Mgmt 3830 Ch-4

Competitive advantage can be defined as:

A firm's ability to earn a persistently higher profit rate than its rivals

A typical cost leadership strategy involves:

Answers a and b

Isolating mechanisms are:

Barriers that slow or stop the equalization of profits between firms, such as barriers to imitation

Porter's value chain:

Answers b and c

Porter says that firms get stuck in the middle because:

As A above and firms need very different organizational processes to achieve the lowest costs or effective differentiation in the industry

The seven drivers of cost advantage:

Can be a useful framework within which to compare a firm's costs with its competitors

If an industry has a stable environment and firms pursue similar strategies:

Firms with similar resources and capabilities should have similar profit rates

In many industries the market leader:

Manage to reconcile low costs with some effective differentiation

Once established, competitive advantage is:

Subject to erosion by competitors or entrants

Overall, the Singapore Airlines case shows:

That rivals may copy parts of your business strategy but some unique resources and causal ambiguity can successfully hide your key distinctive capabilities

To imitate the competitive advantage of another company, a firm must first:

Understand the basis of its rival's success

A "Blue ocean strategy" refers to the creation of entirely new markets.

true

In the long run competition eliminates differences in profitability between firms.

true

Causal ambiguity and uncertain imitability are:

All of the above

Singapore Airlines appears to have competitive advantages from:

All of the above

"Strategic innovation" means introducing:

All of the above, or introducing new ways of doing business

Apple's ITunes success was an example of:

An innovative and legal business model replacing the conventional (legal) recorded music business model

How can a firm hide its superior profits?

Any of the above

Cost leadership means a firm must:

Exploit all sources of cost advantage in providing customers with a standardised product

The development of "collateralized debt obligations", by Drexel Burnham Lambert, shows that:

Financial products are easily copied so first movers must quickly establish a large track record of successful trades

Overall, the Singapore Airlines case shows that:

Firms can create cultures that do motivate staff to continually eliminate waste, reduce costs and improve customer service

A firm can pre-empt imitation by:

Introducing new products to fill each niche, investing in capacity ahead of market growth and filing many patents

A value chain analysis:

Is an alternative framework within which to compare costs with your competitors

Increasing flight reliability at Singapore Airlines:

Is likely to be the outcome of several linked activities

Is it easy for Sears Holdings (Kmart) to understand Wal-Mart's competitive advantages?

No, it is not that easy

Differentiation is when a firm:

Offers customers something valuable and unique other than a low price

"Strategic innovation" involves:

Pioneering in at least one of the three dimensions: new industry, new customer segment, or new source of competitive advantage

Requirements for quick organizational response to a turbulent environment are:

Quick, accurate information, and short product launch cycle times

The success of Japanese Total Quality Management:

Refutes the perceived trade-off between low cost products and high quality products

A cost leadership strategy:

Requires a firm to commoditize their product - i.e. no frills - even if the industry's product is differentiable (e.g. cars or airlines)

A firm with a competitive advantage other than superior profitability may have?

Some or all of the above

The central task of a differentiation strategy is:

To ask how all your customers' interactions with your product could be enhanced even more

Zara's response to very fast-changing fashion demands was:

To cut the product launch cycle from concept to store to three weeks

For a firm to imitate the strategy of another firm, it must do four things: identify the target firm, incentivize the rival, diagnose the sources of competitive advantage, and acquire the resources needed.

false

Isolating mechanisms are forces tending to equalize profit rates among firms, i.e. phenomena that erode a firm's competitive advantages.

false

One firm possesses a competitive advantage over other firms when it earns or has the potential to earn a persistently higher profit margin.

false

Porter's value chain is mostly used to analyse the success or otherwise of cost leadership strategies.

false

"Causal ambiguity" is the failure to clearly understand the source of a rival's competitive advantages - in particular which of the rival's distinctive features are causes and which are effects of another feature.

true

A firm can create competitive advantage by responding better than rivals to changes in its environment or by maintaining strategic differences from its rivals that customers accept.

true

Because some resources are valuable and not perfectly uniform (they are unique, not homogenous) acquiring or developing these can take years before a firm achieves and sustains higher profitability.

true

Entrepreneurship can be defined as the ability to identify and rapidly respond to opportunities in the environment.

true

Firms can achieve competitive advantage by supplying a product at lower cost than competitors or by effectively differentiating their product so that the customer is willing to pay a higher price.

true

For some firms, speed of new product development appears to be the only real source of competitive advantage in today's economy.

true

In industries like finance where genuinely unique resources or capabilities are hard to find, imitation is fast and sustainable competitive advantage is hard to achieve.

true

Innovation can be narrowly interpreted as bringing new products or processes to market, but also more broadly as introducing new ways of doing business into an industry or market (new business models).

true

Starting a price war immediately a firm enters your industry is an entry deterrent tactic that may dissuade other potential entrants for years to come.

true

The two main sources of competitive advantage are cost leadership and differentiation.

true

To "pre-empt" an entrant, a firm can occupy existing and potential strategic niches to reduce the range of opportunities open to potential entrants.

true

The value chain analysis of Singapore Airlines shown is:

A good start on analysis but now needs to be followed up with hard figures of cost comparisons between SA and its rivals

Being 'stuck in the middle' gives low profits because:

All of the above

It is quite natural to combine cost leadership and differentiation strategies:

Answers b and c

The fundamental choice for capability acquisitions is the decision to either:

Buy them or build them

A firm's ability to turn change in its external environment into profit:

Depends on its ability to respond by changing its capabilities appropriately

Competitive advantage:

Emerges from external and internal sources

To successfully imitate the strategy of another firm, an organization must:

Identify and diagnose the rival's advantage, believe in its ability to deliver a superior return, and, finally, acquire the resource

Rivals can be pre-empted from entering a firm's markets using the above methods only if:

There is significant first-mover advantage in this industry

Differentiation means offering many product features that distinguish your product from everyone else's.

false