Q&A Hero

Q: ________ in the RBV are defined as the tangible and intangible assets that a firm controls that it can use to conceive and implement its strategies. A) Management controls B) Capabilities C) Resources D) Compensation policies

Q: If all a firm does is create value in the same way as its competitors, the best performance it can ever expect to gain is competitive parity.

Q: If there is a conflict between the resources a firm controls and the firm's organization, the resources should be changed.

Q: In the end, competitive advantage is so important to a firm's success, it must remain the sole property of senior management.

Q: Tacit cooperation is only a viable strategy when an industry is perfectly competitive.

Q: When tacit cooperation has the effect of reducing supply and increasing prices, it is known as tacit collusion.

Q: Any actions that a firm takes that have the effect of reducing the level of rivalry in an industry that also do not require firms in an industry to negotiate with each other can be thought of as explicit cooperation.

Q: One reason a firm may not respond to another firm's competitive advantage is because it does not have the resources or capabilities to do so.

Q: Decisions made by other firms given the strategic choices of a particular firm define the nature of the competitive dynamics that exist in an industry.

Q: If a resource or capability is valuable and rare but not costly to imitate, exploiting this resource will generate a sustainable competitive advantage for a firm.

Q: Compensation policies are the ways that firms pay employees, and such policies create incentives for employees to behave in certain ways.

Q: For Southwest Airlines, competitive advantage falls into two big categories: financial decisions made by Southwest and Southwest's approach to managing people.

Q: A firm's formal reporting structure is a description of who in an organization reports to whom and is often embedded in a firm's organizational chart.

Q: Most technological developments in an industry are diffused throughout firms in that industry in a relatively brief period of time, but only if the technology in question has not been patented.

Q: Whenever the sources for competitive advantage are widely diffused across people, locations, and processes in a firm, those sources will be costly to imitate.

Q: The interpersonal relations among managers in a firm, a firm's culture, and a firm's reputation among suppliers and customers can all act to make a firm's resources and capabilities socially complex.

Q: A process is said to be path dependent when imitating firms are not able to understand the relationship between the resources and capabilities controlled by a firm and that firm's competitive advantage.

Q: The ability of firms to acquire, develop, and use resources often depends upon their place in time and space, and firms that do not have space-and-time-dependent resources face a significant cost disadvantage in obtaining and developing them.

Q: In general, imitation can occur in one of two ways: direct duplication or substitution.

Q: A sustained competitive advantage can be competed away by strategic imitation if competing firms face an important cost disadvantage in duplicating a successful firm's valuable resources.

Q: When firms without a resource or capability face a cost disadvantage in obtaining or developing it compared to firms that already possess it, this resource or capability is described as perfectly imitable.

Q: In general, as long as the number of firms that possess a particular valuable resource or capability is less than the number of firms needed to generate perfect competition dynamics in an industry, that resource or capability can be considered rare and a potential source of competitive advantage.

Q: Most firms have a resource base that is composed primarily of valuable but common resources and capabilities, some of which are essential if a firm is to gain competitive parity.

Q: A resource can be a source of competitive advantage even if the resource is controlled by numerous firms.

Q: The value chain model developed by McKinsey and Company divides value-creating activities into two large categories: primary activities and secondary activities.

Q: If a firm creates environmental pollution in the process of manufacturing its goods, the pollution is known as an externality.

Q: Studying a firm's value chain forces us to think about firm resources in an aggregated way.

Q: Many firms have resources and capabilities that are used to neutralize threats and the use of these resources enables the firms to increase their net revenues.

Q: In general, firms that use their resources and capabilities to exploit opportunities or neutralize threats will see no increase in their net revenues nor a decrease in their net costs compared to the situation where they are not using these resources and capabilities to exploit opportunities or neutralize threats.

Q: Within the VRIO framework, resources and capabilities that are not valuable are also known as weaknesses.

Q: Within the VRIO framework, valuable resources and capabilities are also known as strengths.

Q: In the VRIO framework, the R represents resources.

Q: A firm's plant and equipment, its geographic location and its access to raw materials are all examples of physical resources.

Q: Inputs whose quantity of supply is fixed and whose demand does not respond to price increases are said to be elastic in supply.

Q: The assumption of resource immobility holds that it may be very costly for firms without certain resources and capabilities to develop or acquire them.

Q: One of the key assumptions of the RBV is resource homogeneity.

Q: Organizational resources include the training, experience, judgment, intelligence, relationships and insight of individual managers and workers in a firm, while human resources are an attribute of collections of individuals.

Q: Financial resources include only the profits a firm has made earlier in its history and that it has reinvested in itself.

Q: Resources in the resource based view are defined as the tangible and intangible assets that a firm controls, which it can use to conceive and implement its strategies.

Q: Capabilities are a subset of a firm's resources and are defined as tangible and intangible assets that enable a firm to take full advantage of other resources it controls.

Q: All other things being equal, which of the following would lead to lower barriers to entry in an industry? A) The existence of economies of scale in the industry B) Products are highly differentiated in the industry. C) Industry incumbents have learning-curve cost advantages. D) Raw materials are widely and readily available at a competitive price.

