Chapter 02 Competitive Advantage Answer Key
Multiple Choice Questions
1.
(p. 24)
What determines the value of a product?
2.
(p. 47)
Which of the following are isolating mechanisms?
3.
(p. 35–
42)
Which of the following are value drivers: 1. the product’s technology, 2. the firm’s risk
assumption, 3. economies of scale, 4. network externalities?
4.
(p. 43)
Which of the following are cost drivers: 1. the learning curve, 2. complementary products, 3.
breadth of product line, 4. economies of scope?
5.
(p. 40)
A firm creates a network externality when:
6.
(p. 52)
Time compression diseconomies are larger when:
7.
(p. 48–
49)
Which of the following value drivers is less likely to contribute to customer retention?
8.
(p. 28–
If a firm is neither a cost leader nor a differentiator, it is called:
9.
(p. 57)
What determines a superior market position compared to rivals?
10.
(p. 27)
The buyer’s surplus is:
True / False Questions
11.
(p. 30–
A generic strategy always represents a superior market position.
12.
(p. 47)
A superior market position compared to rivals is sufficient to achieve a sustainable competitive
advantage.
13.
(p. 33)
Reducing costs provides a greater return than increasing value when the marginal customer is
value, not price, sensitive.
14.
The price customers pay always represents the full value of the product.
15.
(p. 43)
Sunk costs in imitating a capability increase when it is tied to complementary practices.
16.
(p. 29)
A key assumption regarding the disadvantage of being stuck in the middle is that demand is
insufficient to allow the firm to improve its position.
17.
(p. 33)
Investing in cost drivers can improve the firm’s performance by allowing it to lower prices.
18.
(p. 33)
Cost reduction, compared to increasing value, is more attractive when the firms in an industry
have access to the same process innovations.
(p. 36)
19.
The benefit of customer one-stop shopping pertains to the value driver of complements.
20.
(p. 33)
Competitive advantage depends on being at one end of the high value – low cost continuum.
(p. 24)
Short Answer Questions
21.
(p. 29–
32)
How can a firm achieve a superior market position without having the lowest cost or offering
the highest value, relative to rivals?
22.
(p. 25–
26)
Assume you are opening up a mobile app store (with applications for smartphones and
tablets). Describe how you will measure a customer’s willingness to pay for your product
offerings.
23.
(p. 51)
What mechanisms help to isolate or protect Southwest Airlines’ superior market position
relative to rivals?
24.
(p. 33,
53)
What is the relationship between a firm’s resources and capabilities and its Value and Cost
Drivers?
25.
(p. 48–
49)
How can a firm use switching costs to increase customer retention? Give one example.