CH08_Answer - Chapter 8 The Nature and Sources of...

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Chapter 8 The Nature and Sources of Competitive Advantage Test Bank True/False Questions 1. Competitive advantage is a relatively simple construct to understand and operationalize. False Page: p211 2. The magnitude of change and the degree of a firm’s strategic differences are the main determinants of the extent to which external change creates competitive advantage. True Page: p211 3. The theory of limit pricing postulates that a firm with market power will set prices at a level that just fails to attract entrants. True Page: p215 4. A difficulty related to imitation relates to a clear understanding of the source of rivals’ competitive advantages. This is referred to as “causal ambiguity”. True Page: p216 5. For competitive advantage to exist, the market must exhibit the “pure and perfect competition” described by economists. False Page: p219 6. In an efficient market, prices reflect all available information and they adjust instantaneously to newly available information. True Page: p219 7. Cost leadership and differentiation are the two main types of competitive advantages. True Page: p222 © 2010 Robert M. Grant www.contemporarystrategyanalysis.com 1
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Multiple Choice Questions 1. Competitive advantage can be defined as: a. A firm’s ability to achieve a greater market share than its competitors b. A firm’s ability to consistently outperform the stock market index in terms of shareholder returns c. The ability for a firm to earn a persistent rate of profit which is higher than its rivals d. A concept that is meaningless because the definition requires so many approximations Page: p211 2. If the source of competitive advantage is external change, then: a. The extent of the potential competitive advantage created depends on the magnitude of that change and the gap in a
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CH08_Answer - Chapter 8 The Nature and Sources of...

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