Corporate Strategy
Question Bank
Course Introduction
Corporate Strategy explores the fundamental principles and frameworks that guide organizations in making high-level decisions to achieve long-term objectives and maintain competitive advantage. The course examines topics such as diversification, mergers and acquisitions, international expansion, strategic alliances, and the management of business portfolios. Through real-world case studies and analytical tools, students learn how top executives define the scope of the firm, allocate resources, and respond to dynamic market environments to create value and drive sustained success at the corporate level.
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) What was the most significant development to the evolution of business circa 1910?
A)Railroad integration
B)Telegraph communication expansion
C)Banking and accounting standard practices
D)Mass-production technology
E)Advent of steam technology in railroads and shipping
Answer: D
Q2) Matchmakers between manufacturers and sellers are called:
A)Agents
B)Factors
C)Brokers
D)Merchants
E)None of the Above
Answer: C
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Page 3
Chapter 2: The Horizontal Boundaries of the Firm
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34 Verified Questions
34 Flashcards
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Sample Questions
Q1) Why is firm specific learning better in general for an organization?
A)Encourages individuality among workers within the organization
B)Keeps unionized workers happy
C)Allows workers to acquire skills they can then "shop around"
D)Ensures worker knowledge is tied to current employment
E)Increases complexity and creativity in the organization
Answer: D
Q2) Which of the following is generally a way that LBOs can help a firm realize its potential value?
A)The synergies created allow for cost savings
B)The transaction reduces the disparity between a firm's actual and potential share price
C)The acquisition reduces the likelihood of competition in the industry
D)The transaction requires debt repayment with future free cash flow leaving management no discretion over the investment of these funds
E)The buyout gives an opportunity to adjust the management structure and makeup
Answer: D
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4
Chapter 3: The Vertical Boundaries of the Firm
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34 Verified Questions
34 Flashcards
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Sample Questions
Q1) Suppose you manufacture 10 million hard drives per year specifically for Dell laptop computers.Suppose your average variable cost C=$20/unit and annualized cost of investment to build a hard drive factory I=$30 million.If Dell agrees to purchase the 10 million hard drives at a price P*=$25/unit,what is your company's "rent?
Answer: $20 million
Q2) What problem preventing complete contracts refers to a lack of transparency/equal access to the details surrounding a contract?
A)Agency costs
B)Bounded rationality
C)Performance measurement difficulties
D)Asymmetric information
E)Contract body of law
Answer: D
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Chapter 4: Integration and Its Alternatives
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32 Flashcards
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Sample Questions
Q1) Suppose we have two firms (Firm 1 & Firm 2)enter into a transaction where Firm 1 is upstream of firm 2 in a vertical chain.What term best describes the organization of the transaction where the two firms are independent,each with control over its own assets?
A)Backward Integration
B)Forward integration
C)Nonintegration
D)Contractually unbound
E)Contractually bound
Q2) What concept describes the situation where the owner of an asset grants another party the right to use that asset,but the owner retains all controlling rights that are not explicitly stipulated in the contract?
A)Asset specificity
B)Non-contract rights of ownership
C)Control rights agreement
D)Residual rights of control
E)Coordination
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6
Chapter 5: Competitors and Competition
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Sample Questions
Q1) 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
Q2) What empirical method generally is used to measure the degree to which products substitute for each other?
A)Cross-price elasticity
B)Price comparison
C)Relatedness factor
D)Standard Industrial Classification
E)SSNIP
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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35 Flashcards
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Sample Questions
Q1) Which of the following is a potential risk of a brand umbrella?
A)The brand umbrella reduces the incumbents sunk cost of introducing a new product
B)The umbrella brand may help the incumbent navigate the vertical chain
C)The brand umbrella allows an incumbent offset uncertainty about the quality of a new product
D)A brand umbrella may make suppliers and distributors more willing to enter relationship specific investments in or sell credit to incumbents
E)If a new product under the umbrella fails,consumers may become disenchanted with the entire brand
Q2) Which of the following is a method a monopolist firm would not use to prevent entry into a market?
A)Limit pricing
B)Predatory pricing
C)Capacity expansion
D)Strict patent enforcement
E)Utilizing excess capacity for generic branded products
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Chapter 7: The Dynamics Competing Across Time
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33 Flashcards
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Sample Questions
Q1) What type of option exists when a decision maker has the opportunity to tailor a decision to information that will be received in the future?
A)Real option
B)Commitment option
C)Project option
D)Decision option
E)Future option
Q2) What term describes a policy in which a firm is prepared to match whatever change in strategy a competitor makes?
