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1. Strategy involves planning for actions rather than reactions or interaction.
a. True
2. Multimarket competition occurs when firms engage the same rivals in multiple markets.
a. True
3. Multimarket competition destroys mutual forbearance.
a. True
4. The effects of action and response on competitive interaction are what is needed for competitive advantage and
performance.
a. True
b. False
5. Multimarket competitors can respond to a firm’s action in any of the markets where the firms meet.
a. True
6. If an attack is so subtle that rivals are not aware of it, the attacker’s objectives are not likely to have been
attained.
a. True
b. False
7. If the attacked market is of marginal value, managers may decide not to counterattack.
a. True
b. False
8. The “strategy as action” perspective highlights the power of creative destruction.
a. True
9. Bargaining can take place through signals and actions.
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b. False
10. Industry-based considerations are fundamentally concerned with the very first of the Porter five forces, interfirm
rivalry.
a. True
11. Market commonality may lead to tacit collusion.
a. True
b. False
12. Collusion survives because it does not have an incentive problem as is illustrated by the prisoner’s dilemma.
a. True
13. In the prisoners’ dilemma, the maximum joint payoff comes if both prisoners confess.
a. True
14. According to game theory, two competitors who have agreed to cooperate no longer have incentive to cheat.
a. True
b. False
15. A price leader in a market has a great deal of control of the level of tacit collusion by competitors in the market.
a. True
16. The capability to attack in multiple markets throws the firm off balance leaving it vulnerable to rivals and
thus reducing value.
a. True
b. False
17. Firms that have a high degree of resource similarity are likely to have similar strengths and weaknesses.
a. True
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18. Under antitrust law, a company can be in trouble for setting prices too high but not for setting them too low.
a. True
b. False
19. Firms with a strong sphere of influence in responding to rival actions are better able to defend their core markets.
a. True
b. False
20. Slow-moving firms have better organization and more committed employees, which enable them to respond quickly to
competitive attacks.
a. True
b. False
21. Understanding the framework for competitor analysis between a pair of rivals can help managers allocate resources in
proportion to the degree of threat from each rival.
a. True
b. False
22. When faced with a competitor that could take away a firm’s current customers, the firm should immediately launch a
price war.
a. True
b. False
23. U.S. courts have not sought to unilaterally punish non-U.S. cartels (if they are legal elsewhere) simply because they
may have a substantial adverse impact on U.S. markets.
a. True
24. Critics of U.S. policy on dumping at least agree that our policy on predatory pricing is consistent both domestically
and internationally.
a. True
b. False
25. All countries treat incumbents who fix prices and raise entry barriers to new entrants as engaging in antitrust actions.
a. True
b. False
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26. In general, stronger, pro-consumer antitrust laws result in greater competitive forces and lower prices in that
country.
a. True
27. Thrust makes use of military theory that the attacker needs to overcome a well-defended position through a
conventional frontal assault.
a. True
b. False
28. A gambit move can be regarded as exchange of firm’s spheres of influence.
a. True
b. False
29. Two of the three drivers for counterattacks are motivation and concentration.
a. True
b. False
30. To reduce competitive intensity, firms can send an open signal for a truce.
a. True
b. False
31. Rivals within strategic alliances can legally reduce cost through price fixing.
a. True
32. Local firms’ primary strengths lie in a deep understanding of local markets, and thus they would pursue a dodger
strategy.
a. True
b. False
33. A strategy that leverages local assets is called an extender strategy.
a. True
b. False
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34. An extender strategy may be appropriate in some industries where pressures for globalization are relatively low.
a. True
b. False
35. An extender strategy is being used when local firms engage in rapid learning to approach the capabilities of the MNEs
and then expand overseas.
a. True
b. False
36. A firm’s choice of competing/cooperating with rivals depends on industry conditions and the nature of competitive
assets.
a. True
b. False
37. For MNEs, initial dominance means that they will be able to stay on top in a given market.
a. True
b. False
38. Antitrust laws were mostly created primarily in response to the realities of domestic competition.
a. True
b. False
39. Anticompetitive actions can easily be distinguished from competitive actions.
a. True
b. False
40. Complexity and unpredictability are not helpful in dealing with firms’ attacks and counterattacks.
a. True
b. False
41. Which is true of strategy?
a. Business strategy has few similarities with military strategy.
b. Military principles can be completely applied in business.
c. Militaries fight over territories, waters, and air spaces, firms compete in markets.
d. None of the above.
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42. In essence, strategy is interaction in which:
a. Performance is not the goal.
b. Action and reactions lead to competitive advantage.
c. Mutual forbearance is the goal.
d. Competitive performance is the result of collusion.
43. A comprehensive model of global competitive dynamics involves:
a. Resource-based considerations.
b. Institution-based considerations.
c. Industry-based considerations.
d. All of the above.
