Competitive Strategy
Test Questions
Course Introduction
Competitive Strategy explores the frameworks, tools, and analytical techniques that organizations use to achieve and sustain a competitive advantage in dynamic markets. The course covers key concepts such as industry analysis, value creation, positioning, and strategic decision-making, using real-world case studies to illustrate how firms evaluate their environments and rivals. Students learn to develop and implement effective strategies by understanding market forces, anticipating competitor moves, and leveraging organizational capabilities, preparing them for strategic roles in diverse industries.
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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Chapter 1: The Power of Principles: A Historical Perspective
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Sample Questions
Q1) Which of the following government regulations on business conditions did not increase circa 1910?
A)Regulation on corporate governance
B)Securities markets regulation
C)Antitrust regulation
D)Regulations on disability insurance provisions
E)Regulations on insurance for widows and children
Answer: B
Q2) What significant government infrastructure project led to the development of national stock and commodity markets?
A)Transcontinental Railroad
B)Erie Canal
C)Union Pacific Railroad
D)Prime Meridian Conference
E)Central Pacific Railroad
Answer: A
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Chapter 2: The Horizontal Boundaries of the Firm
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Sample Questions
Q1) Consolidation of managers often occurs due to which of the following?
A)Increased compensation for senior managers
B)Lower costs in the vertical supply chain
C)Mergers and acquisitions
D)Increased political power of senior managers
E)Social prominence of middle magaers
Answer: C
Q2) If a firm enjoys lower costs due to a complex labor-intensive process,which of the following statements would then be true?
A)Cutbacks in volume will always raise unit costs
B)The firm is unconcerned with labor turnover
C)An example of this process could be the practice of anti-trust law
D)The firm's average cost rises due to moving down the learning curve
E)The process is likely a repetitive manufacturing process such as two-piece aluminum can manufacturing
Answer: C
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4
Chapter 3: The Vertical Boundaries of the Firm
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Sample Questions
Q1) Which of the following processes is most representative of a less integrated firm on the "buy" end of the make-or-buy continuum?
A)Arm's length market transactions
B)Long-term contracts
C)Strategic alliances and joint ventures
D)Parent/subsidiary relationships
E)Perform activity internally
Answer: A
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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Chapter 4: Integration and Its Alternatives
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Sample Questions
Q1) Which of the following conclusions can we make about vertical integration with regard to scale and scope economies?
A)If asset specificity is significant enough,vertical integration will be more profitable than arm's-length market purchases,even when production of the input is characterized by strong scale economies or when the firm's product market scale is small.
B)A firm gains more from vertical integration when outside market specialists are better able to take advantage of economies of scale and scope
C)A firm with a larger share of the product market will benefit more from vertical integration than a firm with a smaller share of the product market
D)The more a firm produces,the greater its input and this ultimately decreases the likelihood that in-house production can take as much advantage of economies of scale and scope as an outside market specialist
E)If a firm is considering whether to make or buy an input requiring significant up-front setup costs,and there is a large market outside the firm for the input,then the firm should buy the input from outside market specialists
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6
Chapter 5: Competitors and Competition
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Sample Questions
Q1) What is the term for examining consumers travel patterns?
A)Flow analysis
B)Travel analysis
C)Purchase location analysis
D)Consumer distance analysis
E)None of the above
Q2) Which of the following is a reason other than concentration that price-cost margins may vary across industries?
A)Accounting practices
B)Regulation
C)Product differentiation
D)Nature of sales transactions
E)All of the above
Q3) In a three firm market where the market share split is 50%,30% & 20%,what is the Herfindahl index?
Q4) In a two firm market,let the marginal cost of producing a product be $20 and the market demand for their products be given by Q =12-P +P and Q =12-P +P .What is the Bertrand equilibrium price each firm would produce in this market?
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Chapter 6: Entry and Exit
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Sample Questions
Q1) Which of the following conditions may make predatory pricing by incumbents rational?
A)When entry costs are very high
B)When entrants are uncertain about market conditions
C)When existing firms have significant coast advantages
D)When entrants are required to obtain extensive licensing and regulatory approvals
E)When exiting firms have increasing marginal revenue
Q2) What are the two types of barriers to entry?
A)Legal and strategic
B)Price and Size
C)Structural and strategic
D)Size and Legal
E)Price and Structure
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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Page 8
Chapter 7: The Dynamics Competing Across Time
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Sample Questions
Q1) Which of the following practices can help firms facilitate cooperative pricing?
A)Price leadership
B)Advance announcement of price changes
C)Price following
D)Most favored customer clauses
E)Uniform delivered prices
Q2) Which of the following commitment strategies involves soft commitment postures,strategic complements for the stage 2 tactical variables,a refrain commitment action and an acceptance of the status quo out of fear thus waiting to follow the leader?
