Corporate Strategy Study Guide Questions
Course Introduction
Corporate Strategy explores the frameworks, tools, and analytical approaches companies use to achieve long-term success and competitive advantage in complex environments. The course examines how firms create value across multiple businesses and markets, including diversification, mergers and acquisitions, strategic alliances, international expansion, vertical integration, and portfolio management. Through case studies and real-world examples, students learn to evaluate different strategic options, assess risks and synergies, and understand the roles of corporate governance and organizational structure in shaping strategic decisions. By the end of the course, students are equipped to analyze and formulate effective corporate strategies that align with both internal capabilities and external opportunities.
Recommended Textbook
Economics of Strategy 7th Edition by David Dranove
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15 Chapters
505 Verified Questions
505 Flashcards
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Page 2
Chapter 1: The Power of Principles: A Historical Perspective
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35 Verified Questions
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Sample Questions
Q1) What was a key factor that aided foreign steel producers in penetrating U.S.markets?
A)Shifting demand in the economy to "lighter" products
B)Invention of the basic oxygen furnace
C)Development of the continuous casting process
D)U.S.steelmakers' commitment to "light" products
E)Development of the electric arc furnace
Answer: A
Q2) How have late 20 and 21 century communications technologies directly created global markets from products and services?
A)Created paperless communications
B)Created seamless and instantaneous communications
C)Decreased coordination for interfirm alliances
D)Increased worker productivity
E)Unflattened the world
Answer: B
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3
Chapter 2: The Horizontal Boundaries of the Firm
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Sample Questions
Q1) Which of the following benefits of diversification explains the idea that combining unrelated businesses can allow firms to finance projects through cross-subsidization when they previously were unable to finance the same projects externally?
A)Use of internal capital markets
B)Economies of scale and scope
C)Economizing on transaction costs
D)Diversifying shareholder portfolios
E)Identifying undervalued firms
Answer: C
Q2) If a firm enjoys lower costs due to a complex labor-intensive process,which of the following statements would then be true?
A)Cutbacks in volume will always raise unit costs
B)The firm is unconcerned with labor turnover
C)An example of this process could be the practice of anti-trust law
D)The firm's average cost rises due to moving down the learning curve
E)The process is likely a repetitive manufacturing process such as two-piece aluminum can manufacturing
Answer: C
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Chapter 3: The Vertical Boundaries of the Firm
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Sample Questions
Q1) Under what circumstance would it be logical to leave contracts vague and open-ended?
A)When performance may be ambiguous or difficult to measure.
B)When one of the firms in the contract is much larger than the other firm
C)If there are many other firms that can provide the same service or product
D)When the cost of writing the contract is too high
E)If the smaller of the two contracting firms is the upstream firm
Answer: A
Q2) Strong contract law aids the most in which of the following?
A)Incomplete contracts
B)Complete contracts
C)Negotiated contracts
D)Dual contracts
E)None of the above
Answer: A
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Chapter 4: Integration and Its Alternatives
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Sample Questions
Q1) Which of the following is true with regard to the difference in exchange costs between an item produced internally firm and an item purchased from an outside supplier through an arm's length market transaction as the level of asset specificity increases?
A)The cost difference is positive for both low and high levels of specificity
B)The cost difference is negative for both low and high levels of specificity
C)The cost difference is negative for low and positive for high levels of specificity
D)The cost difference is positive for low and negative for high levels of specificity
E)As asset specificity increases,the transaction costs of the market exchange decrease
Q2) Which of the following is not a benefit that Toys "R" Us gained through its alliance with McDonald's Japan?
A)Political know-how
B)Site-selection expertise
C)Changes to Japan's Large-Scale Retail Store Law requiring MITI approval
D)Business Connections
E)Significant growth on all three major islands
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Chapter 5: Competitors and Competition
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Sample Questions
Q1) Suppose the demand for a product faces by a monopolist firm is given by Q=60-P/2.If the marginal cost of producing the product is $20,what is the profit maximizing price the firm should charge for the product? What are the firm's profits?
Q2) What kind of competition is generally described as price competition?
A)Bertrand competition
B)Cournot competition
C)Perfect competition
D)Chamberlin competition
E)Monopolistic competition
Q3) The Herfindahl index solves which problem with the N-Firm ratio?
A)Inaccuracy when dealing with more than 4 firms
B)Inability to measure concentration if market shares are split evenly
C)Inability to measure concentration across borders
D)Invariance with changes in the size of the largest firms
E)High variability when firm sizes are small
Q4) In a three firm market where the market share split is 50%,30% & 20%,what is the Herfindahl index?
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Chapter 6: Entry and Exit
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Sample Questions
Q1) What are the two types of barriers to entry?
A)Legal and strategic
B)Price and Size
C)Structural and strategic
D)Size and Legal
E)Price and Structure
Q2) Which of the following conditions may make predatory pricing by incumbents rational?
A)When entry costs are very high
B)When entrants are uncertain about market conditions
C)When existing firms have significant coast advantages
D)When entrants are required to obtain extensive licensing and regulatory approvals
E)When exiting firms have increasing marginal revenue
Q3) Which of the following is an exit barrier for firms in an industry?
A)Sunk costs
B)Labor agreements or commitments to purchase raw materials
C)Obligations to input suppliers
D)Government restrictions
E)All of the above
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Page 8
Chapter 7: The Dynamics Competing Across Time
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Sample Questions
Q1) In a six-firm market,if all firms charge the monopoly price,the profit equals $120,000.In that same six-firm market,if all firms instead charge the prevailing price,the profit is $60,000.If the pricing period is one-month long,what is the maximum monthly discount rate implied for each firm to still have an incentive to independently price at the monopoly level?
Q2) Why might a firm not be able to react quickly to competitors' pricing moves?
