Chapter 11 Quiz Questions

What did Vonage do to deflect the impact of the intense price competition in the U.S.? a) Attempted to position itself as the high-quality, high-reliability player in the market b) Raised its prices c) Was acquired by Ebay d) Began jointly providing service with cable companies e) Replicate other firms on hardware and service features

A) Attempted to position itself as the high-quality, high-reliability player in the market

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

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

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 performanc

A) Regression to the mean

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

What term coined by Richard Rumelt refers to situations in which the causes of a firm's ability to create more value than its competitors are obscure and only imperfectly understood? a) Isolating mechanisms b) Casual ambiguity c) Dependence on historical circumstances d) Social complexity e) Impediments to imitation

B) Casual ambiguity

Which of the following is an example of an actual network? a) Computer operating systems b) E-mail c) Video gaming d) DVD players e) iPods

B) E-mail

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

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

Which of the following statements is least true with regards to Dennis Mueller's study of profit persistence? a) Mueller's results suggest that firms with abnormally high levels of profitability tend, on average, to decrease in profitability over time. b) The profit rates of firms with abnormally high levels of profitability and firms with abnormally low levels of profitability will always converge to a common mean as the theory of perfect competition predicts c) Mueller's results suggest that firms with abnormally low levels of profitability tend, on average, to experiences increases in profitability over time d) Firms that start out with high profits converge, in the long run, to rates of profitability that are higher than the rates of profitability of firms that start out with low profits e) Mueller's work implies that market forces are a threat to profits, but only up to a point

B) The profit rates of firms with abnormally high levels of profitability and firms with abnormally low levels of profitability will always converge to a common means as the theory of perfect competition predicts

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

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

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

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

What best describes the reason superstar athletes (resources) capture most of the extra-value they create for a firm in the form of higher salaries rather than the firm capturing the extra value itself? a) The athletes are not value-creating b) The athletes are isolating mechanisms c) The athletes are not cospecialized d) The athletes are not scarce e) The athletes are imperfectly mobile

C) The athletes are not cospecialized

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

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

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

D) Intellectual property

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

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

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

What term coined by Richard Rumelt refers to economic forces that limit the extent to which a competitive advantage can be duplicated or neutralized through resource-creation activities of other firms? a) Capability-based theory of the firm b) Resource-based theory of the firm c) Early-mover advantages d) Impediments to imitation e) Isolating mechanisms

E) Isolating mechanisms

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

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