Which of the following terms best describes all aspects of the customers interaction with the firm its services and its products?

1. 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?

a) Dedicated pricing

b) Strategic pricing

c) Marginal pricing

d) Cost-plus pricing

e) Cooperative pricing

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

a) Dedicated investment

b) Strategic commitment

c) Critical choice

d) Market investment

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

a) Backward induction

b) Focal point

c) Always aggress

d) Coordination

e) Folk

4. 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?

a) Tough commitment

b) Strategic complement

c) Soft commitment

d) Strategic substitute

e) Duopoly

5. Why might a firm not be able to react quickly to competitors’ pricing moves?

a) Lags in detecting competitors’ prices

b) Infrequent interactions with competitors

c) Ambiguities in identifying which firm among a group of firms in a market is cutting price

d) Difficulties distinguishing drops in volume due to price cutting by rivals from drops in volume due to anticipated decreases in market demand

e) All of the above

6. 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?

a) Price umbrella

b) Price leading

c) Predatory pricing

d) Premium pricing

e) Price lining

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

a) Price leadership

b) Advance announcement of price changes

c) Price following

d) Most favored customer clauses

e) Uniform delivered prices

8. 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?

a) Low price clause

b) Price matching clause

c) Best price clause

d) Most favored customer clause

e) Competitive price clause

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

a) It is bad for competitors

b) It is good for competitors

c) In Cournot competition, capacity expansion is an example of a soft commitment

d) In Betrand competition, a commitment to reduce prices is an example of a soft commitment

e) Tough commitments are always in the best interest of a firm

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

a) Uniform delivered pricing

b) Uniform FOB pricing

c) Uniform customer pricing

d) Uniform favored pricing

e) Uniform competitive pricing

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

a) Regression testing

b) Virtual reality

c) War gaming

d) Commitment testing

e) Scenario testing

12. 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?

a) Clunker market

b) Quality conundrum

c) Car scrapping market

d) Low-quality market

e) Lemons market

13. 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?

a) Positioning analysis

b) Sustainability analysis

c) Flexibility analysis

d) Judgment analysis

e) Final Commitment analysis

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

a) A firm charges a fixed price to every customer

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

c) A firm offers discounts for purchasing in quantity

d) A firm requires customers to enter into long-term purchase contracts

e) None of the above

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

a) Dedicated investment

b) Strategic commitment

c) Critical choice

d) Market investment

e) None of the above

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

a) It pays little attention to factors that might affect demand

b) It focuses on a whole industry rather than on individual firms that may occupy unique positions that insulate them from some competitive forces

c) The framework does not explicitly account for the role of government, except when government is a supplier or buyer

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

e) The framework is a qualitative analysis method

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

a) Divisions competing within a firm for resources

b) Differing product lines from one manufacturer competing

c) Firms jockeying for share within a market.

d) Firms competing for resources to produce goods

e) Suppliers dividing factors between competing firms

3. In which of the following ways can entry erode incumbents’ profits?

a) Entrants divide market demand among fewer sellers

b) Entrants decrease market concentration

c) Entrants usually grow the market for all parties

d) Entrants increase market concentration

e) Entrants reduce internal rivalry

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

a) Availability of close substitutes and/or complements

b) Price-value characteristics of substitutes/complements

c) Price elasticity of industry demand

d) All of the above

e) None of the above

5. Why are suppliers in a competitive upstream market said to have “indirect power”?

a) They can sell their services to the lowest bidder

b) They are always concentrated

c) Their customers are always locked into relationships with them

d) The price they charge never depends on supply and demand in the upstream market

e) The can sell their services to the highest bidder

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

a) Competitiveness of the output market

b) Purchase volume of downstream firms

c) Availability of substitute inputs

d) Threat of forward integration by suppliers

e) Ability of suppliers to price discriminate

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

a) Suppliers

b) Customers

c) Competitors

d) Supplementors

e) Complementors

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

a) Had infrequent (contract lengths of two to three years) and lumpy (one insurer may have represented over 5% of a hospital’s business) sales

b) Treated all hospitals as identical

c) Kept price negotiations between insurers and hospitals secret, encouraging hospitals to lower prices to win contracts

d) Contracted with hospitals that patients were most loyal to

e) Created pressure for hospitals to win each individual contract with no thought of future consequences

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

a) Fast follower

b) Passive

c) Aggressive

d) Innovator

e) De novo

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

a) Medicaid

b) Admitting physicians

c) Hospital-based physician

d) Patients

e) Medicare

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

a) The FTC recently won an antitrust case that forced the members of the Evanston Northwestern Healthcare system to negotiate independently with insurers

