final competitive strategy

Why might a firm not be able to react quickly to competitors' pricing moves?

(all of the above) - Lags in detecting competitors' prices -Infrequent interactions with competitors -Ambiguities in identifying which firm among a group of firms in a market is cutting price - Difficulties distinguishing drops in volume due to price cutting by rivals from drops in volume due to anticipated decreases in market demand

Which of the following practices can help firms facilitate cooperative pricing?

(all of the above) -Price leadership -Advance announcement of price changes -Price following -Most favored customer clauses -Uniform delivered prices - the way to prevent cheating

Which of following factors should be considered when assessing complements and substitutes?

(all of the above) a) Availability of close substitutes and/or complements b) Price-value characteristics of substitutes/complements c) Price elasticity of industry demand

Cooperative pricing is helped by which of the following situations?

(all of the above) a) Price following b) Advance announcement of price changes c) Price leadership d) Most favored customer clauses e) Uniform delivered prices

Which of the following is a component of the Value Net?

(all of the above) a) Suppliers b) Customers c) Competitors d) Complementors

What term describes a decision that has a short-term impact and is easy to reverse?

(none of the above) a) Dedicated investment b) Strategic commitment c) Critical choice d) Market investment

Given the following payoff diagram: Firm 2 Aggressive Passive Firm 1 Aggressive 40,10 55,15 Passive 50, 25 70, 20 How much can firm 1 improve its outcome by committing to a strategy thus transforming the simultaneous move game to a sequential move game?

5

Which of the following is false with respect to the strategy of cost leadership?

A firm following a strategy of cost leadership is following a generic strategy narrow in scope

Which of the following best describes a tit-for-tat strategy?

A firm is prepared to match whatever change in strategy a competitor makes

What is a grim trigger strategy in a two firm repeated game?

A strategy in which a firm initially cooperates and then aggresses for the rest of the game as soon as the opponent aggresses

Which set of advice below should a manager disregard when seeking pricing stability that is least likely to suffer from antitrust legislation?

Always share analyses of probably competitive reactions

Which of the following represents consumer surplus in the value creation equation, (B-P) + (P-C)?

B-P

Which of the following factors requires the least consideration when assessing supplier power relative to the downstream industry it sells to?

Competitiveness of the output market

Which of the following is not a feature of selective contracting (used by Managed Care Organizations) that intensified internal rivalry?

Contracted with hospitals that patients were most loyal to

What term refers to situations in which firms can sustain prices in excess of those that would arise in a non-cooperative single-shot price or quantity-setting game?

Cooperative pricing

Benefit proximity refers to which of the following?

Cost leading firms offering products with slightly less benefit

What type of entrant would be described as a new entrant with no current brand identity, distribution channels or presence within an industry?

De Novo (could be any of these? Innovator, Aggressive, Fast follower, Passive)

What term describes a decision that has a long-term impact and is difficult to reverse?

Dedicated Investment

Which of the following statements is true about how the volatility of demand conditions affects the sustainability of cooperative pricing?

Demand volatility is an especially serious problem when the production involves substantial fixed costs

What type of effect describes how a commitment impacts the present value of the firm's profits, assuming the firm adjusts its own tactical decisions in light of this commitment and that its competitor's behavior does not change?

Direct Effect

In which of the following ways can entry erode incumbents' profits?

Entrants decrease market concentration

Which of the following does not tend to affect the threat of entry?

Expectations about pre-entry competition

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?

Fat-Cat Effect

Which of the following best describes the consumer's shopping problem?

Finding the seller that offers the highest value of B - P

Which of the following best describes the term, internal rivalry?

Firms jockeying for share within a market

What type of cooperation-inducing strategy is defined as one so compelling that that a firm would expect all other firms to adopt it?

Focal Point

Which of the following is a concept developed by Michael Porter that describes, in broad terms, how it positions itself to compete in the market it serves?

Generic strategy

Which of the following is generally thought of as a supplier in the hospital industry?