44. Which of the following are least likely to result in collusion?
a. High concentration ratio.
b. Heterogeneous products.
c. High entry barriers.
d. Presence of an industry price leader.
45. Firm A indirectly coordinates a limit on price increases on its products that compete with Firm B’s products. Firm A is
engaging in:
a. Tacit collusion.
b. Explicit collusion.
c. A prisoner’s dilemma.
d. A prisoner’s dilemma.
46. Which of the following factors is not involved in determining whether an industry is conducive for collusion?
a. Concentration ratio.
b. Homogeneity of products.
c. Game theory.
d. Entry barriers.
47. A mechanical approach to determining whether antitrust activities are taking place:
a. Has been abandoned.
b. Is widely used in all developed economies.
c. Is used in emerging economies but not in developed ones.
d. Provide a detailed assessment of collusion.
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48. The main types of attack include:
a. Defender.
b. Dodger.
c. Gambit.
d. Mutual forbearance.
49. Cross-market retaliation:
a. Seldom occurs among rivals.
b. Occurs in markets where rivals have little overlap.
c. Is more common in situations with greater market commonality.
d. None of the above.
50. In developing a strategy regarding competition or cooperation, it would be useful to:
a. Employ aggressive language, such as “Let’s beat all rivals.”
b. Strengthen capabilities that more effectively compete and/or cooperate.
c. Engage rivals in a prisoners’ dilemma type of context.
d. “Look back, reason ahead.”
51. Industry-based considerations regarding strategy:
a. Focus on gaining a geographical or organizational advantage.
b. Deal with the relationship between industry structures and firms’ propensity to collude.
c. Involve decisions about dumping.
d. Indicate whether to engage in predatory pricing.
52. Explicit collusion is exemplified by:
a. Cartels.
b. Trusts.
c. Users of game theory.
d. All of the above.
53. Firm A may be more successful in imitating Firm B if Firm B:
a. Is not competitively aggressive.
b. Carries out complex actions.
c. Uses difficult to execute maneuvers.
d. All of the above.
54. Which of the following will enable a firm to be competitive even if there is a lack of top management commitment
and employee involvement?
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a. Organizational structure.
b. Use of stealth attacks.
c. Rapid responses, and willingness to answer challenges.
d. None of the above.
55. “The extent to which a given competitor possesses strategic endowment comparable, in terms of both type and
amount, to those of the focal firm” refers to similarity of:
a. Strategy.
b. Resources.
c. Markets.
d. Industry.
56. A firm’s ability to attack in multiple markets is a(n):
a. Industry-based consideration.
b. Resource-based consideration.
c. Institution-based consideration.
d. Sign of collusion.
57. The resource similarity of two firms:
a. Indicates how likely they are to have similar competitive actions.
b. Means that the firms will eventually end of colluding.
c. Is unimportant if the firms have little market commonality.
d. All of the above.
58. A firm that answers yes to the question, “If I set up a low-cost business, will it generate synergies with my existing
business?” its next action should probably be to:
a. Watch out for rivals but not take them on.
b. Switch to selling solutions.
c. Merge with or take over rivals.
d. Merge with or take over rivals.
59. The extraterritoriality aspects of U.S. competition/antitrust policy have:
a. Been primarily directed at the EU.
b. Generally become more permissive since the 1980s.
c. Significantly curtailed strategic alliances since the 1980s.
d. Benefited U.S. firms much more than foreign firms.
60. Cartels:
a. Involve collusion.
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b. Are seldom outlawed.
c. Are common across all industries.
d. Bypass the “prisoners’ dilemma” for participants.
61. Which is NOT true concerning US anti trust policy today?
a. Legislation has legally permitted rivals to join hands in research and development (R&D).
b. There is increased permissiveness regarding mergers among rivals.
c. Clarity of policy has improved.
d. The legal standards for interfirm cooperation are no longer ambiguous in the United States.
62. Dumping is defined as:
a. Shipping hazardous waste to locations in other countries.
b. An exporter selling below cost abroad.
c. Unloading unsold inventory from the United States in other countries.
63. The goal of competition policies and antitrust policies is to:
a. Prevent domestic firms from gaining market share against foreign firms.
b. Prevent foreign firms from gaining market share against domestic firms.
c. Allow most favorable status to domestic firms.
d. Balance efficiency and fairness.
64. Which of the following is NOT one of the major influences in antitrust law in the United States?
a. Sherman Act of 1890.
b. Clayton Act of 1914.
c. Glass-Steagall Act of 1934.
d. Hart-Scott-Rodino Act of 1976.
65. Predatory pricing is more than just setting prices below cost. To qualify, it must:
a. Take place in a market with numerous rivals.
b. Be anti-consumer in outcome.
c. Be followed by a price increase after rivals are eliminated.
d. None of the above.
66. Which of the following would not be considered an initial set of actions to gain competitive advantage:
a. Price cuts.
b. Advertising campaigns.
c. Market entries.
d. Counterattacks.