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

c) Employers are asking employees to bear more of their own health care costs. At the same time some employers are reconsidering the decision to opt for wide, but costly MCO networks

d) If regulatory barriers fall, entry by specialty hospitals in wealthier communities could skim off some of the areas’ most profitable patients

e) Employers, payers, regulators and patients are demanding and getting more information about hospital quality

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

a) High development costs

b) Learning curve in production

c) Raw materials and labor

d) Airlines prefer to purchase from the same manufacturer

e) Airlines are reluctant to purchase from startups

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

a) Raw materials suppliers

b) Airlines

c) Aircraft leasing companies

d) Unions

e) Passengers

14. 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

e) Because the number of potential billionaire owners has risen dramatically, the purchase prices have dropped

15. Which of the following is a complement to professional sports?

a) Merchandise sales

b) Gambling

c) Luxury Boxes at stadiums

d) Food and beverage sales

e) None of the above

16. In which of the following ways can entry erode incumbents’ profits?

a) Entrants divide market demand among fewer sellers

b) Entrants decrease market concentration

c) Entrants usually grow the market for all parties

d) Entrants increase market concentration

e) Entrants reduce internal rivalry

17. Price competition is increased when which of the following occurs??

a) Many sellers in the market

b) Products are differentiated

c) Firms are producing at capacity

d) Buyers have high switching costs

e) Firms purchase raw materials from the same suppliers

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

a) Substitutes and Complements

b) Competition

c) Customer power

d) Seller power

e) Buyer power

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

a) Number of competitors in downstream market

b) Purchase volume of raw materials

c) Availability of substitute inputs

d) Number of upstream suppliers

e) Ability of suppliers to price discriminate

1. 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?

a) Industry effect

b) Competitive advantage

c) Business unit effect

d) Competitive position

e) Market profitability economics

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

a) Value creation

b) Competitive advantage

c) Consumer surplus

d) Maximum willingness-to-pay

e) Value chain

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

a) Frontier curve

b) Learning curve

c) Level curve

d) Implicit curve

e) Indifference curve

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

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

b) The change in price holding product benefit constant

c) The change in benefit holding price constant

d) The tradeoff between consumer surplus and producer surplus

e) None of the above

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

a) B

b) P

c) C

d) B-P

e) P-C

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

a) B + C

b) P + C

c) B – C

d) P – C

e) None of the above

7. 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?

a) Value-added analysis

b) Value creation analysis

c) Market value analysis

d) Value benefit drivers

e) Value cost drivers

8. Which of the following is a capability?

a) Patents and trademarks

b) Brand-name reputation

c) Installed base

d) Organizational culture

e) Sourcing skills

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

a) They are valuable across multiple products or markets

b) They are tacit

c) They are easy to reduce to simple algorithms or procedure guides

d) They are embedded in what Richard Nelson and Sidney Winter call organizational routines – well-honed patterns of performing activities inside an organization

e) They can persist even though individuals leave the organization

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

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

b) A firm can follow a cost leadership strategy through achieving benefit parity by making products with the same B, but at a lower C than its rivals

c) A firm can follow a cost leadership strategy through achieving benefit proximity by offering a B that is not much less than those of competitors

d) A firm following a strategy of cost leadership creates more value than its competitors by offering products that have a lower C than those of its rivals

e) A firm can follow a cost leadership strategy by offering a product that is qualitatively different from that of its rivals

11. 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?

a) Pricing strategy

b) Share strategy

c) Margin strategy

d) Focus strategy

e) Generic strategy

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

a) Consumer packaged good

b) Search good

c) Experience good

d) Automobile

e) Appliance

13. 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?

a) Five forces

b) Value creation

c) Value chain

d) Stuck in the middle

e) Generic strategy

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

a) Generic strategy

b) Margin strategy

c) Focus strategy

d) Share strategy

e) Broad-coverage strategy

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

a) Broad-coverage strategy

b) Focus Strategy

c) Geographic specialization

d) Product specialization

e) Customer specialization

16. Consumer surplus is measured as which of the following?

a) The excess of sales price over manufacturing cost

b) The amount a consumer pays for a good minus search costs

c) The perceived manufacturing cost by a consumer as a percentage of sales price

d) The perceived benefit of a product per unit consumed minus the product’s monetary price

e) The loss incurred by a firm selling at a price below its manufacturing cost

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

a) Warranty service is included in the sales price

b) An independent evaluation certifies the product

c) The product is heavily advertised

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

e) Noen of the above

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

2. 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

3. 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

4. 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

5. 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

6. 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

7. 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

8. 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

9. 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

10. 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

11. Which of the following is not a Legal Restriction?

a) Patent

b) Copyright

c) Trademark

d) Intellectual property

e) Operating rights

12. 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

13. 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

14. 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

15. 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

16. 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

17. 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

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