generally a potential benefit of diversification?
A)Control systems rewarding/penalizing division managers based on business unit objective
B)Economies of scale and scope
C)Economizing on transaction costs
D)Diversifying shareholder portfolios
E)Identifying undervalued firms
Answer: A
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Chapter 3: The Vertical Boundaries of the Firm
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34 Verified Questions
34 Flashcards
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Sample Questions
Q1) Which of the following are the costs associated with slack effort and with the administrative controls to deter it?
A)Administrative costs
B)Coordination costs
C)Agency Costs
D)Overhead costs
E)Market costs
Answer: C
Q2) Which of the following types of fit (used to aide in coordination along all dimensions of production)explains a situation where the steps of a particular process must occur in a particular order?
A)Timing fit
B)Size fit
C)Color fit
D)Sequence fit
E)Price fit
Answer: D
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Chapter 4: Integration and Its Alternatives
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32 Verified Questions
32 Flashcards
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Sample Questions
Q1) Which of the following causes finished goods prices not to maximize the joint profits of a manufacturer and its supplier?
A)Inefficient asset specificity
B)Lack of coordinated scope economies
C)Incomplete contracting
D)Double marginalization
E)None of the above
Q2) What Japanese term describes a labyrinth of firms with long-term semi-formal relationships up and down the vertical chain?
A)Kaizen
B)Keiretsu
C)Kanban
D)Karõshi
E)Mochibun kaisha
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6
Chapter 5: Competitors and Competition
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Sample Questions
Q1) In a two firm market,let the marginal cost of producing a product be $20,the market demand be given by the function Q=60-P/2 and the market quantity be equal to Q +Q .What is the Cournot equilibrium quantity each firm would produce in this market?
Q2) Of the following industries listed,which one is generally thought of as having the highest search costs?
A)Consumer packaged goods
B)Electronics
C)Physician service
D)Automotive
E)Apparel
Q3) Suppose two hot dog stands,Al's & Bob's,position themselves at different ends of a 1000 yard stretch of beach.Assume there are 100 beach goers evenly distributed along the stretch of beach and travel costs are $.01 per yard.If Al charges $1 for his hot dogs and Bob charges $2 for his hot dogs,what is the cost of purchasing a hot dog from each stand for a hungry beachgoer situated at a position D yards from Al's end of the beach? How many consumers will go to Al's and how many will go to Bob's?
Q4) In a three firm market where the market share split is 50%,30% & 20%,what is the Herfindahl index?
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Page 7
Chapter 6: Entry and Exit
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35 Flashcards
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Sample Questions
Q1) What situation occurs when a large incumbent sets a low price to drive smaller rivals from the market?
A)Limit pricing
B)Price leading
C)Predatory pricing
D)Quality pricing
E)Capacity expansion
Q2) What term represents the conduct and performance of firms in the market after entry has occurred?
A)Postentry competition
B)Postentry actions
C)Postentry procedures
D)Postentry diversification
E)Postentry strategic decisions
Q3) Which of the following is an exit barrier for firms in an industry?
A)Sunk costs
B)Labor agreements or commitments to purchase raw materials
C)Obligations to input suppliers
D)Government restrictions
E)All of the above
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Chapter 7: The Dynamics Competing Across Time
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Sample Questions
Q1) Which of the following best describes a tit-for-tat strategy?
A)A firm charges a fixed price to every customer
B)A firm is prepared to match whatever change in strategy a competitor makes
C)A firm offers discounts for purchasing in quantity
D)A firm requires customers to enter into long-term purchase contracts
E)None of the above
Q2) How much revenue a firm brings in by improving the quality of a product such that more consumers want to buy it depends on which two factors?
A)The decrease in demand caused by the increase in quality and the incremental profit earned on each additional unit sold
B)The increase in demand caused by the increase in quality and the incremental profit earned on each additional unit sold
C)The increase in demand caused by the increase in quality and the incremental loss on each additional unit sold
D)The decrease in demand caused by the increase in quality and the incremental loss on each additional unit sold
E)The quality of changes to the original product and the decrease in demand cause by the changes in quality
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Chapter 8: Industry Analysis
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35 Flashcards
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Sample Questions
Q1) Which of following factors should be considered when assessing complements and substitutes?
A)Availability of close substitutes and/or complements
B)Price-value characteristics of substitutes/complements
C)Price elasticity of industry demand
D)All of the above
E)None of the above
Q2) Which of the following is generally thought of as a buyer in the hospital industry?
A)Pharmaceutical drug houses
B)Medical equipment companies
C)Technician
D)Patients
E)Nurse
Q3) Which of the following is a complement to professional sports?
A)Merchandise sales
B)Gambling
C)Luxury Boxes at stadiums
D)Food and beverage sales
E)None of the above
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Page 10
Chapter 9: Strategic Positioning for Competitive Advantage
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33 Verified Questions
33 Flashcards
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Sample Questions
Q1) Which of the following is false with respect to the strategy of cost leadership?