Hospital-based physician

Which of the following trends or methods has since helped reduce the pricing rivalry that had intensified by the late 1990s?

Hospitals consolidated (conducted mergers)

What type of curve can be used to describe the set of price-quality combinations that yields the same consumer surplus to an individual?

Indifference curve

Which of the following statements is true about a tough commitment?

It is bad for competitors

Which of the following statements is true about a soft commitment?

It is good fro competitors

What term refers to the situation in the used car market where owners are more anxious to sell low-quality cars than high-quality cars?

Lemons Market

Price competition is increased when which of the following occurs?

Many sellers in the market

What kind of strategy is one by which a firm maintains price parity with its competitors and profits from its benefit or cost advantage primarily through high price-cost margins, rather than through a higher market share?

Margin strategy

What type of clause is a provision in a sales contract that promises a buyer that it will pay the lowest price the seller charges?

Most favored customer clause

Which of the following factors requires the least consideration when assessing supplier power relative to the upstream industry in which it buys raw materials?

Number of competitors in downstream market

Which of the following statements best describes a characteristic of geographic specialization focus strategies?

Offers a variety of products and/or sells to a variety of customer groups within a narrow geography

Which of the following represents producer surplus in the value creation equation, (B-P) + (P-C)?

P-C

What step of Ghemawat's framework for analyzing commitment intensive choices involves analyzing whether the firm's commitment is likely to result in a product market position in which the firm delivers superior benefits to consumers or operates with lower costs than competitors?

Positioning Analysis

Which of the following terms describes the situation created by a large dominant firm where smaller firms can find buyers as long as they sustain a lower price?

Price umbrella

Which of the following conditions does not tend to heat up price competition?

Products are differentiated/buyers have high switching costs

Which of the following is a characteristic of an experience good?

Quality can be assessed only after the customer has used it for a while

Which of the following is not a significant entry barrier in the commercial airframe manufacturing market?

Raw materials and labor

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?

Real Option

Which of the following is not a part of the five-forces framework?

Regulation

Which of the following is not a factor that could intensify internal rivalry in the Chicago hospital market?

Relatively small number of doctors

Select the letter corresponding to the best answer. For a given consumer, any price-quality combination along the indifference curve yields the _______________.

Same consumer surplus

Substitutes erode profits because of which of the following factor?

Substitutes divide demand and drive up internal rivalry

Which of the following is not a potential limitation of the five-forces framework?

The framework provides a structured way to systematically work through wide-ranging and often complex issues

How much revenue a firm brings in by improving the quality of a product such that more consumers want to buy it depends on which two factors?

The increase in demand caused by the increase in quality and the incremental profit earned on each additional unit sold

Why do price-sensitive buyers tend to harm cooperative pricing in a market?

The is an increase in temptation to cut price, even if competitors are expected to match

Consumer surplus is measured as which of the following?

The perceived benefit of a product per unit consumed minus the product's monetary price

Which of the following is a trend that Chicago area hospitals should least likely be worried about with respect to pricing?

There has been considerable consolidation (hospital mergers) in regional submarkets, including the city of Chicago and the important North Shore suburbs

Which of the following is not a common characteristic of capabilities?

They are easy to reduce to simple algorithms or procedure guides

What type of pricing involves a firm quoting a single delivered price for all buyers with the firm absorbing any freight charges itself?

Uniform delivered pricing

. Which of the following terms is a concept, developed by Michael Porter, which describes the activities within firms and across firms that add value along the way to the ultimate transacted good or service?

Value chain

What concept developed by Brandenburger and Nalebuff as a counterpart to Porter's five-forces consists of suppliers, customers, competitors and complementors?

Value net

Which of the following is true about hospital industry profits from 1980 to 2000 and a five forces analysis?

Virtually every factor caused profits to decrease

What process involves using computer simulations to track the likely competitive implications of pricing and investment decisions over many years?

