Sustainable Competitive Advantage Quiz
40 Questions
0 Views

Sustainable Competitive Advantage Quiz

Created by
@LovableSard9675

Podcast Beta

Play an AI-generated podcast conversation about this lesson

Questions and Answers

What protects a company from imitation in its competitive strategy?

  • Financial resources available for marketing
  • A singular focus on a single competitive advantage
  • An activity system that relies on consistent trade-offs (correct)
  • Unique products that cannot be replicated

    • Which type of fit involves a simple consistency between each activity and the overall strategy?

  • First-order fit (correct)
  • Third-order fit
  • Competitive fit
  • Second-order fit

    • What best characterizes second-order fit in a competitive strategy?

  • Reinforcement between activities increasing their attractiveness (correct)
  • Focus solely on cost-cutting measures
  • Simple alignment with external trends
  • Redundancy between activities

    • What is the primary purpose of optimizing effort in an activity system?

    <p>To eliminate redundancy and minimize wasted effort</p> Signup and view all the answers

    How does Walmart exemplify the concept of consistency in its competitive strategy?

    <p>By ensuring activities align with its low-cost positioning</p> Signup and view all the answers

    Which of the following is NOT a type of fit described in the competitive strategy?

    <p>Qualitative fit</p> Signup and view all the answers

    What role do trade-offs play in an organization’s competitive strategy?

    <p>They create barriers for potential imitators through complexity</p> Signup and view all the answers

    What example best illustrates third-order fit in strategic activities?

    <p>Coordination between a company and its suppliers to reduce in-house needs</p> Signup and view all the answers

    What is essential for a sustainable competitive advantage?

    <p>Aligning and reinforcing a system of interdependent activities</p> Signup and view all the answers

    Which of the following factors does NOT contribute to the sustainability of a competitive advantage?

    <p>Having a unique product with no operational strategy</p> Signup and view all the answers

    Why is it important for a firm to anticipate changes in its environment?

    <p>To adapt its strategy and ensure long-term success</p> Signup and view all the answers

    How does industry structure influence competition and profitability?

    <p>It drives the intensity of competition and overall industry profitability</p> Signup and view all the answers

    What is meant by 'choosing what NOT to do' in a strategy?

    <p>It highlights the importance of resource allocation and trade-offs</p> Signup and view all the answers

    Which approach is necessary to develop a system of activities that supports competitive advantage?

    <p>Ensuring interdependence among multiple activities</p> Signup and view all the answers

    What is a key characteristic of firms that consistently perform better over time?

    <p>They maintain a unique and valuable position with distinct activities</p> Signup and view all the answers

    What is the outcome of optimizing efforts at the activity system level?

    <p>Enhanced performance and efficiency across activities</p> Signup and view all the answers

    What is the primary impact of the threat of new entrants in an industry?

    <p>It prompts incumbents to either lower prices or invest more.</p> Signup and view all the answers

    Which of the following accurately describes supply-side economies of scale?

    <p>They occur when firms with larger outputs have lower unit costs.</p> Signup and view all the answers

    What are customer switching costs?

    <p>Expenses incurred by buyers when they change suppliers.</p> Signup and view all the answers

    Which of the following factors is NOT considered a barrier to entry?

    <p>Government policies that foster competition.</p> Signup and view all the answers

    What kind of advantages might incumbents have that are independent of size?

    <p>Proprietary technology and established brand identities.</p> Signup and view all the answers

    What might newcomers fear regarding expected retaliation from incumbents?

    <p>The likelihood of price cuts to maintain market share.</p> Signup and view all the answers

    How do demand-side benefits of scale influence new entrants?

    <p>They enhance the value of products as more customers buy.</p> Signup and view all the answers

    Which of the following examples best illustrates the concept of diversifying entrants shaking up competition?

    <p>Pepsi entering the bottled water market.</p> Signup and view all the answers

    What was a primary reason for franchising bottlers in the franchise system?

    <p>To ensure accessibility across the US</p> Signup and view all the answers

    What benefit did Pepsi and Coke gain from buying back bottlers?

    <p>Increased economies of scale</p> Signup and view all the answers

    How is competitive advantage related to industry analysis?

    <p>It helps devise strategies based on industry attractiveness</p> Signup and view all the answers

    What does the 'Value Stick' concept indicate?

    <p>A necessary condition for value creation is WTP being higher than WTS</p> Signup and view all the answers

    What does a wider wedge indicate for a firm?

    <p>Increased competitive advantage and potential for profit</p> Signup and view all the answers

    Which statement best characterizes strategy?

    <p>It is the creation of a unique position with different activities</p> Signup and view all the answers

    What role does buyer's willingness to pay (WTP) play in determining a firm's price?

    <p>It influences price along with costs to the firm</p> Signup and view all the answers

    What is a consequence of high supplier power for bottlers?

