Questions

Question 1

Which one of Porter’s 5 forces would be most directly affected if an existing firm in that niche threatens to engage
in vertical integration?

1. Pressure from substitutes
2. Barriers to entry
3. Supplier power
4. Intensity of rivalry

Question 2

Regarding the statement “patents protect innovation better than any other mechanism":

1. a century of evidence shows this is true.
2. no one can confirm or disprove this statement.
3. is true for process innovation, but not product innovation.
4. evidence shows that this is not true in most industries.

Question 3

In the material from Lecture 1, Rumelt gives four criteria for evaluating a strategy. Which criterion has to do with
making sure that the strategy does not overwhelm the available resources?

1. Consonance
2. Feasibility
3. Consistency
4. Advantage

Question 4

The key insight from the “prisoners’ dilemma” game is:

1. competitive behavior can create an outcome that is inferior for all involved in a situation.
2. the principle of “honor among thieves” is inapplicable either to thieves or to business executives.
3. the inability to directly communicate always results in an inferior outcome.
4. trust can play a critical role in creating favorable outcomes in both crime and business.

Question 5

According to the lecture, in Barney’s approach to the resource-based view, entry barriers can only provide a
sustainable competitive advantage under which condition(s)?

1. Resources must be homogeneously distributed across firms.
2. Resources are perfectly mobile.
3. All of the above.
4. None of the above

Question 6

A well-known brand can provide a sustainable competitive advantage because:

1. consumers will always pay a premium for a recognized brand.
2. it can be protected by the law relating to trademarks.
3. it protects a firm from scandals.
4. it tends to be durable, loses value when transferred between firms, and is costly to replicate.

Question 7

Which of the following factors is NOT conducive to vertical integration [p.303] between two adjacent stages of
production?

1. Similarity of the optimum scale of production between the two stages
2. Few companies at each of the two stages
3. Stability in the technologies used at each stage
4. Different organizational capabilities are required at each stage

Question 8

If an industry earns a return on capital in excess of its cost of capital:

1. It will soon attracts the attention of governmental regulatory agencies.
2. Workers will push for higher pay and benefits causing the level of profitability to fall.
3. It will attract the attention of potential entrants and, unless protected by high barriers to entry, the return on capital will fall.
4. Firms within the industry will over-invest causing the return on capital to fall.

Answers

Question 1

C

Question 2

D

Question 3

B

Question 4

A

Question 5

D

Question 6

D

Question 7

D

Question 8

C