War gaming

Which of the following best describes a focus strategy?

When a firm either offer a narrow set of varieties, serve a narrow set of customers, or do both

Which of the following is not a barrier to entry in professional sports markets?

a) Each league has rules governing the addition of new franchises b) Potential new owners must pay current owners hundreds of millions of dollars c) Most potential owners must offer to build new stadiums d) Incumbent teams have rights to veto franchises in their own geographic markets

Which of the following is not a way teams "collude" within professional sports markets?

agreeing on ticket prices

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?

competitive advantage

What is the perceived benefit of a product per unit consumed minus the product's monetary price?

consumer surplus

When multiple firms' price-quality positions line up along the same indifference curve offering a consumer the same amount of consumer surplus, what term describes the situation?

consumer surplus parity

What term best describes a targeting strategy in which the firm offers a variety or related products to a particular class of customers?

customer specialization

Under what type of strategy does a firm either offer a narrow set of varieties, serve a narrow set of customers, or do both?

focus strategy

What professional sports complement poses the biggest dilemma?

gambling

Which of the following is a complement to professional sports?

gambling

What term coined by Michael Porter describes a tool that can be used to show how nearly every industry can be broken down into smaller pieces known as segments?

industry segmentation matrix

Who are the most powerful suppliers in professional sports?

players unions

What type of good is one whose quality is relatively easy to evaluate before purchase?

search good

Products for which consumers can easily obtain the information required to compare alternatives are called:

search goods

What term refers to the ability of firms to negotiate purchase prices that extract higher profits from buyers?

seller power

When consumers learn about one seller at a time it is known as a:

sequential search

What kind of strategy is one by which a firm exploits its benefit or cost advantage through a higher market share rather than through high price-cost margins?

share strategy

When consumers learn about many products at once, it is known as a:

simultaneous search

What term coined by Michael Porter describes a firm that pursues elements of cost leadership and benefit leadership at the same time and in the process fails to achieve either a cost advantage or a benefit advantage?

stuck in the middle

How did European governments help Airbus aggressively pursue a 50% market share in its early years of operation?

subsidies

Which of the following is not a component of the Value Net?

supplementors

What is one way to measure a firm's willingness-to-pay?

value added analysis

What term describes the process of using market prices of unfinished and semi-finished goods to estimate the incremental value-created by distinctive parts of the value chain?

value-added analysis

Which of the following is a resource?

workers with firm-specific expertise or know-how

Which of the following represents total surplus in the value creation equation, (B-P) + (P-C)?

B-C (also called social welfare)

What term refers to the ability of individual customers to negotiate purchase prices that extract profits from sellers?

Buyer power

Which of the following is an example of a market where barometric price leadership occurs?

Prime-rate loan

What tactical term best describes the capacity relationship between Toyota and Honda such that Toyota's response is to reduce production output of the Rav 4 if Honda were to first announce a large increase in the production of the CR-V that drove down prices?

Strategic substitute

Why are suppliers in a competitive upstream market said to have "indirect power"?

The can sell their services to the highest bidder

The steepness (slope) of an indifference curve indicates which of the following?

The tradeoff a consumer is willing to make between price and quality

What term best describes a firm informing customers about a product's benefits?

disclosure

What type of good is one whose quality can be assessed only after the customer has used it for a while?

experience good

What is another term for a "win-win" business opportunity?

gains from trade

What term describes the price at which a consumer is indifferent between buying a product and going without it?

maximum willingness-to-pay

Which of the following is the most likely substitute for commercial aircraft travel between Chicago and Tokyo?

teleconferencing

What term describes a policy in which a firm is prepared to match whatever change in strategy a competitor makes?

tit-for-tat strategy

What type of strategy seeks to serve all customer groups in the market by offering a full line of related products?

broad-coverage strategy

Which of the following is a capability?

sourcing skills

What entity as a supplier has the most substantial power over manufacturers in the commercial aircraft market?

unions