    <p>High switching costs for bottlers</p> Signup and view all the answers

    What is the main advantage of a differentiation strategy?

    <p>It enables a firm to boost the willingness to pay (WTP) for its output.</p> Signup and view all the answers

    What happens when a second firm enters the market at a lower price point?

    <p>Price will decrease until it equals the cost of production.</p> Signup and view all the answers

    Which of the following is NOT a way for firms to generate a cost advantage?

    <p>Differentiation of product features.</p> Signup and view all the answers

    What is a challenge associated with pursuing a low-cost strategy?

    <p>Maintaining proximity in quality with competitors.</p> Signup and view all the answers

    How does proprietary knowledge help firms lower costs?

    <p>Through optimizing inventory management.</p> Signup and view all the answers

    What is the outcome of the cost leadership strategy?

    <p>Achieving low prices while ensuring acceptable product features.</p> Signup and view all the answers

    Which factor is critical to achieving economies of scale?

    <p>Spreading fixed costs over larger volumes.</p> Signup and view all the answers

    What impact does a firm’s ability to source from low-cost locations have?

    <p>It typically results in reduced input costs.</p> Signup and view all the answers

    Study Notes

    Sustainable Competitive Advantage

    • A sustainable competitive advantage relies on a system of multiple activities that complement each other and are difficult to imitate.
    • Examples of reinforcing activities: Neutrogena marketing products to upscale hotels, leveraging dermatologists' recommendations to boost both medical and hotel marketing efforts.

    Optimizing Effort (Third-Order Fit)

    • Eliminate redundancy and minimize effort by coordinating activities and sharing information.
    • Product design choices can minimize the need for after-sale service, allowing customers to perform self-service.
    • Collaboration with suppliers or distribution channels can eliminate internal activities like end-user training.
    • Trade-offs help protect against imitation because competitors must replicate the entire activity system, including the sacrifices made.

    Value Stick:

    • Value created in a market occurs when the buyer's WTP (willingness to pay) exceeds the supplier's OC (opportunity cost).
    • The value stick represents the difference between WTP and OC, with the firm capturing value through its pricing and cost structure.
    • A firm with a wider wedge between WTP and OC has a competitive advantage and potential for greater profits.

    Porter's Five Forces: Industry Attractiveness

    • Entry barriers affect the profitability of an industry by influencing the threat of new entrants.
    • Entry barriers include supply-side economies of scale, demand-side network effects, customer switching costs, capital requirements, incumbency advantages, access to distribution channels, and restrictive government policies.
    • An industry's attractiveness is determined by the intensity of competition, which is influenced by the five forces: threat of new entrants, bargaining power of suppliers, bargaining power of buyers, threat of substitutes, and rivalry among existing competitors.

    Strategy and Competitive Advantage

    • Competitive advantage results from a distinctive set of activities that differentiate a firm from its rivals.
    • The activities should be consistent with each other, reinforcing, and optimized at the system level to achieve sustainability.
    • Walmart’s activities are coherent with its low-cost positioning, showcasing the importance of consistency in strategy.

    Strategic Integration

    • A successful strategy integrates all aspects of a firm’s operations, considering its internal environment, external environment, and potential changes over time.
    • It involves identifying a unique and valuable position that involves distinct activities compared to competitors.
    • Choosing what not to do is as crucial as choosing what to do to achieve a sustainable competitive advantage.

    Industry Analysis and Competitive Advantage

    • Industry analysis helps identify opportunities to create a competitive advantage by exploiting the attractive features of an industry and neutralizing its unattractive features.
    • Some industries have limited room for superior wedges due to restrictive structures.

    Differentiation vs. Low-Cost Strategy

    • A differentiation strategy focuses on raising WTP with minimal cost increases, while a low-cost strategy aims for significant cost savings with only minor reductions in WTP.
    • Both strategies aim to widen the wedge between WTP and OC to generate profits.

    Cost-Based Positioning (Cost Leadership)

    • Cost Leadership involves performing activities differently to achieve lower costs than competitors.
    • This strategy aims to produce acceptable quality goods or services at the lowest possible cost, resulting in above-average profitability with relatively low prices.
    • Challenges include maintaining product quality and potential trade-offs in differentiation.

    Generating a Cost Advantage

    • Firms can achieve cost advantages through economies of scale (spreading fixed costs), learning and experience curves, proprietary knowledge, lower input costs (sourcing from low-cost locations or collaborating with suppliers), and adopting different business models.

    Studying That Suits You

    Use AI to generate personalized quizzes and flashcards to suit your learning preferences.

    Quiz Team

    Related Documents

    Midterm Notes PDF

    Description

    Test your knowledge on sustainable competitive advantages and third-order fit in business. Explore how coordinated activities and strategic trade-offs contribute to optimizing effort and creating value in the market. Answer questions related to real-world examples and theoretical concepts.

    More Like This

    Use Quizgecko on...
    Browser
    Open
    Browser
    Browser