Question 1

​Firms with a strong sphere of influence in responding to rival actions are better able to defend their core markets.

Accepted Answer

Firms with a strong sphere of influence, such as a well-established brand or a loyal customer base, are more likely to successfully respond to rival actions and protect their core markets.

Question 2

If an attack is so subtle that rivals are not aware of it,the attacker's objectives are not likely to have been attained.

Accepted Answer

An attack can be subtle and still achieve its objectives, especially if it's designed to be covert or to slowly undermine the target without immediate detection. This allows the attacker to achieve their goals without alerting their rivals.

Question 3

Industry-based considerations are fundamentally concerned with the very first of the Porter five forces,interfirm rivalry.

Accepted Answer

Industry-based considerations are focused on analyzing the competitive environment within an industry, with interfirm rivalry being the key factor. This is the first of the Porter five forces model, which also includes the threat of new entrants, bargaining power of suppliers, bargaining power of buyers, and the threat of substitute products or services.

Question 4

​Multimarket competitors can respond to a firm's action in any of the markets where the firms meet.

Accepted Answer

Multimarket competitors compete with each other in multiple markets, so they can respond to a firm's action in any of the markets where they have a presence. This makes it difficult for a firm to isolate its actions in one market from its competitors in another market.

Question 5

Bargaining can take place through signals and actions.

Accepted Answer

Bargaining can take place through verbal communication, but it can also be achieved through nonverbal cues and actions, such as body language, eye contact, and gestures. Therefore, bargaining can take place through signals and actions in addition to verbal communication.

Question 6

Collusion survives because it does not have an incentive problem as is illustrated by the prisoner's dilemma.

Accepted Answer

The statement is incorrect. Collusion actually does have an incentive problem similar to the prisoner's dilemma, in which individual members may be tempted to defect and act in their own self-interest rather than maintaining the collusion.

Question 7

The effects of action and response on competitive interaction are what is needed for competitive advantage and performance.

Accepted Answer

Action and response are key components of competitive interaction as they allow for adaptation and improvement, ultimately leading to a competitive advantage and better performance.

Question 8

Multimarket competition occurs when firms engage the same rivals in multiple markets.

Accepted Answer

Multimarket competition refers to competition between firms that occurs in multiple markets, where the firms are engaged in similar or related lines of business. They compete with each other in one market while cooperating in another, and this type of competition involves strategic interactions across multiple markets.

Question 9

Under antitrust law,a company can be in trouble for setting prices too high but not for setting them too low.

Accepted Answer

A company can also be in trouble for setting prices too low if it is seen as predatory pricing, intended to drive competitors out of the market. This can be considered an antitrust violation because it harms competition in the long run.

Question 10

​According to game theory,two competitors who have agreed to cooperate no longer have incentive to cheat.

Accepted Answer

While it is true that in some situations, cooperation can reduce the incentive to cheat, it is not a universal principle of game theory. In some games, even if two players have agreed to cooperate, there may still be incentives to cheat or deviate from the cooperative strategy. Additionally, the success of cooperation depends on trust between the players and the potential rewards that both players receive from the cooperative outcome.

Question 11

Market commonality may lead to tacit collusion.

Accepted Answer

Market commonality refers to the degree to which firms compete in similar markets. Higher market commonality may incentivize firms to engage in tacit collusion, where firms coordinate their pricing and other strategies without explicitly communicating. This is because firms may recognize that competition is mutually harmful and seek to avoid a price war or other forms of intense competition.

Question 12

​In the prisoners' dilemma,the maximum joint payoff comes if both prisoners confess.

Accepted Answer

The maximum joint payoff comes if both prisoners remain silent. Confessing may result in one prisoner receiving a lower sentence or avoiding punishment altogether, but overall the joint payoff will be lower than if both remained silent.

Question 13

​Slow-moving firms have better organization and more committed employees,which enable them to respond quickly to competitive attacks.

Accepted Answer

Slow-moving firms may have difficulty responding quickly to competitive attacks because they may be less agile and flexible. Faster-moving firms may be able to quickly adapt to changing market conditions and seize opportunities.

Question 14

If the attacked market is of marginal value,managers may decide not to counterattack.

Accepted Answer

If the attacked market is of marginal value, managers may decide that the cost of a counterattack outweighs the potential benefits of defending the market, and therefore may choose not to counterattack.

Question 15

Multimarket competition destroys mutual forbearance.

Accepted Answer

Multimarket competition often leads to mutual forbearance, where competing firms choose not to aggressively challenge each other in multiple markets to avoid retaliation in markets where they are more vulnerable.

Question 16

The capability to attack in multiple markets throws the firm off balance leaving it vulnerable to rivals and thus reducing value.

Accepted Answer

The capability to attack in multiple markets can actually be a strength, allowing a firm to diversify its risk, leverage synergies across different markets, and potentially increase its value by capturing more market share and achieving economies of scale.

Question 17

​A price leader in a market has a great deal of control of the level of tacit collusion by competitors in the market.

Accepted Answer

As the price leader sets the price first, competitors may follow and price their products similarly, thus leading to tacit collusion. The price leader has control over this behavior and can manipulate it to their advantage.

Question 18

The "strategy as action" perspective highlights the power of creative destruction.

Accepted Answer

The "strategy as action" perspective highlights the importance of taking action and continuously adapting to changing circumstances, which often involves disrupting or destroying existing structures and processes in order to create something new and better. This process of "creative destruction" is seen as a necessary aspect of strategic action in a dynamic and competitive environment.

Question 19

Strategy involves planning for actions rather than reactions or interaction.

Accepted Answer

Strategy involves planning for both proactive actions and reactive or interactive responses to anticipated or actual events, changes, or competitor moves in the environment.

Question 20

Firms that have a high degree of resource similarity are likely to have similar strengths and weaknesses.

Accepted Answer

Resource similarity refers to the similarity of resources and capabilities between two or more firms. If firms have a high degree of resource similarity, it is likely that they have similar strengths and weaknesses, as they have access to similar resources and capabilities. This can impact competitive advantage and market positioning, making it important for firms to differentiate themselves in other ways.

Quiz 8: Managing Global Competitive Dynamics