Contemporary Strategy Analysis Text and Cases 8th Edition Test Bank
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Chapter 4
Further Topics in
Industry and Competitive Analysis
True or False
questions
1. Porter’s five forces model offers a rigorous, empirically
validated approach to explaining the variation in profitability across
industries
@ Pages and
References: pp88-89
1. T
*b. F
2. Industries are the central arenas in which competition takes
place. To understand competition there is little need to disaggregate
industries into segments and groups of firms.
@ Pages and
References: p89
1. T
*b. F
3.
Industry accounts for
a major proportion of the differences in profitability between firms
@ Pages and
References: p89
*a. T
1.
F
4.
A key factor
determining the profitability of making inkjet printers is the complementary
relationship between printers and ink cartridges.
@ Pages and
References: p91
*a. T
1. F
5. A key factor determining the profitability of making automobiles
is the complementary relationship between automobiles and gasoline.
@ Pages and
References: p91
1. T
*b. F
6. When two products complement each another, profit accrues to the
supplier that builds the stronger market position and reduces the value
contributed by the other
@ Pages and
References: p91
*a. T
1. F
7. The Schumpeterian view of competition in industries (the
Austrian school of economics) emphasizes the role of innovation and
entrepreneurship
@ Pages and
References: p91
*a. T
1. F
8. In common with the Porter five forces framework, the
Schumpeterian approach views competitive behavior as the outcome of industry
structure
@ Pages and
References: p91
1. T
*b. F
9. Hypercompetition is an intense and dynamic mode of competition
in which sustaining established competitive advantage becomes the key goal for
strategy.
@ Pages and
References: p91
*a. T
1. F
10. Empirical studies on hypercompetition show unanimously that
industries are becoming increasingly turbulent and competitive advantage
increasingly short-lived
@ Pages and
References: pp91-92
1. T
*b. F
11. By modeling the process of interactive decision making by rival
firms, game theory can predict the outcome of a range of competitive
situations.
@ Pages and
References: p92
*a. T
1. F
12. In the world of business, competition and cooperation are
exclusive
@ Pages and
References: p93
1. T
*b. F
13. The propensity for similar businesses to cluster in the same
locality is evidence of the intensity of the competitive instincts that drive
business owners.
@ Pages and
References: p93
1. T
*b. F
14. “Deterrence” can be defined as imposing costs on the other
players for actions that we deem to be desirable
@ Pages and
References: p93
1. T
*b. F
15. The tendency for both Coca-Cola and Pepsi to compete through
large advertising budgets which leave market shares unchanged is not an example
of a “prisoners’ dilemma” because both firms remain highly profitable.
@ Pages and
References: p94
1. T
*b. F
16. One solution to the “prisoners’ dilemma” is to change the
payoffs in order to induce cooperative behavior.
@ Pages and
References: p94
*a. T
1. F
17. After arriving in Mexico in 1519, the destruction by Hernan
Cortes of his own ships was a signal, in game theory terminology, of
“commitment” for his troops to the conquest of the Aztec empire
@ Pages and
References: pp93&95
*a. T
1. F
18. When applied to real business situations, the usefulness of game
theory is limited by
the tendency for predictions to be highly sensitive to small changes in initial
conditions.
@ Pages and
References: p96
*a. T
1. F
19. Competitive intelligence involves the systematic collection and
analysis of public information about suppliers and customers to aid decision
making
@ Pages and
References: p97
1. T
*b. F
20. The aim of competitive intelligence is to predict competitor
behavior, it should not attempt to “get inside the heads of your rivals”
@ Pages and
References: p98
1. T
*b. F
21. A company whose primary goal is profitability is likely to be a
much more aggressive competitor than one that is mainly interested in expanding
market share.
@ Pages and
References: pp98-99
1. T
*b. F
22. An “industry recipe” is a set of beliefs among senior managers
of different firms concerning the nature of their industry and the success
factors within it.
@ Pages and
References: p99
*a. T
1. F
23. Segmenting an industry involves assessing the characteristics of
its customers and its products
@ Pages and
References: pp100–101
*a. T
1. F
24. A two dimensional segmentation matrix is typically too
simplistic to be of practical use.
@ Pages and
References: p101
1. T
*b. F
25. Choosing segmentation variables is facilitated by the fact that
different segmentation variables are closely correlated.
@ Pages and
References: p101
*a. T
1. F
26. In the automobile industry barriers to mobility are sufficiently
high that profit differences between segments are sustained over long periods
of time.
@ Pages and
References: p103
1. T
*b. F
27. Profit pool mapping is a technique that analyzes the vertical
structure of an industry and measures total profit at each stage of that
industry’s value chain
@ Pages and
References: p104
*a. T
1. F
28. A strategic group is a group of firms in an industry that are
following the same or similar strategy along strategic dimensions, serving the
same strategic customer segment
@ Pages and
References: pp104-5
*a. T
1. F
29. The main usefulness of strategic group analysis is in analyzing
interfirm profitability
differences within an
industry; it is less useful as a tool for describing the strategic
positioning of firms within an industry.
@ Pages and
References: p105
1. T
*b. F
Multiple Choice
Questions
30. Porter’s five forces model of competition is too simple as
originally conceived because it overlooks phenomena such as:
@ Pages and
References: p88
1. The relationships of substitution between products or services
within one segment of the market
*b. Competitors’
strategies may shape the industry structure, rather than structure shaping
competition
1. The complexity and stability of the competitive world where
rivals’ strategies affect each other
2. The different levels of industry analysis that the five forces
model can be applied to
31. Empirical research shows that proportion of inter-firm
differences in profitability that industry factors explain is:
@ Pages and
References: p88
1. More than 75%
2. About half
*c. Less than
25%
1. The question is cannot be answered because “industry” is a
meaningless concept.
32. The difference between substitute and complementary products may
be summarized as follows:
@ Pages and
References: p89
*a. Substitutes reduce
the value of a product, whereas complements increase value
1. Complements reduce the value of a product, whereas substitutes
increase value
2. Complements cannot be used together, whereas substitutes can
3. Complements increase the average price of any of them, whereas
substitutes do the opposite
33. Video game consoles and video games are complementary products: the
availability of one increases the value of the other. How this value is
distributed between the suppliers of video game consoles and the suppliers of
video games depends upon:
@ Pages and
References: p90
1. Which costs more to develop, consoles or video games
*b. Relative
bargaining power
1. Whether video games are exclusive to a single video console
platform
The size of the video
console producers relative to the size of the video game publishers
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