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67. A firm’s attack on a focal arena important to a competitor, but not the attacker’s true target area, is referred to as:
a. Thrust.
b. Feint.
c. Gambit.
d. Miscalculation.
68. The three drivers of counterattacks do not include:
a. Awareness.
b. Vengeance.
c. Capability.
d. Motivation.
69. Which of the following is not a legal means of signaling?
a. Strategic alliances.
b. Direct discussion of reduced rivalry with competitors.
c. Truce seeking.
d. Communication via governments.
70. To make an attack more likely to succeed, a firm needs to:
a. Make sure the rival is aware of the attack.
b. Attack only strong rivals.
c. Follow a blue ocean strategy.
d. Go after rivals’ core markets.
71. Firm A produces soccer equipment and softball/baseball equipment, as does Firm B. Firm A discontinued its
softball/baseball line to focus entirely on its soccer line. This move is known as a:
a. Feint.
b. Gambit.
c. Thrust.
72. Rather than illegally colluding to raise their prices 20%, two firms can work together to cut their prices 20% through:
a. Dumping.
b. Game theory.
c. A feint.
d. Strategic alliance.
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73. In some industries where pressures for globalization are relatively low, local firms may possess some skills and assets
that are transferable overseas, thus leading to a(n) _____ strategy.
a. Defender
b. Extender
c. Dodger
d. Contender
74. A defender strategy is best employed in which of the following situations?
a. When local firms’ understanding of the market is greater than the MNE’s knowledge of it.
b. When the pressure to globalize is high.
c. When a local firm prefers to cooperate through a joint venture.
d. When the goal is rapid learning and then global expansion.
75. A local firm finds it cannot compete head–to-head against a MNE in its market, so it decides the best strategy to use in
this situation is the:
a. Defender strategy.
b. Extender strategy.
c. Dodger strategy.
d. Contender strategy.
76. A local firm possesses an extensive understanding of an aspect of a market an MNE is not particularly strong in.
Therefore, the local firm should probably pursue a(n):
a. Extender strategy.
b. Defender strategy.
c. Dodger strategy.
d. Contender strategy.
77. A local firm has built a successful business but acknowledges it would be difficult to continue to compete with a large
MNE. The MNE makes an offer to buy the local firm’s interests, and the local firm accepts the offer. It is following the:
a. Contender strategy.
b. Extender strategy.
c. Dodger strategy.
d. Defender strategy.
78. Which of the following arguments is NOT among those offered by management scholars to explain in part why firms
such as AT&T, IBM, and Microsoft faced antitrust accusations for engaging in the same activities that made them
successful in the first place?
a. Antitrust laws were often created in response to the old realities of mostly domestic competition.
b. The same actions labeled as anticompetitive may actually be highly competitive.
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c. U.S. antitrust laws create strategic confusion.
d. U.S. antitrust laws are unfair because they discriminate against foreign firms.
79. Which of the following can be considered a form of “dumping”?
a. Selling a product “below cost.”
b. Coupons.
c. Putting backlog of inventory on the market.
d. All of the above.
80. When considering strategic actions for global competition, the first step for a strategist is to
a. Thoroughly understand the nature of your industry.
b. Strengthen the resources and capabilities that help you compete more effectively.
c. Understand the rules of the game for domestic and international competition.
d. Determine whether collusion or competition is the best course of action.
81. Briefly explain competitive dynamics and how they relate to strategy as action.
82. The text points out that modern ideas of strategy, pioneered by Michael Porter, have turned IO economics “on its
head.” Although IO economics attempts to prevent any firm from gaining sustained competitive advantage, the very
purpose of strategy is to gain a sustainable advantage. Is that good or bad?
83. How do resource similarity and market similarity interact to influence the actions of rival firms, and why is awareness
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84. Dumping involves selling something below cost. Using what you have learned in accounting or economics (or
perhaps by talking to someone familiar with these courses) point out why it might sometimes be difficult to prove that a
firm is selling below cost.
85. In the interest of maintaining high standards for international trade, the U.S. has at various times attempted to legislate
the behavior of U.S. based companies. It has even at times tried to apply U.S. standards to those from other
countries. Does this make sense to you?
86. In some of the discussions of strategy. It was suggested that a firm might attempt to mislead a rival as to the firm’s
true objective (i.e., feint). Is that unethical? Explain.
87. “While you can’t talk to your competitors on pricing, you can always wink at them.” How do companies “wink”? And
88. Describe the four responses given in the text for ways in which small local firms respond to MNE attacks in a given
market.
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89. Can national policies that seek to promote the well-being of its citizens by its attempts to maintain competition
actually have the opposite effect? Why or why not?
90. In light of the four questions (Why do firms differ? How do firms behave? What determines the scope of the
firm? What determines the success and failure of firms around the globe?), how would you use them to