A)A firm following a strategy of cost leadership is following a generic strategy narrow in scope
B)A firm can follow a cost leadership strategy through achieving benefit parity by making products with the same B,but at a lower C than its rivals
C)A firm can follow a cost leadership strategy through achieving benefit proximity by offering a B that is not much less than those of competitors
D)A firm following a strategy of cost leadership creates more value than its competitors by offering products that have a lower C than those of its rivals
E)A firm can follow a cost leadership strategy by offering a product that is qualitatively different from that of its rivals
Q2) Which of the following is a characteristic of an experience good?
A)Warranty service is included in the sales price
B)An independent evaluation certifies the product
C)The product is heavily advertised
D)Quality can be assessed only after the customer has used it for a while E)Noen of the above
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Page 11
Chapter 10: Information and Value Creation
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Sample Questions
Q1) Conflicts of interest in the certifier market often can lead to which of the following?
A)Higher priced goods and services
B)Lower competition between substitute goods
C)A reduction in the number of competitive sellers
D)Certification bias
E)Less product choice for the consumer
Q2) Which of the following best describes a credence good?
A)Products for which consumers can easily evaluate quality even after purchasing and using the product
B)Products for which consumers rely on other purchasers' experience before buying
C)Products for which consumers cannot easily evaluate quality even after purchasing and using the product
D)Products for which consumers always,or almost always,purchase with a warranty
E)None of the above
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Chapter 11: Sustaining Competitive Advantage
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Sample Questions
Q1) Which of the following is a Legal Restriction?
A)Operational processes
B)Secret formulas or recipes
C)Employee job descriptions
D)Intellectual property
E)Operating rights
Q2) What type of isolating mechanisms increase the economic power of a competitive advantage over time once a firm has acquired that advantage?
A)Scarce
B)Imperfectly mobile
C)Early-mover advantages
D)Impediments to imitation
E)Cospecialized
Q3) What term best describes assets that are more valuable when used together than when separated?
A)Isolating
B)Value-creating
C)Imperfectly mobile
D)Scarce
E)Cospecialized
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Chapter 12: Performance Measurement and Incentives
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33 Verified Questions
33 Flashcards
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Sample Questions
Q1) Which of the following terms best describes a piece of information on which an incentive contract (explicit or implicit)can be based?
A)Absolute Performance
B)Relative Performance
C)Incentive
D)Performance measure
E)Performance standard
Q2) Which of the following terms describes a contract by which the value of the compensation depends on the measured performance of the employee?
A)Explicit incentive contract
B)Implicit incentive contract
C)Risk sharing contract
D)Compensation contract
E)Pay-for-performance contract
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14
Chapter 13: Strategy and Structure
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Sample Questions
Q1) In which of the following situations identified by Baron and Besanko will a matrix never be optimal regardless of any additional circumstances?
A)When spillovers are positively correlated and activities are profit complements
B)When activities are profit complements but spillovers are negatively correlated
C)If activities are profit substitutes and spillovers are positively correlated
D)If spillovers are negatively correlated and activities are profit substitutes
E)None of the above
Q2) Which of the following should not be considered when selecting organizing dimensions?
A)Economies of scale
B)Economies of scope
C)Transactions costs
D)Agency costs
E)Sunk costs
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Chapter 14: Environment, Power, and Culture
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Sample Questions
Q1) Which of the following is the most visible example of a firm's social context?
A)Employment practices
B)Contracting
C)Regulation
D)Entry-deterring behaviors
E)Formal controls
Q2) Which of the following statements is least true regarding institutions?
A)Institutions can involve formal regulation of firms by governmental agencies
B)Institutions can involve formal regulation of firms by nongovernmental regulatory organizations
C)Institutions can be less formal and involve ongoing power/dependence relationships between firms
D)Institutional arrangements may embody general patterns of values,beliefs,ad behavioral norms that motivate and stabilize affected firms
E)None of the above
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16
Chapter 15: Economics Primer
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Sample Questions
Q1) Which characteristic is present in a perfectly competitive market?
A)Firms produce identical or nearly identical products
B)Market price is beyond the control of any individual firm
C)A firm's demand curve is perfectly horizontal at the market price
D)Firms can enter and exit the market very easily
E)all of the above
Q2) Which of the following would not be a characteristic of a good with an elastic demand?
A)The product lacks unique features that differentiate it from competing products
B)The product is a high percentage of a consumer's total expenditures
C)The good is an input used to make a product that is sensitive to changes in price
D)There are many substitutes available for the good
E)The product has high switching costs
Q3) Suppose a firm's plant produces Q units in any given year.The plant itself operates with annualized costs of $10M and other annual fixed expenses totaling $3M.In addition,the firm's variable costs depend on Q and are given by the formula 5Q²+3Q.What is the formula for the firm's Average Fixed Costs?
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Page 17