A)Lags in detecting competitors' prices
B)Infrequent interactions with competitors
C)Ambiguities in identifying which firm among a group of firms in a market is cutting price
D)Difficulties distinguishing drops in volume due to price cutting by rivals from drops in volume due to anticipated decreases in market demand
E)All of the above
Q3) Which of the following practices can help firms facilitate cooperative pricing?
A)Price leadership
B)Advance announcement of price changes
C)Price following
D)Most favored customer clauses
E)Uniform delivered prices
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Page 9
Chapter 8: Industry Analysis
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Sample Questions
Q1) What term refers to the ability of individual customers to negotiate purchase prices that extract profits from sellers?
A)Substitutes and Complements
B)Competition
C)Customer power
D)Seller power
E)Buyer power
Q2) Which of the following is not a significant entry barrier in the commercial airframe manufacturing market?
A)High development costs
B)Learning curve in production
C)Raw materials and labor
D)Airlines prefer to purchase from the same manufacturer
E)Airlines are reluctant to purchase from startups
Q3) Which of the following best describes the term,internal rivalry?
A)Divisions competing within a firm for resources
B)Differing product lines from one manufacturer competing
C)Firms jockeying for share within a market.
D)Firms competing for resources to produce goods
E)Suppliers dividing factors between competing firms
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Chapter 9: Strategic Positioning for Competitive Advantage
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Sample Questions
Q1) Select the letter corresponding to the best answer.For a given consumer,any price-quality combination along the indifference curve yields the _______________.
A)Same consumer surplus
B)Same maximum willingness-to-pay
C)High consumer surplus
D)Low consumer surplus
E)Same competitive advantage
Q2) Which of the following terms is a concept,developed by Michael Porter,which describes the activities within firms and across firms that add value along the way to the ultimate transacted good or service?
A)Five forces
B)Value creation
C)Value chain
D)Consumer surplus
E)Producer surplus
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11
Chapter 10: Information and Value Creation
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Sample Questions
Q1) When consumers learn about one seller at a time it is known as a :
A)Simultaneous search
B)Parallel search
C)Serial search
D)Sequential search
E)Divided search
Q2) Which of the following best describes a credence good?
A)Products for which consumers can easily evaluate quality even after purchasing and using the product
B)Products for which consumers rely on other purchasers' experience before buying
C)Products for which consumers cannot easily evaluate quality even after purchasing and using the product
D)Products for which consumers always,or almost always,purchase with a warranty
E)None of the above
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Chapter 11: Sustaining Competitive Advantage
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Sample Questions
Q1) Which of the following terms best describes the ability of a firm to maintain and adapt the capabilities that are the basis of its competitive advantage?
A)Riskiness of R&D
B)Correlated research strategies
C)Evolutionary economics
D)Dynamic efficiency
E)Dynamic capabilities
Q2) Which of the following is least likely a characteristic of profit persistence in an industry?
A)Entry barriers exist
B)Economic profits should quickly converge to zero
C)Barriers to imitation exist
D)Firms earning above-average profits today should continue to do so in the future
E)Low profit firms today should remain low-profit firms in the future
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Chapter 12: Performance Measurement and Incentives
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Sample Questions
Q1) Which of the following terms describes a contract by which the value of the compensation depends on the measured performance of the employee?
A)Explicit incentive contract
B)Implicit incentive contract
C)Risk sharing contract
D)Compensation contract
E)Pay-for-performance contract
Q2) What term best refers to a wage payment made to an agent that exceeds his opportunity cost of working and discourages the agent from shirking?
A)Living wage
B)Efficiency wage
C)Minimum wage
D)Efficiency payment
E)Termination wage
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Chapter 13: Strategy and Structure
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Sample Questions
Q1) Which of the following modes of task interdependence exists when two or more positions are not directly dependent on each other but are associated through their independent contributions to the success of the firm?
A)Technology interdependence
B)Environment interdependence
C)Reciprocal interdependence
D)Sequential interdependence
E)Pooled interdependence
Q2) Which of the following modes of task interdependence exists when two or more workers or work groups depend on each other to do their work?
A)Technology interdependence
B)Environment interdependence
C)Reciprocal interdependence
D)Sequential interdependence
E)Pooled interdependence
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15
Chapter 14: Environment, Power, and Culture
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Sample Questions
Q1) Which of the following statements is least true regarding institutions?
A)Institutions can involve formal regulation of firms by governmental agencies
B)Institutions can involve formal regulation of firms by nongovernmental regulatory organizations
C)Institutions can be less formal and involve ongoing power/dependence relationships between firms
D)Institutional arrangements may embody general patterns of values,beliefs,ad behavioral norms that motivate and stabilize affected firms
E)None of the above
Q2) What term best refers to interrelated beliefs,values,material practices,and norms of behavior that exist in an industry at any given time?
A)Institutional elements
B)Institutional standards
C)Institutional influences
D)Institutional logics
E)Institutional ideas
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16
Chapter 15: Economics Primer
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Sample Questions
Q1) If a firm can sell its product for more than its fixed costs,but not for more than its totals costs:
A)It will shut down
B)It will lower its fixed costs
C)It will stop producing that product
D)It will continue to operate in the short run at a loss
E)It will increase its production quantity
Q2) Why does a Nash equilibrium represent a plausible outcome for a game?
A)If Party A chooses first,the outcome is the same as its expectation regardless of B's choice
B)If Party B chooses first,the outcome is the same as its expectation regardless of A's choice
C)Regardless of which party chooses first,if they both expect the other to choose a its Nash equilibrium,then both parties expectations will equal the outcome.
D)Neither party needs to make a choice,the market forces an agreeable equilibrium outcome
E)None of the above are correct
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