Q: ________ exist when a firm's costs rise as a function of its volume of production. A) Economies of scale B) Economies of scope C) Diseconomies of scale D) Learning curve effects

Q: Firms that have either recently begun operations in an industry or that threaten to begin operations in an industry soon are considered to be ________ in the five forces framework. A) barriers to entry B) new competitors C) suppliers D) buyers

Q: A(n) ________ is any individual, group, or organization outside a firm that seeks to reduce the level of that firm's performance. A) environmental threat B) environmental opportunity C) environmental equalizer D) competitive advantage

Q: Which type of competition is characterized by a small number of firms, homogeneous products and costly entry and exit? A) perfect competition B) monopolistic competition C) oligopoly D) monopoly

Q: Which type of competition is characterized by a large number of firms, heterogeneous products and low cost of entry and exit? A) perfect competition B) monopolistic competition C) oligopoly D) monopoly

Q: Firms in industries characterized by ________ can expect to earn only competitive parity. A) perfect competition B) monopolistic competition C) oligopoly D) monopoly

Q: Within the five forces framework, the five most common threats facing firms from their competitive environment include each of the following except A) substitutes. B) complementors. C) suppliers. D) buyers.

Q: In a perfectly competitive industry, A) there are relatively few firms operating in the industry. B) the products and services sold by firms in the industry are very different from each other. C) it is very costly for firms to enter the industry. D) it is not very costly for firms to enter or exit the industry.

Q: In the S-C-P model, ________ refers to the strategies that firms in an industry implement. A) structure B) strategy C) conduct D) performance

Q: Civil wars, political coups, terrorism, wars between countries, famines, and country or regional economic recessions are all examples of which element of the general environment? A) demographics B) specific international events C) economics D) culture

Q: When activity in an economy is relatively low for a short period of time, the economy is said to be in a A) recession. B) depression. C) prosperous cycle. D) boom.

Q: The values, beliefs and norms that guide behavior in a society are known as A) climate. B) demographics. C) economics. D) culture.

Q: ________ is/are the distribution of individuals in a society in terms of age, sex, marital status, income, ethnicity, and other personal attributes that may determine buying patterns. A) Demographics B) Economics C) Technological trends D) Culture

Q: All of the following are elements of the general environment except A) technological trends. B) demographic trends. C) industrial trends. D) cultural trends.

Q: The ________ consists of broad trends in the context in which a firm operates that can have an impact on a firm's strategic choices. A) micro-environment B) general environment C) task environment D) internal environment

Q: All divestments are caused by industry decline.

Q: The objective of divestment is to extract a firm from a declining industry.

Q: Firms pursuing a harvest strategy in a declining industry do not expect to remain in the industry over the long term.

Q: A firm following a niche strategy in a declining industry reduces its scope of operations and focuses on narrow segments of the declining industry.

Q: A fragmented industry is an industry that has experienced an absolute decline in unit sales over a sustained period of time.

Q: Product innovation is an effort to refine and improve a firm's current processes.

Q: Mature industries are characterized by elements such as increasing growth in total industry demand, significant increases in product capacity, and an overall increase in the profitability of firms in the industry.

Q: If you were to purchase a new Apple iPod and were unable to use your previously downloaded library of digital music with your new iPod, this would be an example of a customer-switching cost you would incur to use Apple's product.

Q: First movers that invest only in technology usually obtain sustained competitive advantages, even if they do not tie up strategically valuable resources in an industry before their full value is widely understood.

Q: The major opportunity facing firms in fragmented industries is the implementation of strategies that begin to consolidate the industry into a smaller number of firms.

Q: An emerging industry is an industry in which a large number of small or medium-sized firms operate and no small set of firms has a dominant market share or creates dominant technologies.

Q: It is possible for a single firm to be a complementor of one firm and a competitor of another.

Q: According to Bradenburger and Nalebluff, a firm's competitors help increase the size of a firm's markets while complementors divide this market among a set of firms.

Q: Sophisticated software can enhance the value that customers receive from a personal computer. Therefore, software can be said to be a complementor of a personal computer.

Q: In general, it is rarely the case that all five forces in the five forces framework will be equally threatening at the same time.

Q: If the owner of a jewelry store who normally purchased diamonds from a diamond brokerage firm were to open his own diamond brokerage firm, this would be an example of forward vertical integration.

Q: The threat of buyers is greater if the products or services that are being sold to buyers are standard and not differentiated than if the products sold to buyers are highly differentiated.

Q: Suppliers are a greater threat to firms in an industry when suppliers are threatened by substitutes.

Q: A firm's supplier poses a greater threat if the supplier's industry has a large number of firms, none of which dominate the supplying industry, than if the supplier's industry is dominated by a small number of firms.

Q: In an industry, the products or services provided by a firm's competition meet approximately the same customer needs in the same way as the products or services provided by the firm itself, whereas substitutes meet approximately the same customer needs but do so in different ways.

Q: The threat of existing competition tends to be high in an industry when firms are able to meaningfully differentiate their products.

Q: Learning-curve cost advantages are present when the cost of production falls with the cumulative volume of production.

Q: Proprietary technology often is more important as a barrier to entry than is managerial know-how.

Q: Brand identification and customer loyalty serve as entry barriers because new entrants not only have to absorb the standard costs associated with starting production in a new industry, but also have to absorb the costs associated with overcoming an incumbent firm's differentiation advantages.