Chapter 11

25. What term refers to the costs incurred by buyers when they change to a different supplier? a) Switching costs b) Buyer costs c) Reputation costs d) Learning costs e) Customer costs

a) Switching costs

27. Size, growth, and character of home demand for a firm's product are examples of what? a) Factor conditions b) Demand conditions c) Supply conditions d) Related supplier or support industries e) Strategy, structure, and rivalry

b) Demand conditions

16. What term best refers to fundamental changes that lead to major shifts of competitive positions in a market? a) Jump b) Shock c) Alteration d) Bolt e) Shift

b) Shock

33. What term refers to the costs incurred by sellers when they deliver substandard, or defective products? a) Switching costs b) Buyer costs c) Reputation costs d) Learning costs e) Customer costs

c) Reputation costs

6. What term best describes firm-specific assets such as patents and trademarks, brand-name reputation, installed base, and organizational culture? a) Competitive advantage b) Capabilities c) Resources d) Threats to sustainability e) Strategic firm assets

c) Resources

20. Which of the following is not an impediment to imitation? a) Legal restrictions b) Superior access to inputs or customers c) Scale diseconomies d) Market size economies e) Intangible barriers: casual ambiguity, dependence on historical circumstances, and social complexity

c) Scale diseconomies

7. 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

c) Strategic stretch

13. Which of the following terms best describes a phenomenon whereby a profit-maximizing firm sticks with its current technology or product concept even though the profit-maximizing decision for a firm starting from scratch would be to choose a different technology or product concept? a) The replacement effect b) Strategic intent c) Strategic stretch d) Hypercompetition e) The sunk cost effect

e) The sunk cost effect

19. Which of the following is the weakest an example of a "shock"? a) Contracting to use another firm's proprietary process b) Product Innovations c) Discoveries of new sources of consumer value or market segments d) Shifts in demand e) Changes in public policy that enables firms to significantly shift their strategic position in a business

a) Contracting to use another firm's proprietary process

28. Which of the following is not an example of a way a seller can increase switching costs? a) Creating a product line compatible with parts that are made by other manufacturers b) Offering coupons that tie discounts to the completion of a series of transactions c) Offering warranties if product is not serviced at authorized dealer d) Bundling complementary products that fit together in a product line e) Offering "frequent customer" points that tie promotions to the completion of a series of transactions

a) Creating a product line compatible with parts that are made by other manufacturers

2. What term best describes when quiet periods in markets are punctuated by fundamental "shocks" or "discontinuities" that destroy old sources of advantage and replace them with new ones? a) Creative destruction b) Entrepreneurship c) Innovation d) Market for ideas e) Disruptive technologies

a) Creative destruction

26. Which of the following terms describes a nation's position with regard to the elements (e.g. human resources, infrastructure) of production that are necessary to compete in a particular industry? a) Factor conditions b) Demand conditions c) Supply conditions d) Related supplier or support industries e) Strategy, structure, and rivalry

a) Factor conditions

34. Which of the following terms best describes a place in which a firm can sell its ideas for full value? a) Market for ideas b) Community of ideas c) Innovation market d) Patent market e) Idea environment

a) Market for ideas

23. What term best describes the characteristic of a process if past circumstances could exclude certain evolutions in the future? a) Path dependence b) Correlated research strategies c) Evolutionary economics d) Dynamic efficiency e) Dynamic capabilities

a) Path dependence

1. What term describes the situation where a firm does exceedingly well due to good luck or exceedingly poorly due to bad luck, but returns to normal performance following? a) Regression to the mean b) Competitive advantage c) Persistent performer d) Sustainable firm e) Predictable performance

a) Regression to the mean

14. 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

a) The replacement effect

4. Which of the following is least likely a characteristic of profit persistence in an industry? a) Entry barriers exist b) Economic profits should quickly converge to zero c) Barriers to imitation exist d) Firms earning above-average profits today should continue to do so in the future e) Low profit firms today should remain low-profit firms in the future

b) Economic profits should quickly converge to zero

3. What term describes the optimal allocation of society's resources at a given point in time? a) Creative destruction b) Static efficiency c) Dynamic efficiency d) Efficient allocation e) Resource efficiency

b) Static efficiency

5. What term best describes clusters of activities that a firm does especially well in comparison with other firms? a) Competitive advantage b) Resources c) Capabilities d) Threats to sustainability e) Strategic firm assets

c) Capabilities

15. 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

c) Early-mover advantages

31. Which of the following best describes regression to the mean?? a) Quiet periods in markets are punctuated by fundamental "shocks" or "discontinuities" that destroy old sources of advantage and replace them with new ones b) The optimal allocation of society's resources at a given point in time c) Clusters of activities that a firm does especially well in comparison with other firms d) A firm does exceedingly well due to good luck or exceedingly poorly due to bad luck, but returns to normal performance following e) None of the above

d) A firm does exceedingly well due to good luck or exceedingly poorly due to bad luck, but returns to normal performance following

8. Which of the following terms best describes the situation when sources of competitive advantage in an industry are being created and eroded at an increasingly rapid rate? a) Leveraging resources b) Strategic intent c) Strategic stretch d) Hypercompetition e) Global dominance

d) Hypercompetition

12. What type of isolating mechanisms impedes existing firms and potential entrants from duplicating the resources and capabilities that form the basis of the firm's advantage? a) Scarce b) Imperfectly mobile c) Early-mover advantages d) Impediments to imitation e) Cospecialized

d) Impediments to imitation

10. What term best describes a resource that cannot "sell itself" to the highest bidder? a) Isolated b) Value-creating c) Scarce d) Imperfectly mobile e) Profit maximizing

d) Imperfectly mobile

21. Which of the following is not a Legal Restriction? a) Patent b) Copyright c) Trademark d) Intellectual property e) Operating rights

d) Intellectual property

17. Which of the following terms best describes a place in which a firm can sell its ideas for full value? a) Industry for ideas b) Community of ideas c) Innovation market d) Market for ideas e) Idea environment

d) Market for ideas

9. 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

d) Resource-based theory of the firm

30. 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

e) All of the above

11. 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

e) Cospecialized

22. Which of the following terms best describes the ability of a firm to maintain and adapt the capabilities that are the basis of its competitive advantage? a) Riskiness of R&D b) Correlated research strategies c) Evolutionary economics d) Dynamic efficiency e) Dynamic capabilities

e) Dynamic capabilities

29. What product characteristic refers to the situation where consumers place higher value on a product if other consumers also use it? a) Value creation effect b) Product linkage c) Product externality d) Complementary effect e) Network effect

e) Network effect

32. 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

e) Operating rights

18. 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

e) Patent race

24. Which of the following is not an isolating mechanism that falls under the heading of early-mover advantage? a) Learning curve b) Reputation and buyer uncertainty c) Buyer switching costs d) Network effects e) Superior access to inputs or customers

e) Superior access to inputs or customers