Question 1

In the automobile industry,scale economies have resulted in the biggest automobile companies-Toyota,General Motors,Volkswagen,Ford,and Hyundai-also being the most profitable.

Accepted Answer

Economies of scale can lead to lower costs, but profitability also depends on factors like market conditions, management, and competition.

Question 2

The cost reductions that firms derive from moving down their experience curves are mainly the result of learning which increases the productivity of labor.

Accepted Answer

Experience curves demonstrate that as firms produce more, their costs decrease due to learning and increased productivity of labor. Therefore, the cost reductions are mainly a result of learning.

Question 3

A basic principle of Business Process Reengineering is that dramatic improvements in cost efficiency are better achieved through incremental improvements rather than fundamental redesign.

Accepted Answer

The statement is incorrect. BPR involves radical redesign and reorganization of processes to achieve significant improvements in efficiency, rather than incremental changes.

Question 4

The main strategy implication of the Boston Consulting Group's analysis of experience curves was that firms should not lower profit trade profit margins in order to seek sales growth.

Accepted Answer

The Boston Consulting Group's experience curve analysis suggested that firms could lower prices to gain market share, as increased production would lead to lower costs and higher profitability over time.

Question 5

There are two primary sources of competitive advantage: cost advantage and differentiation advantage.

Accepted Answer

Cost advantage refers to a company's ability to produce goods or services at a lower cost than its competitors, while differentiation advantage pertains to a company's ability to offer unique or superior products or services that distinguish it from its competitors.

Question 6

The fact that a firm's "activity system" comprises closely linked,complementary activities simplifies the task of imitating a competitor's strategy.

Accepted Answer

The fact that a firm's "activity system" comprises closely linked, complementary activities actually complicates the task of imitating a competitor's strategy because replicating one part of the system without understanding its interrelationships with the other parts will not lead to the same performance outcomes.

Question 7

An industry's level of concentration is largely determined by the existence of economies of scale.

Accepted Answer

Industries with economies of scale tend to have high levels of concentration because larger firms can spread costs over a larger volume of production, making it difficult for smaller firms to compete. This creates barriers to entry and allows larger firms to dominate the market.

Question 8

In order to discover a "blue ocean" of uncontested market space,a firm must use technological innovation to create a new product market

Accepted Answer

A "blue ocean" strategy involves creating a new, uncontested market space that makes competitors irrelevant and does not necessarily require technological innovation; it can also be achieved through differentiating products or services in existing markets in novel ways.

Question 9

If the prices of securities fully reflect all the information available,then passive investors are best advised to invest in index-based mutual funds (unit trusts)with the lowest administration costs.

Accepted Answer

If the prices of securities fully reflect all available information, then there is no advantage to actively managing a portfolio to try and outperform the market. Instead, passive investors should invest in index-based mutual funds with low fees, as these funds are designed to mimic the performance of a particular index at minimal cost.

Question 10

Strategic innovation comprises the introduction of novel products or processes that embody new technology

Accepted Answer

The answer of Strategic innovation comprises the introduction of novel...

Question 11

Uncertain imitability is one type of isolating mechanisms.

Accepted Answer

Uncertain imitability refers to a situation where a company's resources and capabilities are not easily seen or understood by competitors, making it difficult for them to imitate the company's competitive advantage. This is a type of isolating mechanism that can help a company maintain its competitive advantage over time.

Question 12

A firm's competitive advantages can only be sustained if it is protected by some form of "isolating mechanisms."

Accepted Answer

Isolating mechanisms, such as patents, trademarks, and economies of scale, can help protect a firm's competitive advantages from being replicated by competitors, which can lead to sustained competitive advantage.

Question 13

Causal ambiguity creates uncertain imitability.

Accepted Answer

Causal ambiguity refers to the difficulty in determining the precise cause-and-effect relationship between a firm's resources and capabilities and its performance outcomes. This can make it difficult for competitors to imitate the firm's success, as they may not be able to replicate the specific combination of resources and capabilities that led to that success. Therefore, causal ambiguity does create uncertain imitability.

Question 14

Sustainable competitive advantage can be established in all types of market-including those financial markets deemed to be "efficient."

Accepted Answer

In efficient financial markets, prices reflect all available information, making it difficult for investors to achieve a sustainable competitive advantage through information asymmetry or market timing.

Question 15

Business Process Reengineering that starts with a "clean sheet of paper" runs the risk of destroying some valuable organizational capabilities which have taken many years to build

Accepted Answer

Business Process Reengineering that starts with a "clean sheet of paper" means that the entire organization is being restructured from scratch, without taking into account its existing capabilities. This approach can lead to the elimination of valuable organizational capabilities that have been developed over the years, resulting in the loss of crucial knowledge and expertise. Therefore, it is important to carefully assess and leverage existing capabilities while implementing BPR.

Question 16

A "business model" describes the overall configuration of a firm's business system.

Accepted Answer

A business model is a conceptual framework that defines the way a company creates value, delivers it to customers, and captures revenue for that value. It includes elements such as the company's target market, value proposition, revenue streams, cost structure, and channels of distribution.

Question 17

Gary Hamel argues that management innovations (such as Procter & Gamble's brand management system or Toyota's lean production are unlikely to offer sustainable competitive advantage because these innovations are easy to imitate.

Accepted Answer

The answer of Gary Hamel argues that management innovations (such...

Question 18

Achieving productivity gains from process innovation usually requires that new production processes are matched by other management changes-including changes in human resource management.

Accepted Answer

Achieving productivity gains from process innovation often involves changes in human resource management as well as other management practices. These changes may include the use of training programs to help employees adapt to new processes, the implementation of new performance metrics to measure the effectiveness of the new processes, and changes in the organizational structure to ensure that the new processes are integrated into the overall operations of the firm.

Question 19

Competitive advantage is invariably revealed by a firm being more profitable than its rivals.

Accepted Answer

Competitive advantage can also refer to a firm having a unique differentiation or cost advantage that sets it apart from its competitors, even if its profits are not necessarily higher.

Question 20

A change in the external environment creates competitive advantage either because some firms by responding more effectively than others to the firm or because the change has differential effects upon competing firms.

Accepted Answer

A change in the external environment can create a competitive advantage if a firm can respond more effectively than its competitors, or if the change affects competing firms differently. This can lead to a firm gaining a stronger market position or increased profitability.

Quiz 7: The Sources and Dimensions of Competitive Advantage