A)Top Dog
B)Lean and Hungry Look
C)Mad Dog
D)Puppy-Dog Ploy
E)Fat-Cat Effect
Q3) In a six-firm market,if all firms charge the monopoly price,the profit equals $120,000.In that same six-firm market,if all firms instead charge the prevailing price,the profit is $60,000.If the pricing period is one-month long,what is the maximum monthly discount rate implied for each firm to still have an incentive to independently price at the monopoly level?
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Page 9
Chapter 8: Industry Analysis
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Sample Questions
Q1) Which of the following is not a feature of selective contracting (used by Managed Care Organizations)that intensified internal rivalry?
A)Had infrequent (contract lengths of two to three years)and lumpy (one insurer may have represented over 5% of a hospital's business)sales
B)Treated all hospitals as identical
C)Kept price negotiations between insurers and hospitals secret,encouraging hospitals to lower prices to win contracts
D)Contracted with hospitals that patients were most loyal to E)Created pressure for hospitals to win each individual contract with no thought of future consequences
Q2) What term refers to the ability of firms to negotiate purchase prices that extract higher profits from buyers?
A)Substitutes and Complements
B)Competition
C)Customer power
D)Seller power
E)Buyer power
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Chapter 9: Strategic Positioning for Competitive Advantage
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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) 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
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Chapter 10: Information and Value Creation
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Sample Questions
Q1) Which of the following is another term for "teaching to the test?"
A)Sample bias
B)Test variance
C)Teaching discrimination
D)Multitasking
E)None of the above
Q2) Products for which consumers can easily obtain the information required to compare alternatives are called:
A)Experience goods
B)Search goods
C)Retail goods
D)Consumer goods
E)Credence Goods
Q3) Which of the following is a grade used to evaluate quality?
A)Report card
B)Status report
C)Verification
D)Warrantee claim
E)Product statement
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Page 12
Chapter 11: Sustaining Competitive Advantage
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Sample Questions
Q1) Which of the following terms best describes an idea,developed by Gary Hamel and C.K.Prahalad,which combines commitment to the firm's ambitions with the flexibility to change with circumstances?
A)Leveraging resources
B)Strategic intent
C)Strategic stretch
D)Hypercompetition
E)Global dominance
Q2) What term best characterizes the battle between firms to innovate first?
A)Market for new ideas
B)New product competition
C)R&D race
D)Innovation competition
E)Patent race
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) Which of the following is not a principal/agent relationship?
A)Shareholders/Company CEO
B)Shareholders/Company employees
C)Company/Hired counsel
D)Carmaker/Auto part supplier
E)Shareholder/IRS auditors of a company
Q2) Which of the following is an example of a principal/agent relationship?
A)Company salesperson/Customer
B)Company CEO/Company Vice President
C)Company/Hired counsel
D)Company/Company competitor
E)Shareholder/IRS auditors of a company
Q3) Relative performance is best described as which of the following??
A)The excess of a firm's revenue over its costs
B)How a firm performs based on a comparison to another firm in its peer set within an industry
C)The average compensation of employees compared to the average at other firms
D)The percentage of output attributed to fixed versus variable costs
E)How a firm compares in number employees to another frim in its peer set within an industry
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Chapter 13: Strategy and Structure
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Q1) Which of the following terms best describes a type of network structure that involves relatively self-contained organizational subunits tied together through a technology that focuses on standardized linkages?
A)Unitary functional organization
B)Multidivisional organization
C)Matrix organization
D)Modular organization
E)Hierarchical organization
Q2) What term best defines a complex set of behavior patterns that Nelson and Winter view the actions of firms to be a result of?
A)Routines
B)Decisions
C)Heuristics
D)Relationships
E)Resolutions
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15
Chapter 14: Environment, Power, and Culture
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Q1) Which of the following statements is least true regarding the conditions John Barney identifies under which culture can be a source of sustained competitive advantage?
A)Culture should be imitable
B)Culture must be valuable for the firm
C)If culture is common to most firms in the market,so that it reflects the influence of the national or regional culture,then it is unlikely to lead to a relative competitive advantage
D)If factors of a firm's culture are easy to copy,other firms will begin to do so,which will nullify any advantage for the firm where the culture first developed
E)Something about the firm's culture and values must be linked to the value the firm creates for customers
Q2) What aspect(s)of internal context are important in situations of chronic goal conflict?
A)Formal authority
B)Formal controls
C)Contracts
D)Power and culture
E)Exclusive dealings
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16
Chapter 15: Economics Primer
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Sample Questions
Q1) Which of the following statements is true regarding the relationship between average and marginal cost functions?
A)When average cost is a decreasing function of output,marginal cost is greater than average cost.
B)When average cost neither increases or decreases (because it is constant or at a minimum point),marginal cost is equal to average cost
C)The average cost function is always smaller than the marginal cost function
D)The average cost function is always greater than the marginal cost function
E)When average cost is an increasing function of output,marginal cost is less than average cost
Q2) 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
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