A)Response strategy
B)Always cooperate strategy
C)Always aggress strategy
D)Tit-for-tat strategy
E)Trigger strategy
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 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
Q2) Who are the most powerful suppliers in professional sports?
A)Players unions
B)Referees
C)Owners
D)Politicians
E)Cities
Q3) What entity as a supplier has the most substantial power over manufacturers in the commercial aircraft market?
A)Raw materials suppliers
B)Airlines
C)Aircraft leasing companies
D)Unions
E)Passengers
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Chapter 9: Strategic Positioning for Competitive Advantage
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Sample Questions
Q1) What type of strategy seeks to serve all customer groups in the market by offering a full line of related products?
A)Generic strategy
B)Margin strategy
C)Focus strategy
D)Share strategy
E)Broad-coverage strategy
Q2) What term describes the situation when a firm earns a higher rate of economic profit than the average rate of economic profit of other firms competing within the same market?
A)Industry effect
B)Competitive advantage
C)Business unit effect
D)Competitive position
E)Market profitability economics
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11
Chapter 10: Information and Value Creation
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35 Flashcards
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Sample Questions
Q1) Location can provide which of the following?
A)Vertical differentiation
B)Horizontal differentiation
C)Isolation
D)Customer switching costs
E)Availability of substitutes
Q2) Which of the following is measured by a report card that assesses product performance?
A)Process
B)Inputs
C)Warrantees
D)Outcomes
E)Longevity
Q3) Unraveling is an economic theory that describes which of the following?
A)Low quality products will be quickly discovered and abandoned by buyers
B)High seller concentration leads to the development of many substitute products
C)Few sellers improve product quality once they have scale in production
D)Even low quality sellers will disclose their product quality
E)Consumers ultimately switch products regardless of quality
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Page 12
Chapter 11: Sustaining Competitive Advantage
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Sample Questions
Q1) What term describes a framework used in strategy based on resource heterogeneity which posits that for a competitive advantage to be sustainable,it must be underpinned by resource capabilities that are scarce and imperfectly mobile?
A)Persistence of profitability for the firm
B)Capability-based theory of the firm
C)Regression to the mean
D)Resource-based theory of the firm
E)Five-forces framework
Q2) Which of the following terms best describes a phenomenon whereby,despite equal innovative capabilities,an entrant is willing to spend more to develop an innovation?
A)The replacement effect
B)Strategic intent
C)Strategic stretch
D)Hypercompetition
E)The sunk cost effect
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13
Chapter 12: Performance Measurement and Incentives
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33 Flashcards
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Sample Questions
Q1) What term best describes how a firm performs based on a comparison to another firm in its peer set within an industry?
A)Absolute performance
B)Comparative performance
C)Proportional performance
D)Performance measurement
E)Relative performance
Q2) What is a benefit of the de-centralized organization coordination solution?
A)Ensures no coordination opportunities are missed
B)Makes the organization more hierarchical
C)Takes advantage of localized information
D)Improves communication
E)Always encourages collaboration
Q3) 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
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Page 14
Chapter 13: Strategy and Structure
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Sample Questions
Q1) What type of organizational structure is one in which employees are subject to two or more sets of managers at once?
A)Unitary functional structure
B)Multidivisional structure
C)Matrix structure
D)Network structure
E)Individual structure
Q2) What type of organizational structure is one in which there is a single department responsible for each of the basic business functions within the firm?
A)Unitary functional structure
B)Multidivisional structure
C)Matrix structure
D)Network structure
E)Individual structure
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Chapter 14: Environment, Power, and Culture
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Sample Questions
Q1) What is the source from which a person derives legitimate or formal power?
A)Due to status
B)Possession of specialized knowledge
C)Ability to punish
D)Ability to grant rewards
E)Position within a hierarchy
Q2) What term does Ronald Burt use to describe relationships in social networks in which one actor is the critical link between individuals or entire groups of actors?
A)Mavens
B)Nodes
C)Structural holes
D)Tertius gaudens
E)Brokers
Q3) 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
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Page 16
Chapter 15: Economics Primer
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Sample Questions
Q1) In what special situation might the law of demand not hold?
A)In a perfectly competitive market
B)When there is a high price elasticity of demand
C)When MR=MC
D)At the Nash Equilibrium
E)If high prices confer prestige
Q2) Which characteristic does not describe 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)Industry-level price elasticity is finite
E)Firm-level price elasticity of demand facing another perfect competitor is infinite
Q3) Which of the following variables does not influence the quantity of product that a firm is able to sell?
A)Price of the product
B)Price of related products
C)Plant production costs
D)Incomes and tastes of consumers
E)Advertising
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