MBA 6202 - Strategic Management (Notes: Ch 1)
Which of the following statements about competitive advantage is NOT true? - A firm will have a sustainable competitive advantage when it outperforms its competitors over a prolonged period of time. - A firm can gain a competitive advantage by providing goods similar to its competitive advantage by providing goods similar to its competitors' goods at a lower price. - A firm's competitive advantage is always absolute, not relative - A firms' past performance does not guarantee its future performance
Answer: A firm's competitive advantage is always absolute, not relative Competitive advantage is always relative, not absolute. To assess competitive advantage, compare firm performance to a benchmark - that is, either the performance of the other firms in the same industry or an industry average.
Revved Rider Inc., a motorcycle company, is the market leader due to its superior engine technology and service orientation. These unique qualities have helped the company generate revenues that are consistently higher than other firms in the same industry. Which of the following can be concluded about Revved Rider Inc. from this scenario? - It has a direct investment in the other firms - It has a competitive advantage over the other firms - It has an exchange relationship with the other firms - It has competitive parity with the other firms
Answer: It has a competitive advantage over the other firms Revved Rider Inc. has a competitive advantage over the other firms. A firm that achieves superior performance relative to other competitors in the same industry or the industry average has a competitive advantage.
A diagnosis of the competitive challenge, an element of a good strategy, is primarily accomplished through strategy. - implementation - formulation - analysis - control
Answer: analysis A good strategy consists of a diagnosis of the competitive challenge. This element is accomplished through strategy analysis of the firm's external and internal environments.
How has Walmart staked out a unique strategic position? - by paying high wages to attract the most talented employees - by providing excellent customer service in a luxury setting - by cutting costs to offer lower prices than competitors - by investing 100% of profits in community development programs
Answer: by cutting costs to offer lower prices than competitors Walmart's strategic activities strengthen its position as cost leader: Big retail stores in rural locations, extremely high purchasing power, sophisticated IT systems, regional distribution centers, low corporate overhead, and low base wages and salaries combined with employee profit sharing reinforce each other, to maintain the company's cost leadership.
The greater the difference between value creation and cost, the - less likely a firm will gain competitive advantage - greater a firm's economic contribution - greater a firm's competitive parity - less likely that a firm's strategic position will be competitive
Answer: greater a firm's economic contribution The greater the difference between value creation and cost, the greater the firm's economic contribution and the more likely it will gain competitive advantage.
A firm is likely to have a competitive advantage when it - performs at a level similar to the other firms in the industry - provides goods similar to those of its competitors, but at a higher price - provides services that consumers will value more than those of its rivals - minimizes the difference between value creation and the costs involved
Answer: provides services that consumers will value more than those of its rivals. To gain a competitive advantage, a firm needs to provide either goods or services consumers value more highly than those of its competitors, or goods or services similar to the competitors' at a lower price.
which of the following has contributed to Tesla's competitive advantage in terms of stock appreciation? - copying the most popular feature of competitors' vehicles - reinvesting profits to continually design and produce better electric vehicles - keeping its proprietary technologies secret - using inexpensive materials to keep costs low
Answer: reinvesting profits to continually design and produce better electric vehicles As discussed in the case, Tesla's strategy of constantly reinvesting profits to improve on its products and capabilities is key to its ability to achieve a competitive advantage. Rather than keep its proprietary technologies secret, Tesla has made them available to the public to expand the overall market for electric cars.
Which of the following does a firm possess when it can outperform other firms in the same industry or the industry average over a prolonged period of time? - Consistent power position - long-term capital gain - strategic positioning - sustainable competitive advantage
Answer: sustainable competitive advantage A firm that is able to outperform its competitors or the industry average over a prolonged period of time has a sustainable competitive advantage.
When a firm integrates the competitive strategies of cost-leadership and differentiation, it will most likely result in - a competitive advantage through superior performance - trade-offs that work against each other - an increase in the firm's economic contribution - competitive parity with firms that have adopted either of the strategies
Answer: trade-offs that work against each other Although the idea of combining different business strategies seems appealing, it it actually quite difficult to execute an integrated cost-leadership and differentiation position. Cost-leadership and differentiation are distinct strategic positions. Pursuing them at the same time results in trade-offs that work against each other.